Feature

Home, Sweet Home

Today's candidates for campus positions may well need a benefits package with housing assistance. Some institutions are hearing the call.

Last year, Catie Lasley, age 29, became the first in her family to purchase a house. Throughout her childhood, her parents had always rented apartments. While attending college, she lived in a dorm. Even after she was married, she and her husband rented an apartment.

CMS: Sticking with the Tried & True

Institutions are boosting their content management efforts with the use of commercial software while looking at open-source technology with a cautious eye.

As colleges and universities have put into placE large-scale content management systems (CMS) in recent years to take care of indexing and serving up their vast amounts of files, they have been making use of commercial products new and old to create these systems. Many of them have gone that route despite the availability of open-source alternatives, opting for safety over open-source promises of freedom.

But wasn't open-source technology supposed to be the savior of software budgets and vendor-stressed information technology (IT) departments? Its promise has been to give users the ability to get into the source code and make changes as they see necessary, without having to rely on a large, impersonal software company (or a small software company that may not be in business tomorrow) to make timely updates to the software.

True, open-source technology has been much talked about in recent years, but its uptake has still been slow.

In "The State of Open Source Software," a March 2006 report from the Alliance for Higher Education Competitiveness (A-HEC, a technology research organization serving the university and college market), A-HEC founder Rob Abel wrote that two-thirds of chief information officers at institutions of higher education have considered or are actively considering using open-source technology. Furthermore, about 25 percent of all institutions are engaged in implementing higher ed-specific open-source applications.

But that doesn't mean open source is a tidal wave. In fact, its popularity may be broad, but it's not deep. A significant switchover to open source from commercial software would have to take place for its "also-ran" status to change. "Despite much enthusiasm for open source, there are no signs that a large shift is occurring at this time," Abel writes.

Open source has been widely popular in Europe for years, with Spanish schools, French government agencies, and German municipalities adopting it enthusiastically. Governments there have pushed open source both out of national pride (choosing it over U.S.-based commercial software vendors) and as a way to keep costs down.

I would be
delighted to use open-source technologies anywhere we can. But when you get to
a high-level
application such as content
management,
I haven't yet
seen open source that
fits the criteria we have."-Larry Bouthillier, Harvard Business School

In many cases, they adopted e-government initiatives far earlier than U.S. agencies and municipalities, and they have kept up the momentum. A 2005 survey by the Maastricht Economic Research Institute on Innovation and Technology about open-source use in Europe found, for example, that 98 percent of local Spanish authorities used open-source applications.

Open source is also widely popular in U.S. higher education, but IHE technology professionals are choosy about where they use it. They tend to employ it in smaller bits of programming (or in the tools programmers use to create and modify their programs) rather than in large, complex, mission-critical programs, say tech leaders.

Whatever the current status of open source's adoption, it's unlikely to disappear from the modern campus. "In the university environment, you're never going to outlaw open source," says Jeff Ernst, vice president of marketing at FatWire Software, a maker of a commercial CMS product. "You're always going to have the kids who are going to be enamored with getting into the source and doing whatever they want." Ernst says his customers tell him they have open-source elements throughout their systems, especially on "renegade" sites run by students or small departments, but not on mission-critical websites such as those used for recruitment.

Open-source CMS products do exist, such as PostNuke and Mambo Server, as do communities of users who are supporters of open-source CMS, such as the aptly named OpenSourceCMS website. But users are not necessarily convinced the products can do the job.

"I would be delighted to use open-source technologies anywhere we can," says Larry Bouthillier, director of educational technologies and multimedia development at Harvard Business School. "When you go up to a high[-level], total application such as content management, the thing I haven't yet seen is open source that fits the criteria we have."

When HBS staff needed to catalog their rapidly expanding library of video content, which had outgrown the abilities of earlier solutions, they used ClearStory Active Media, a commercial product. The application indexes the videos and supporting files (such as Microsoft Word documents or PDF files) so they can be served up easily to faculty and students searching for the right files.

HBS's case is a good example of a CMS that has evolved over the years. In late 1995, the institution started streaming video on campus. "We've always had lots of video in the curriculum-interviews with protagonists, documentaries, etc.," says Bouthillier. "But it required scheduled viewing, and students and faculty would all have to go someplace to view it." Over the years, IT staff wrote common gateway interface scripts to help users find videos on the system. They also added capabilities to:

Scan the videos and provide snippets of text and snapshots of video scenes to prospective viewers;

"Support can be a challenge if you run into software problems, depending on who developed the code.
If you purchase a particular software package from a vendor, you get support." -Deb Wells, Bowling Green State University (Ohio)

Automatically detect the bandwidth capacity of viewers to deliver to them the video at the top quality their system is able to handle; and

Include podcasting and RSS feeds for users with the ability to access them.

The system is now about 50 percent commercial product, and 50 percent home-grown, according to Bouthillier. HBS also recently implemented a Wiki solution, to which users across campus can add information.

Open-source options that used the script language PHP (see glossary, p. 66) simply didn't work well with the rest of the business school's system. So officials chose Confluence Wiki software from Atlassian Software Systems. "We looked at all the open-source stuff and at the commercial stuff, and we ended up going with the commercial product because it was the one that would allow us to integrate into the rest of our system," says Bouthillier.

Even open-source advocates such as Virgil Wong, head of web services for Weill Medical College at Cornell University, have shied away from using it on content management systems.

When the college was looking for a CMS solution in 2005, administrators considered both open-source and commercial products before choosing Element115 running on the FatWire Content Server. "As an academic institution, we see open-source technologies as much more of an academic challenge," says Wong. "Our sense was that with open-source technologies, building project plans is extremely difficult, predominantly because of the uncertainty of open-source products. The tools we looked at had very little support. Ultimately, no one is accountable for maintaining the security of your content management system. You're at the mercy of any rescuers who might arrive."

That's not a risk he wanted to run with his system, which has about 184,000 unique visitors each month. In the year-long process of internal meetings and consultations to refine the requirements of the system and evaluate the possible solutions, Wong also wasn't able to find open-source help that would let him assemble a project plan.

Support "can be a challenge if you run into software problems, depending on who developed the code," says Deb Wells, manager of web development at Bowling Green State University (Ohio). "If you purchase a particular software package from a vendor, you get support."

BGSU leaders began looking at CMS in 2002, when the systems were starting to become affordable enough for universities to consider, notes Wells. The goal was to move from having every website looking different and following different style rules to a more unified look and feel that would also simplify content creation by non-technical users.

They selected Rhythmyx content management solution from Percussion Software. Rhythmyx not only provides a way for non-technical users to create web content without having to learn HTML or Adobe's DreamWeaver web-creation software, but it also provides support.

"We don't have enough staff to support [all of the departments], so this product is great," says Toby Singer, executive director of IT at BGSU. Bouthillier is contrarian on open source and support. "For the most part, buying a commercial product because you want support is often disappointing," he says, adding that there are exceptions among the vendors.

The far-reaching nature of CMS is a big part of the reason for caution among campus tech leaders about adopting open source. If an isolated component of a department's website goes bad, or if the student newspaper posts the wrong editorial cartoon one day, the damage or embarrassment isn't too great. But modern CMS setups are typically campuswide, aggregating content from every department and serving it up to faculty, students, administrators, alumni, prospective students, and others.

Venkatesh Korla, former director of software engineering at the Rush University Medical Center in Chicago, had to address two seemingly contradictory needs a couple years ago when looking for a CMS solution for that institution. He was looking for something that was broad like any enterprise-level CMS solution to aggregate information from disparate content creators and provide it to disparate users inside and outside of the hospital; he also needed a solution that was specific to health care organizations, however.

Those requirements led to his team creating the foundation for Element115, a spinoff of RUMC for which Korla now serves as president. Element115, the technology used by Wong at Cornell, incorporated typical requirements of health care organizations that make up, by his estimate, 80 percent of the CMS solution, which is then customized as needed for the remaining 20 percent. Health care institutions have their own taxonomy and semantics that need to be considered when serving up information in different ways, depending on whether the user accessing the information is a doctor at the hospital or a prospective patient researching his or her illness.

"The biggest challenge they have in an academic institution is to come to an agreement of what content they want and how they want it to work together," says Korla. "It is surprising that these academic institutions, which have so much content like a publishing house, don't have the [content management technology] like a publishing house."

Good Data In, Good Data Out

IHEs put in systems to capture quality data, and keep those records clean.

When database records indicated that 200 students had signed up to play on the 2004 football team at DePauw University (Ind.), Administrative Upgrade Project Director Daniel Pfeifer realized there was either something seriously wrong with how data was being handled, or the university would be ordering a lot more uniforms.

Endowment Management: New and Proven Strategies

Keeping a pulse on the economy helps today's endowment managers in their quest to bring their institutions the best returns possible.

Many of the answers to your endowment building questions may be found in tried-and-true investment strategies, but you may need to look farther-all the way to the other side of the globe.

From covering risks to increasing international investments, endowment managers at universities and colleges, as well as investment firms, continue to pay close attention to the economy-in the U.S. and globally-as they look to identify new ways to build endowments.

Short credit is playing a key role in endowment strategy, say managers, because credit spreads are much too narrow and they're likely to widen.

And, as credit spreads widen, they impact equities, fixed income, and most hedge fund strategies.

Credit spread is the spread between Treasury securities and non-Treasury securities that are identical except for quality rating. The term can also refer to an options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.

"Clients for the most part are not rewarded for taking risks in this environment, so we're trying to protect against this," says Dick Anderson, practice leader for higher education at St. Louis-based Hammond Associates Institutional Fund Consultants.

The need for short credit is created by the liquidity in the economy, which raises asset prices. What that means, he says, is that the higher price you pay for an asset, whether it's stocks or bonds, the lower the prospective returns.

"That's the trend," Anderson says. "As people are fooling with that trend and are taking more risks than the prospective rewards, we're trying to counter that by buying protection, and specifically we've been buying credit production, short credit funds."

So while investors are taking more risks, Hammond Associates is working with clients to reduce risks.

"The notion is that everyone is embracing risk," Anderson says. "Our intention is to back away from risk."

A move toward more international investing is another trend that's cited by college and university endowment managers around the country.

"Increasingly we are allocating assets to non-U.S. common stock in both developed and emerging markets," says Jeff Davis, senior vice president for finance at the Kansas University Endowment Association, which has an endowment portfolio for The University of Kansas valued at $950 million.

KU's endowment strategy, Davis says, involves considering allocations that more closely reflect each region's gross domestic product.

"We're increasingly looking more globally rather than just locally in the U.S. for investment opportunities," he says. This includes looking more toward international developed markets and international emerging markets.

"I think the underlying thesis is that if you look at world economies and where growth and opportunities are, it's not just in the United States," Davis adds.

"We're increasingly
looking more
globally rather than
just locally in the
U.S. for investment
opportunities."
-Jeff Davis, Kansas University
Endowment Association

Jeff Margolis, director of Institutional Sales and Marketing at TIAA-CREF, a New York-based financial services organization, has noticed that there is definitely a secular trend toward international exposure.

The trend, he says, is likely to continue "as the world, excluding the United States, grows faster than the United States itself," says Margolis, who serves as head of business development for TIAA-CREF Asset Management.

Davis says KU is also looking to increase its allocation to international bonds. "When you look at where the productivity and economic growth is in the world, it's more globally distributed than it was years ago," he says.

Jonathan Hook, chief investment officer for Baylor University (Texas), reveals that the institution moved its international allocation up last year. It's a tactic that has paid off nicely.

"In terms of strategy we are continuing to diversify further," Hook reports. He says the institution is also using diversification as a "first-line measure against a market downturn." Baylor, with a $750 million endowment, has incorporated short credit into its portfolio, he adds, and a goal is to add some return into its domestic equity portfolio.

In addition, its portfolio now has a sub-asset class within the real assets category of investments (those that are physical or identifiable, such as gold, land, or equipment). "We think it will be a lower-risk asset class with good-not necessarily great-returns and be very uncorrelated to the markets," he says.

Further, Baylor is looking into the possibility of recasting its asset allocation to divide its portfolio between different themes or strategies as opposed to the traditional style boxes. The work is in process now and will not be finished for a few more months, at which time it will reach a formal approval stage, Hook says, adding that "it has gotten good response from those who have seen it so far."

Ron Neville, chairman of the Investment Committee of the Drury University (Mo.) Board of Trustees, says he believes his institution is ahead of the curve compared with its peer group. His evidence: Going back more than 15 years ago, Drury made a 20 percent commitment to international equities, which was unusual at the time. "And still today we have a higher commitment than the rest of our peer group," Neville adds. The university has an estimated $75 million in endowment funds.

Diversification is the motivation for Drury's investment strategies, Neville says, but what's been going on in the last month in the markets is flying in the face of that.

The typical situation used to be that if the U.S. markets declined, foreign markets might go up, Neville explains. "But in the last month, U.S. markets have gone down, international markets have gone down, gold's gone down, oil's gone down-everything."

"Another reason for diversification is that a lot of people are predicting that the dollar versus foreign currencies will continue to be weak, so foreign assets will remain stronger. That's helped Drury in the last few years."

Jud Koss, managing director of Commonfund, which manages approximately $36 billion for more than 1,600 educational institutions and other nonprofits, says he sees more and more IHEs turning to outsourcing.

He's not talking about the kind of outsourcing already in place at most institutions-where they hand over aspects of the investment management process to organizations outside the college or university-but rather when an external provider takes over responsibility of the day-to-day management of a majority of an institution's investment funds.

Koss says one of the reasons that "mega" endowments, such as those at Harvard and Yale, just keep getting bigger is that they each have entire internal management companies dedicated exclusively to their endowment's management.

Successful endowment investment becomes more complex, he says, as diversification becomes more important. The number of asset classes has grown from three to 10 or more, yet many colleges and universities just don't have the luxury of full-time staff.

"We are continuing to
diversify further and
using diversification
as our first-line
measure against a
market downturn."
-Jonathan Hook, Baylor Unversity

Further, over the last five years, there's been a marked shift toward investments in classes of alternative assets, such as real estate, commodities, venture capital, private equity, oil and gas, timber, distressed debt, and hedge funds.

The 2006 Commonfund Benchmarks Study shows that most endowments and foundations are using alternative investments to a greater extent, as well as active asset allocation, diversification, and risk management, to maximize both returns and intergenerational equity.

John S. Griswold, executive director of the Commonfund Institute, Commonfund's research and education arm, says the leaders achieved significantly higher returns by increasing allocations to alternative strategies and reducing allocations to domestic equity in 2005.

"This indicates institutions' greater need for special expertise in due diligence, risk management, and proper diversification of an alternatives portfolio," he says, responding to the study.

The trend has meant sub-categories, each carrying a different risk of loss, impact, return expectation, and higher levels of derivative risk. "These schools don't have the manpower to observe all the investments needed to obtain the diversification," Koss notes.

Another Commonfund study, the 2005 Educational Endowment Report, showed that the 707 institutions participating have an average of 1.2 full-time equivalent staff members. But staff size varies widely, usually in proportion to the size of the endowment, according to additional Commonfund research.

Michael West, treasurer and vice president for finance and administration at Skidmore College (N.Y.), believes it is likely that smaller to mid-size schools like his will follow successful strategies used by the larger schools. The college grew its endowment from $35 million in 1993 to more than $220 million in 2006.

Those strategies, he says, will include moving out of traditional U.S. stocks to low correlative investments such as hedge funds, and using different strategies within that asset class with specialized managers, such as investing in distressed securities.

"This trend will result in many more managers, even for relatively small portfolios," West says. "Also, there is likely to be continued movement to international investing, as returns are attractive, diversification is improved, volatility in returns are minimized, and as the world economy grows at a faster pace than the United States."

Those kinds of changes, West says, will be difficult for smaller to mid-size schools because generally they do not have access to the best managers in these asset classes due to investment minimums, frequent personnel changes, and closed funds. Also, smaller colleges are more limited in the risk profile that they can take on, he says.

"Generally smaller and mid-size colleges do not have the resources-staffing and related time-to manage these complicated, changing, volatile investments," West maintains.

"These schools generally cannot compete with the salaries on the street, nor recruit or retain the highest-quality professionals, and they don't have the economies of scale larger schools can achieve by spreading the costs of investment management over a larger pool of assets."

The Commonfund Benchmarks Study released in January, which covers 729 private college and university endowments, public educational endowments, independent school endowments, and private foundations in support of education, showed 32 percent of the institutions are expecting to increase their alternative strategies allocations. Twenty-four percent said they expect to decrease domestic equity allocations, and 16 percent expect to decrease cash and short-term allocations. Few expect to make any change to fixed income allocations. International equities expectations are split, the study shows, with 14 percent anticipating a decrease, and 10 percent an increase.

West says that although firms are forming or have recently incorporated to contract or outsource investment management, and pooled investment vehicles do exist, generally results are uneven, or untested over different market cycles.

TIAA-CREF's Margolis acknowledges that college and university endowments are outsourcing "a bit more," but he says it is still not pervasive.

According to Commonfund, the outsourcing trend is being fueled by the lack of time university and college trustees, specifically investment committees, can give to endowment strategy.

Calling it a "conundrum faced by the twin trends of growing complexity and static resources," Commonfund CEO Verne Sedlacek, in a commentary published last winter in CFQ, the firm's quarterly booklet, questioned whether the investment committee model is the optimal way to manage a portfolio.

The article poses this question: How can trustees exercise their responsibilities in a manner consistent with that of a fiduciary and how a group of individuals can focus their limited resources in a way that can fully address all of the issues spanning everything from high-level policy to manager selection?

That's what Commonfund's managing director Koss wonders too, saying that some trustees get caught up in what he calls the "downstream stuff"-such as rebalancing portfolios-when they should pay more attention to the upstream, big-brain picture.

"Those are things that these folks shouldn't get mired in," he says of what lies downstream.

However, West gives Skidmore trustees a lot of the credit for the college's significant endowment growth.

"We have a higher
commitment [to international
equities] than
the rest of our peer
group. ... A lot of
people are predicting
that the dollar versus
foreign currencies will
continue to be weak."
-Ron Neville, chairman of the
Investment Committee of the Drury
University Board of Trustees

"As our trustees become more engaged appropriately in investment policy and strategies, and more invested in the college, and choose to spend more time with us, we gain their valuable expertise, and access to their contacts. Frequently they see the difference their contributions and the contributions of others make and they donate more money to the college," West says.

Further, the trustees are able to reflect on deals or managers and consider what's good for Skidmore.

"This engagement, reflection, and judgment is far superior than a paid consultant's advice giving the college historical data on performance of a fund, or the r?sum? of a fund manager," West says. "This is a critical difference, I believe."

He cites Arthur Zankel, former chair of the investment committee and longtime member of the board. According to West, it was Zankel who more than a decade ago led the college to looking at investment classes, including alternative investments, hedge funds, and real estate.

"Skidmore's portfolio structure looked more like a university than a small college," West says. It was Zankel's connections and those of other trustees, along with Zankel's national reputation, that allowed Skidmore to get into funds generally closed to schools of Skidmore's size.

"His and others' direct knowledge of a fund's management team, their investment philosophy, mistakes, lessons learned, and experience trumps a third party or report on these important and critical issues," West points out.

Zankel, whose two sons attended Skidmore, helped recruit other strong investment professionals to the board. Today, Skidmore's investment committee remains strong, and Zankel recently left Skidmore $42 million in his will-"clearly a transformative gift for the college he loved," West says. "Leadership and appropriate engagement makes a difference."

Toni Cardarella, a freelance writer based in Kansas City, Mo., specializes in business and finance topics.

An Education in AV Technology

The annual Educomm conference covered podcasting, distance learning and classroom planning.

Orlando, Florida, may be best known for its Magic Kingdom and Island of Adventure, but for three days in June it played host to another "theme park" in the form of the 2006 EduComm conference. The theme, of course, was connecting education with audiovisual and information technology. Co-located with InfoComm 2006, the world's largest AV communications and presentation technologies trade show, EduComm brought together expert educators and industry leaders to share the newest classroom technologies.

Retention Intentions

When it comes to keeping students happy and productive, constituent relationship management is shaping up into a high-tech, high-touch tag team.

Everyone knows how to reach prospects and alumni, and the importance of doing so. But what about the students in between?

Diamond in the Mudd

The many facets of Maria Klawe, Harvey Mudd College's new leader

It's a new day at Harvey Mudd. Known for its focus on engineering, science, and mathematics education, the 700-student liberal arts school-part of California's Claremont Colleges consortium-has done well in realizing its vision of attracting the brightest students. And with about 1,600 applications received each year, Admissions staff can be choosy when selecting each 175-student freshman class; about 90 percent of Mudd students were in the top 10 percent of their high school class.

The Outs and Ins of Facility Management

Outsourcing facilities management isnt't an all-or-nothing decision on today's campuses

There are few givens in the world of facilities management outsourcing. Take the percentage of colleges that have taken the plunge, for one: Most providers estimate about 20 percent of this market has turned over control of some aspect of its operations-food service, bookstore, groundskeeping, building maintenance, janitorial, energy maintenance, or security-to an outside expert.

Are any institutions farming out the whole ball of wax? According to a 2002 survey of attendees conducted during several National Association of College and University Business Officers meetings, a mere 2 percent had done so.

From Kristy Elmore's office as the director for Higher Education Solutions at Johnson Controls in Milwaukee, those numbers are definitely climbing. "In just three years with the higher education market, the conversation has gone from 'Don't say the O word' to 'We need help,'" she reports.

Yet the field report from Rick Justis, an area sales manager for Johnson Controls, is that mass scale outsourcing isn't nearing tidal-wave proportions-it's more like the tide itself. "It's really not very common," he says. "For a while outsourcing was a good thing, and for a while outsourcing was a bad thing. Now, it's situational, and the university's attitude depends on local politics, local labor pool, and so on."

The concept, of course, is solid. "As a risk manager, if it reduces your potential liabilities, it's a good strategy," says Michael Christensen, assistant vice president of Risk Management Services at California State University, Sacramento. Yet he can't identify a single outsourcing project on the IHE level.

The atmosphere is a bit chummier in Waco, Texas, where Baylor University's Don Bagby, director of Facilities Management has finally, after 12 years, shed his oddity status at Association of Higher Education Facilities Officers conventions. "We had a tough time attending activities because colleagues wanted to spend [an extraordinary amount of] time with us finding out how we outsourced and our reasons," he says. "At that time a lot of people said it would never work at their university. Now I hear they've outsourced that work."

According to a 2002 study by FMLink, an online publication for facilities and building managers, 72 percent of the nation's businesses in general outsourced custodial and housekeeping, 65 percent farmed out design and architecture, 63 percent hired others to do landscape maintenance, 51 percent said good-bye to in-house security, 50 percent contracted for preventive maintenance, and 45 percent of utilities maintenance was handled by outsiders. Of those polled, 36 percent said they were likely to add still more functions to their outsourcing lists.

Meanwhile, the folks at Philadelphia-based Aramark worked with 350 registered attendees last year when it held a web seminar on the topic, with a 67 percent increase in web traffic immediately after that event. Overall, the site has received 2 million hits since it launched last year. Such data means officials there estimate the number of IHEs now looking into comprehensive outsourcing is growing at perhaps 1 percent a year. In this large market segment, even a single-digit jump represents serious profit dollars for vendors.

Still, Elmore isn't spinning when she claims that comprehensive outsourcing as a strategy for campuses is not stagnating, but simply resting before the next crest.

The facts: Energy costs are escalating, a large percentage of college employees are nearing retirement, and deferred maintenance

issues have reached critical status (the average age of buildings on American campuses is 30 years), just as new construction hits a record pace over the next decade. It's no surprise that Thomas Galvin, vice president of marketing at energy management provider SourceOne in Boston, now sees first-timers knocking at his door instead of the other way around.

But SourceOne hasn't necessarily found a slam-dunk angle with its market niche. On campus outsourcing priority lists, "I'd say energy hasn't been at the top," Galvin admits. "In parts of the country where we see very stable, low-cost sources of electricity, there isn't the same sense of urgency as in Massachusetts, Connecticut, New York, and Texas, where there is real volatility in pricing."

So in the end, vendors and administrators agree on only one statement about facilities management outsourcing: "We are seeing, quite dramatically, an increase on the part of institutions to think about their facility needs and to consider outsourcing more often and much more seriously than before," notes Frank Mendicino, president of Aramark Education-Facility Services.

As a verb, outsourcing has outlived its headline news status. UNICCO, based in Arlington, Va., has served more than half its IHE customers in operations areas for more than 15 years. Randy Ledbetter, vice president of Business Development, says the facilities services firm retains more than 95 percent of its business-so longevity is piling up.

Nor are IHE administrators strangers to the success stories. That's why Tom Oates, who left Roger Williams University (R.I.) in 2003 to take over as vice president of Administration and Finance, treasurer, and CFO of the University of Bridgeport (Conn.), didn't mess much with the status quo there. Instead, he built on it-switching vendors in charge of buildings and grounds and janitorial but leaving the dining provider in place. Then he found a fourth company to handle security and a fifth firm to handle the mailroom. Still another group of gurus has taken over information technology.

In just three years, his policy helped turn a deficit into a $2.5 million surplus on the operational bottom line. Still, he says, he's ridden this train to the end of the outsourcing track, and he's not especially motivated to consolidate the current farmed-out functions. "You may have more than one service under your umbrella, but-to me, anyway-you have to be better in one area than the other," Oates explains.

He has a friend in Margaret Plympton, vice president for Finance and Administration at Lehigh University (Pa.). She didn't complain about the grounds and custodial contracts she inherited upon joining Lehigh five years ago. Both were with local firms with good reputations that would make competing with them in the hiring arena a tough proposition. "We've never seen that it's particularly preferable to have only one provider of both of these services, so that hasn't been a change worth making," she says.

Yet, when the university embarked on a major upgrade to its energy management systems, it made sense at the start to outsource the highly technical maintenance needs that accompanied it. "Over time, however, our facility staff had to develop expertise in those new systems, so when it came time to renegotiate that contract, it was not as financially advantageous and not as necessary," Plympton reports. So long, HVAC vendor-the boilers are back in house.

Baylor's Bagby oversees vendors that handle maintenance, groundskeeping, food service, cleaning, even elevators. Most of them came on board one at a time. That timetable is one reason he dismisses the notion this was a stressful change. "There really weren't very many fears. As long as we have the right people in place on the Baylor side to manage that, everything's fine," he says.

But vendors shouldn't expect much from a sales call on Herbert C. Peterson, vice president of Business and Finance at the University of Richmond (Va.). He did outsource food services years ago, and then tried the strategy again with information services over nearly a five-year period in the mid-1990s. "That was not a happy arrangement," he says bluntly. "It's a culture clash between two entities. It hampers flexibility. Everything has to be negotiated and renegotiated as opposed to making a decision and moving on."

Of course, many public IHEs have an economic incentive to put up with the hassles of outsourcing. For example, often they'll use money saved from outsourcing for capital improvements on campus, Peterson says. As a private institution, Richmond "can borrow money for things like renovations less expensively." Having more avenues for borrowing money makes outsourcing less important from a financial standpoint.

Such a variety of experiences signals one truth for Johnson Control's Elmore: Today's IHEs are making informed, deliberate decisions rather than being sold a program. Mendicino has seen the same shift. "Administrators are looking at facilities differently, with a greater sense of urgency to use them to the greatest advantage," he says. "The context for outsourcing and the discussion about outsourcing are different as a result."

Many of Rick Justis's contacts cite the classic reasons for outsourcing: Facilities management simply isn't a college's core business-or the task is complicated, changing often, and officials can't leverage their internal economies of scale to keep up. When the technologies needed for skills like floor cleaning, for instance, don't require certification or special tools, they keep it in-house.

In the next breath, he reverses himself. "There is another line of thought that says to do complicated stuff in-house because it gives staff more of a challenge. These campuses outsource the routine, basic stuff," he reports. "And that's what's so confounding with universities. You see just as many thinking one way as another. Then the administration changes and the new person decides to use exactly the opposite logic."

"In just three years with the higher education market, the conversation has gone from 'Don't say the O word' to 'We need help'."

-Kristy Elmore, Johnson Controls.

In other words, there's no discernable pattern as to how IHEs handle outsourcing. Nor can vendors pinpoint whether it makes more sense for public or private institutions, large or small campuses-although some experts do admit the heavy union representation at larger schools can nix a lot of outsourcing possibilities. Perhaps most shocking of all, the players can't determine if this strategy is a savings, and whether they care either way.

From Christensen's seat, if outsourcing doesn't make sense from a financial liability standpoint and then also comes at a cost, why bother? Financial benefit weighs in as the largest factor among the IHE folks Elmore rubs shoulders with as well.

Ask John Anderson, vice president for Finance and Administration at Wake Forest University (N.C.), about their outsourced dining facilities, then get out a calculator and follow along: "Now we have a real food plan-before we just had a food service. That goes to the bottom line. It also means when we think about renovating other facilities we have a cash flow to think about. Not many endeavors that took a year of work and planning have paid off quite so well for us."

But although clients certainly bring up the cash angles with Mendicino, he claims it doesn't drive the conversation. Instead, chimes in Cathy Schlosberg, vice president of Marketing at Aramark-Education Facility Services, they are more interested in finding out how a hired gun can help leverage physical assets against pressures like increasing enrollment and competition for students.

Oates' experiences fall into that camp. He likes his budget boost at University of Bridgeport, but he really values getting top-notch advice for his investment. "I am not an expert in bookstores, I don't know all the policies relative to returns," he says. "We're getting a very good product for the price."

Plympton's initial number-crunching indicates outsourcing is the more expensive option. After all, a for-profit firm has to pay taxes (an area universities can duck) and show a profit for shareholders (again, foreign concepts to educational institutions).

"You might wonder why a university wouldn't say, 'Let's sell the entire campus and lease back the space,'" says Justis. "They don't even look into that because the numbers are shocking. The cost to rent total office space versus what it costs universities and colleges to own and operate their own campuses is outrageously lopsided."

But administrators forget the cost of finding, hiring, training, and keeping employees-numbers Plympton takes into account. To date, outsourcing in two areas has landed on the cost-effective side of the column. However, she admits, she can't currently quote a cost savings number for Lehigh University, so it's conceivable the situation has changed since the last contract negotiation.

"If somebody comes in looking at outsourcing as a way to obtain significant cost savings, I'd really question that," Bagby says. "Between 60 and 70 percent of costs related to facilities management is labor. You'd have to cut that significantly to see any difference." Ledbetter backs him on this issue: Bringing UNICCO in for a wages/benefits budget slash is a short-term approach, he explains.

Savings like Oates enjoys stem more from good management techniques, vendors say. For instance, best practices prevent repairs. They use their buying power as the representative of several campuses to drive down supply prices. They standardize inventory and implement more efficient procedures using higher-grade equipment. "We change the way [IHEs] do business," Ledbetter stresses.

SourceOne CEO Brian Casey routinely sees a shortfall in administrators' abilities to identify innovative products and stay on top of the energy marketplace's roller coaster. That alone has driven about 12 universities to outsource some aspect of their energy management. Future survival rather than immediate cash flow spurs them. It's also the death knell for any partnership that doesn't require both sides to put up a vested interest.

Some experts do admit the heavy union representation at larger schools can mix a lot of outsourcing possibilities.

"One of the things we've seen in this market that was taken up pretty aggressively during the heyday of demand side are management initiatives funded by utilities as the shared savings model," Casey says. "It may work and give the appearance of avoided cost to the school, but it might not be as advantageous as it could be."

Such wildly fluctuating variables to every outsourcing question leave vendors more likely to admit their services aren't a foregone conclusion. To continue playing in this space, they must deliver improved service, greater competence, better asset protection, more optimization of resources, and efficiencies. It actually puts them in the same boat with the administrators they want to partner with.

No matter what decision is made on outsourcing, says Mendicino, facilities organization must be a strategic conversation.

Folks like Elmore are willing to bet the chips still fall on their side of the table. "Outsourcing will be a continuing trend. That doesn't mean IHEs will end up doing a full-on outsourcing of their facilities, but I think it will make sense for a lot of institutions to do some," she sums up. "At least everyone is more openly talking about it."

Good Medicine

How institutions can meet the needs of the modern student with a state-of-the-art health care facility

To combat the growing number of health issues affecting college students today, colleges and universities have greatly expanded the range of health services they offer-tackling everything from fitness and stress management to alcoholism and smoking cessation.

Unfortunately, these robust programs are often hindered by inadequate and aging health-care facilities.

The President Next Door

For the spring semester, the president of Ursuline College moved into a new residence hall on campus. In just a few months she gained insights into college students and their lives.

When students moved into the new residence hall this January at Ursuline College, a small Catholic liberal arts school for women in suburban Cleveland, they had a most unusual hallmate. Ursuline's president, Sister Diana Stano, had decided to spend the spring semester living with juniors and seniors in the college's new dorm.

Pages