IT Crash Course: How To Win Education Business

Education has long been a challenging market to crack for solution providers. Budgets are incredibly tight, resources are strained, and focus remains on test scores more than IT--particularly in K-12, where No Child Left Behind links funds to student achievement. Results from GovernmentVAR's State of the Government Market Survey reflect those challenges. On the average, K-12 and higher education account for only 8 percent of revenue each for the more than 200 solution providers surveyed. When asked which segment of the public sector offers the greatest growth potential, less than 20 percent chose K-12 or higher ed.

Those results reflect the conservative growth in both segments. According to Reston, Va.-based research firm Input, IT spending in education will increase slowly over the next few years, growing from less than $7 billion in 2007 to about $9 billion by 2011. Additional innovation will happen through widespread state initiatives that increasingly incorporate education, such as the Illinois Century Network, which provides communication links through a high-speed telecommunications network to and among schools, higher education institutions and other state and local agencies and entities that provide services to citizens.

Within the two segments of education, universities will increasingly focus on consolidating operations, enhancing networks and reducing inefficiencies in IT applications, according to Input, driving an increase in higher ed spending on professional services for system analysis and design, and network integration and support. K-12 will continue to invest in IT to support online teaching applications and enhance education programs, but remains very decentralized across jurisdictions and constrained by federal mandates and inadequate funding.

"Aggressive pricing makes it harder for the smaller guys to compete," says Justin Smith, president and COO of Victor, N.Y.-based Brite Computers. "It keeps smaller organizations and local or regional systems builders from being able to play. We're focusing elsewhere, including private [universities]."

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The Challenge: Bigger Contracts, Fewer Opportunities

Often, the local and regional players get bumped out of the running for education opportunities because of state contracts that either drive out margin or stack the odds against smaller integrators.

New York, for one, put an aggregation strategy in place for all agencies--including public school districts--that offers prenegotiated discounts when purchases are made through named contractors. And in Pennsylvania, California, Illinois and Ohio, a technology bidding and purchasing program drives purchasing of education-focused technology products to specific vendors. Contrast that with Ohio, where schools have "favored vendors" that they can choose over an alternative, even if the associated cost is slightly higher. Those are only two examples of the challenges associated with education contracting.

"Really, the opportunities change state by state," says Tim Malone, director of business technology sales at Cleveland-based MCPc. "In Ohio, funding is screwed up, so trying to get a deal finalized can take forever. But in Georgia, it's very straightforward. What can be more frustrating for us is that not all resellers understand what's involved, so our competitors can make the process of bidding opportunities more [complicated]."

NEXT: Companies that education customers favor.

Generally, the companies favored by education customers tend to be large, with the capital necessary to offer deep discounts and vendor relationships that result in a huge portfolio of products. So while small and midsize businesses more often target education (see "Market Penetration," right) trends in purchasing increasingly drive more opportunities to the larger integrators.

According to the survey, 62 percent of large businesses reported growth in higher education, compared with 48 percent of small businesses; in K-12, 52 percent of large businesses reported growth, compared with 48 percent of small businesses.

Data Networks of America, for example, reported $81.5 million in public-sector revenue in 2006--$53 million of which came from education. The Hunt Valley, Md.-based company, which ranked No. 79 on this year's GovernmentVAR 100 list of the most profitable public-sector solution providers, touts K-12 customers in North Carolina, Pennsylvania, Georgia and Maryland, to name a few, and higher-education contracts with Towson University, University of Maryland and Bowie State University.

"Our success is a function of the contract vehicles that have been awarded to us or that we have access to," says Rick Fairhurst, account executive for K-12 and higher-education business at Data Networks. "Where you have the history is where you get the business. We do 14 times the amount of business in K-12 compared with higher ed, mainly because we have relationships and contracts with very large districts. If we're one of two or three solution providers that do business with a given school system, the odds are that we're well-positioned to win, even before we do a pitch."

Bob Moore, executive director of IT for Blue Valley School District in Overland, Kan., agrees. "State contracts are huge. Once we select the solution, that may be the biggest factor in determining who we do business with. Sometimes state laws can strangle you in terms of bid requirements and so forth, so being on a state contract gives us the flexibility."

He encourages vendors to list as many solution provider partners on a contract as possible, providing options to the district while also driving opportunities to the channel. "Even if a district has done business with a particular VAR for a number of years, if they're not on a contact, that can end the relationship."

NEXT: Tech distinctions between higher education and K-12.

To position themselves for wins, solution providers have to recognize the distinctions between higher education and K-12 and adjust their sales strategies to match the IT requirements of both.

Here's what the two segments have in common: They both face challenges associated with funding, which can limit the margin the channel can pocket; and the standards set by state governments often influence the procurement process.

Generally speaking, that's where the similarities end between the K-12 and higher-education markets. In terms of IT innovation, the two segments are on opposite sides of the spectrum. Solution providers have to recognize where on the IT implementation curve both segments fall.

"Truly new technology often seems to enter the market in higher education. Then it's adopted in the federal community, flows down to state/local government and finally ends up in the K-12 market," says Bob Laclede, vice president and general manager of government and education at Ingram Micro. "The higher-ed market is typically on the bleeding edge of technology. They'll try anything. Once the technology is proven and the bugs are worked out, the feds will adopt it, which results in some major procurements. Eventually the state/local market follows, and finally the technology works its way down to the K-12 segment."

Laclede uses wireless technologies as an example. Colleges and universities were experimenting with wireless four or five years ago, with little security in the initial implementations. Eventually wireless security technology came to the market and took hold, he says, universities shook them out, and now both the federal and state and local segments are driving cross-government implementations. School districts are starting to adopt the technology, but far more slowly.

That reality often drives solution providers to target colleges and universities, figuring the latest and greatest technologies will be an easier sell. The challenge, however, is accessing the people that make IT purchasing decisions and getting them to relinquish control over systems. As one survey respondent put it, "There's an inability to get past the 'electronic moat' that surrounds the leadership of most institutions."

But as universities increasingly extend enterprise applications across distributed campuses, internal resources become strained. That creates new opportunities for the private sector.

"We don't have the technical expertise in the small offices across the campus to support the departmental applications used more and more as we standardize processes," says Charlie Hofmann, manager of the database application development IT unit at George Mason University in Fairfax, Va. "That work is often outsourced or hosted by [solution providers] that have been coming in a lot stronger with these types of services." In the past year, many of the major projects at George Mason have been related to Sun Identity Manager and the SunGard Banner administrative suite, which is specifically designed for the higher-education market.

"I see a lot of partnering happening between companies that we work with to ensure [all players] are privy to new releases and get the necessary support to develop proper interfaces," Hofmann says. "So much is interrelated."

Contrast that with K-12. School districts may be lagging behind colleges and universities in implementation, but they're also at a point of major modernization that could bring a bit of a spike in IT spending. Schools are investing a lot of dollars in their infrastructures, with widespread implementation of networking software, curriculum applications and more. Solution providers should be prepared to take smaller steps, gradually introducing technologies that help schools move forward, and educating decision-makers about how those technologies can be maximized down the road. Those that do could see major opportunities.

"I've been in a technology leadership role for nearly 20 years," Blue Valley's Moore says. "It's felt increasingly different in the last two to three years. Purchases are becoming more systematic, where previously they were more sporadic. The level of [implementation is] finally getting to where we hoped--it's mission-critical. I'm tiring of those individuals who constantly bash K-12 as being so incredibly behind in technology. I just don't see that."

Blue Valley's major implementations have involved data warehousing for analysis of student information and performance. The district also offers complete wireless coverage, online assessments and curriculum applications to improve student performance. Driving IT implementations is a desire to "individualize learning," Moore says. Solution providers that can help make that a reality while keeping customers in the know will win business.

"In some cases, a company is the wizard behind the screen, and you don't see what's going on," Moore says. "The biggest frustration is getting complete information from a vendor or solution provider. There are different levels of expertise among staffers, but we have a lot of knowledge and we ask a lot of tough questions. As much as [VARs] need that sale, we have to look out for the best interest of the district. They ultimately have to respect our decision."