Using Technology to Transform the Back Office

Can technology and better procurement play a role in generating front line service improvements and lower costs? And how can this be achieved?

Jane Byford, Partner and Head of Higher Education look at some of the issues.

Universities rely on professional services teams to do everything from manage the estate to payroll, human resources and procurement. Each service has a clear role to play in enhancing the reputation and marketability of an institution; often, the student's very first experience will be engaging with professional services to obtain copies of a prospectus or attend an open day.

Pressure on resources and budgets has led many institutions to look prudently at their approach to back office service provision. Competition for student (and staff) recruitment means that universities are applying a 'bang for buck' test to the full range of professional services across their institutions, to free up investment to front line education and research provision.

Is Less Always Best?

But, often, simply removing layers of back office service does not generate the desired savings. Indeed, recent research has shown that the best performing institutions are not afraid to spend to be effective and that stripping out administration costs alone is not always the best way to generate value for money. Investment in service areas can actually contribute to the bottom line and the student experience.

A combination of redesigning service provision, investment in new technology and better procurement can all generate improvements in service quality. Many projects which VWV has worked on have generated benefits by better utilisation of existing resources.

Redesigning Service Provision

This means identifying what you currently have, and what you need for the future. This business process review work will often cover an analysis of current assets, contracts and the cost centres to identify areas of increasing and decreasing demand. By way of example, many finance teams are seeing an increase in queries from students and credit control issues and so will be looking at staff redeployment and investment in systems to meet this need.

Developing and updating contracts registers can help to identify overspend areas and to map re-procurement needs in advance. This avoids last minute contract extensions and negotiations with the incumbent supplier where there is no competitive tension to drive a lower cost.

Simply buying a managed service for some or all of the back office services of a university can have unintended (and expensive) consequences. The service provided by a third party  often does not deliver improved quality or performance , especially where the resources to deliver the services will very often be the same. Outsourcing a problem can often simply lead to increased costs, as the provider will pass on the operational risks that they cannot manage back to the university and charge a fee for doing so. This makes the business process review work, pre-procurement, essential.

Many institutions are looking at alternative business structures to deliver back office services. This could include creating a wholly owned trading subsidiary which can then employ staff and provide services back to the main institution. Structured appropriately, this mechanism need not require a procurement process between the university and the subsidiary, and there could also be an incidental trading role for the subsidiary of up to 20% of its activity (for example, providing similar services to other institutions as a way to generate further income from the same resources). Others are currently considering creating a Cost Sharing Group (CSG), which, again, involves the creation of a separate legal entity, but one where all of the members of the group are directors of the company, and services can be provided to all members without attracting VAT on any services payments made. The model requires cost recovery only, and there are limitations around private sector involvement in both of these structures. Whatever model is considered, is likely to need careful consideration of the HR and employment law aspects at a very early stage.

Technology Investment

Students are increasingly seeing new ways of interacting with the institution, be it via smartphone app, online resources for payment of accommodation and tuition fees as well as academic progression. So called student 'lifecycle' projects involving the creation of bespoke new software and IT solutions can generate efficiency in professional services, freeing up staff into more front line service provision roles. These projects help institutions to create so called 'smart data', harnessing the vast amount of information held by institutions and using it even more effectively to identify areas for future investment.

The move towards technological solutions does not end with administrative services, as of course, many institutions are also looking at new ways of delivering online teaching, whether through shorter courses with lower fees, or more flexible study patterns. This, in turn, often means that existing assets can be redeployed in different ways to generate income, and surplus existing contracts can be terminated or allowed to expire.

Better Procurement

Any new way of delivering services, and the technology required to do it, will require a procurement process to be run by the university. Soft market testing with the supplier base before starting any procurement process will help identify what the market can offer, and the likely costs of doing so. This, in turn, will help to set the bar on what type of service is required and the level of investment needed. Identifying the assets and existing contracts before going to market will help avoid any delay to the procurement process later, and any contingent pricing by bidders who otherwise may not know what they are likely to inherit on day one.

For those institutions caught by the EU procurement regime, contracts of this nature will generally best be procured via competitive dialogue or negotiated procedures which allow the university to negotiate on the contract solutions with bidders. Innovation partnerships are being discussed more and more across the sector, but the narrow parameters for these procurements mean that it is often not the best choice given the strict rules on areas such as intellectual property.

A 'big bang' procurement may not always be needed; often, advances through trials of new technology can be achieved on a discrete, often low cost basis, which can be invaluable to help set the direction of future back office needs. Whichever route is chosen, doing the groundwork first is essential to help ensure that the transformation (big or small) is a success.

For further information, please contact Jane Byford on 0121 227 3712.