Where are we now? Strategic sourcing and universities

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Where are we now? Strategic sourcing and universities
Dr Dharm Kapletia, Senior Research Fellow, University of the West of England
Dr Wendy Phillips, Associate Professor, Strategy and Operations Management, University of the West of England

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  • Given the sectors early stage of maturity, the research team focused on supporting HEIs to make intelligent decisions about outsourcing. This concept is known as “strategic sourcing”If we just focused on the act of outsourcing, we would have a very limited picture
  • Definition and direction of the researchNegative associations with the term “outsourcing”Interviews in HEIs and public sector particularly (e.g. London councils) suggested many were thinking of “insourcing” servicesOver time, our investigation revealed the need for a greater link between “outsourcing/insourcing” decisions and a HEI’s strategyHence, we preferred the term “Strategic Sourcing”This appears to be consistent with the guidance coming from the Cabinet Office – where they argue that it is more important to adopt the “best business model” for the service in questionE.g. This might take the form of a Social Enterprise, Wholly owned subsidiary, Joint-Venture and so on... We have a decision tree that outlines the range of options available to HEIs, which builds on past OGC guidanceOUTPUTSTOOLKIT – Process Model, Tools, Intelligent Customer assessmentFINAL REPORT – Survey, findings, etc
  • From interviews and the survey, we believe in large HEIs, Procurement, Finance, Executive and Commercial functions have the potential to give different answers (because of the scope of their jobs – e.g. tactical vs. strategic)Future work should focus on Commercial / Business Development staff, and also include academic Departments (e.g. Engineering) that are big enough to control their own sourcing arrangements
  • Next slide is support services, which is equally under pressure
  • Similar trend across Mission Groups
  • Useful to understand institutional bias
  • Interesting results – clearly uncertain, and backs up what we know about that the sector needing to invest in procurement capability
  • As defined in slide 4, it is also clear HEIs need to link procurement to strategy and develop a robust intelligent client capability
  • What is behind this uncertainty? Is this due to a lack of data on performance, cost and quality?
  • Surprising result – not as difficult as perceived from our interviews
  • Are large HEIs making sourcing decisions without the input or support of procurement staff?
  • From survey data provided on services that have been outsourcing services – only “14% use the shared service model”New regional networks have formed now! Will be interesting to see what happens?GW4 (Great Western Four) - Bath, Bristol, Cardiff and Exeter. They are set to collaborate more on research projects, grant applications, IT procurement, infrastructure and equipment sharing.N8 (North of England) - Durham, Lancaster, Leeds, Liverpool, Manchester, Newcastle, Sheffield and York – collaborate on efficiency initiativesM5 (Midlands) – Aston, Birmingham, Leicester, Loughborough, Nottingham, Warwick – sharing of equipment
  • Current outsourcing rarely includes Academic Service Delivery, yet as highlighted in the previous slide 60% are entirely completely certain about how teaching will changeThe question is how will HEIs innovate in terms of engaging “external” delivery partners in the Academic Service Delivery space, with a view to enhance their value propositions to potential students
  • Where are we now? Strategic sourcing and universities

    1. 1. Where are we now? Strategic Sourcing in UK HEIs Dr Wendy Phillips Dr Dharm Kapletia
    2. 2. Outsourcing/Insourcing versus Strategic Sourcing “A fact-based and analytical process for optimising the supply base, to ensure the achievement of the Higher Education Institute's (HEIs) strategic objectives. This involves the appraisal of a full spectrum of internal and external business models, and strategic choices as to how HEIs can best realise economic, efficiency and effectiveness benefits.”
    3. 3. Where are we now? Guidance and Recommendations to the HE sector • Final report designed to support senior managers involved in Strategic Sourcing – Includes the results of our 2013 survey (participation 44% of UK HEIs) – Insights from 31 interviews with experts from HE, public and private sectors – Findings from workshops – Exemplars of good practice • Strategic Sourcing toolkit on the www.EfficiencyExchange.ac.uk Freely available online, and contains: – A life-cycle process model tailored for use in HEIs and tools that can be applied at key stages – An Intelligent Customer Function (ICF) Capability Audit to assess an institution’s maturity and gaps
    4. 4. Survey Highlights • 44% response rate to survey (target population 131 HEIs) HEI participation by mission group – 67% Russell Group – 36% 1994 Group – 38% UKADIA – 11% Million + – 46% University Alliance – 48% Identified Non-Aligned • Respondents by profession 41% in Finance 30% in Procurement 17% in the Executive function (Vice Chancellors, their Deputies, PVCs, etc) 12% in other senior roles Total HE sector findings – 75% stated they already outsource to some form of service provider, with sector average of 4 services contracted out – Identified 53 types of outsourced services, almost entirely ‘support services’ based activities – 73% service provider, 14% shared service, 13% under market testing – Services identified, 61% fully outsource to private sector, 29% within public/not for profit, 10% co-source with private sector – Just over two thirds involved ‘fully outsourcing to private sector’, just under a third within the public/not for profit, and very few co-sourcing with private sector – In terms of strategic benefits sought, requirements appear to focus fairly evenly across efficiency (38%), effectiveness (33%) and economic (29%) type benefits. – Benefits expectations focused on: improved productivity (33%), risk reduction (28%), student satisfaction (25%), academic delivery (8%) and revenue generation (6%)
    5. 5. UK HEI Sourcing Maturity Framework Support Services LEADERSHIP & PLANNING (5%) PROFESSIONAL SERVICES (34%) Academic Delivery OPERATIONAL SUPPORT SERVICES (58%) International student recruitment UK Undergrad applications Careers services Counselling Data Analysis Pension administration Marketing - photography Parts of HR INFRASTRUCTURE (26%) Inputs Project mgt of major builds EQUIPMENT (13%) ENABLERS (25%) Internal Audit Modified from DIS (2005) UK Government White Paper Cleaning Hospitality Catering & Platters Catering Student support Fire Risk Mgt Payroll Health and safety Shared campus FM and academic services Maintenance management Facilities Management Estates / Building Maintenance 2 PFI buildings Halls / Student Accommodation Grounds maintenance or landscaping Library services Heating and Cooling Contract Lift maintenance Sports facility Website Development Data Centres Desktop provision IT and AV PEOPLE (36%) Print management Invoice receipt and scanning Student email/ calendar Out of hours IT helpdesk Finance - Tax Advice Electrical Contractors Energy procurement Real estate advisory Rating services Legal Services UCAS Insurance Nursery services Student transport Security Recycling OC / Health Service Retail KNOWLEDGE CREATION KNOWLEDGE SHARING (3%) Pathway centre for overseas students International teaching delivery Some teaching KNOWLEDGE UTILISATION
    6. 6. Interview data – HEIs and the Outsourcing Learning Curve Client Behaviour Phase four: Institutionalized Focus on Value-added Phase three: Market matures, Richer Practices Emerge Phase two: Early Adopters, Best & Worst Practices Emerge Phase one: Hype and Fear Time/Value Modified from Willcocks, LP; Cullen, S; and Craig, A. (2011) The Outsourcing Enterprise. New York: Pallgrave Macmillan
    7. 7. Survey Questions on Policies & Processes (1/7) My institution has benefitted in the past from outsourcing or shared services, working with external or partner organisations 30 42% 25 37% Number of respondents 20 NOT ALIGNED UNIVERSITY ALLIANCE 15 MILLION+ UKADIA 1994 GROUP 10 RUSSELL GROUP 10% 5 7% 5% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    8. 8. Survey Questions - Policies & Processes (2/7) My institution is not under pressure to reform ‘academic delivery’ (teaching, research, knowledge transfer, etc) 25 37% 20 Number of respondents 30% 15 NOT ALIGNED UNIVERSITY ALLIANCE 20% MILLION+ UKADIA 10 1994 GROUP 10% RUSSELL GROUP 5 3% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    9. 9. Survey Questions - Policies & Processes (3/7) My institution is not under pressure to reform ‘support services’ (HR, Finance, ICT, FM, etc) 25 38% 35% Number of respondents 20 15 NOT ALIGNED UNIVERSITY ALLIANCE MILLION+ UKADIA 10 1994 GROUP 12% RUSSELL GROUP 10% 5 5% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    10. 10. Survey Questions - Policies & Processes (4/7) My institution is actively assessing the potential of different sourcing models to realise economic, efficiency and effectiveness benefits 35 50% 30 Number of respondents 25 NOT ALIGNED 20 UNIVERSITY ALLIANCE 23% 15 MILLION+ UKADIA 1994 GROUP RUSSELL GROUP 10 12% 5 8% 7% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    11. 11. Survey Questions - Policies & Processes (5/7) My institution prioritises internal improvement and transformation above external outsourcing and shared services 25 34% 20 30% Number of respondents 28% 15 NOT ALIGNED UNIVERSITY ALLIANCE MILLION+ UKADIA 10 1994 GROUP RUSSELL GROUP 5 3% 5% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    12. 12. Survey Questions - Policies & Processes (6/7) My institution has the skills, tools and resources in place to make endto-end sector-leading sourcing decisions 20 32% 18 25% 16 Number of respondents 14 18% 12 UNIVERSITY ALLIANCE 17% 10 NOT ALIGNED MILLION+ UKADIA 8 1994 GROUP 6 RUSSELL GROUP 8% 4 2 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    13. 13. Survey Questions - Policies & Processes (7/7) Strategic sourcing is fully considered and appropriately represented at the highest level in my institution 20 32% 18 25% 16 23% Number of respondents 14 NOT ALIGNED 12 UNIVERSITY ALLIANCE 15% 10 MILLION+ 8 UKADIA 6 1994 GROUP RUSSELL GROUP 4 5% 2 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely Russell Group HEI comments: “I am unsure the true meaning of "strategic sourcing" happens anywhere across the sector”
    14. 14. Survey Questions – Strategy & Environment (1/8) The core business of my institution is research and teaching 60 87% 50 Number of respondents 40 NOT ALIGNED UNIVERSITY ALLIANCE 30 MILLION+ UKADIA 1994 GROUP 20 RUSSELL GROUP 10 5% 7% 2% 0 Disagree completely Disagree slightly Russell Group HEI – “Social Responsibility is 3rd core goal” Neither agree or disagree Agree slightly Agree completely Non-aligned – (HEI 1) “Support to local enterprise and community issues” and (HEI 2, comment on survey question) “We have a commercialisation strategy, under which we actively seek out opportunities for generating revenues and value from our skills, expertise, facilities and resources”
    15. 15. Survey Questions – Strategy & Environment (2/8) Internally provided services deliver best value for money at this time 30 42% 25 32% Number of respondents 20 NOT ALIGNED UNIVERSITY ALLIANCE 15 MILLION+ UKADIA 1994 GROUP 10 RUSSELL GROUP 13% 10% 5 3% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    16. 16. Survey Questions – Strategy & Environment (3/8) The market is not mature enough to offer competitive sourcing options for our internally run services 18 28% 27% 16 14 20% Number of respondents 12 17% NOT ALIGNED 10 UNIVERSITY ALLIANCE MILLION+ 8 UKADIA 1994 GROUP 6 8% 4 2 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely RUSSELL GROUP
    17. 17. Survey Questions – Strategy & Environment (4/8) The VAT consideration is the most significant barrier in outsourcing to the private sector 25 37% Number of respondents 20 25% NOT ALIGNED 15 UNIVERSITY ALLIANCE MILLION+ 17% 10 15% UKADIA 1994 GROUP RUSSELL GROUP 5 7% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    18. 18. Survey Questions – Strategy & Environment (5/8) Pressure from trade unions prevents my institution from exploring the full range of sourcing options 18 28% 27% 16 25% 14 20% Number of respondents 12 NOT ALIGNED 10 UNIVERSITY ALLIANCE MILLION+ 8 UKADIA 1994 GROUP 6 RUSSELL GROUP 4 2 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    19. 19. Survey Questions – Strategy & Environment (6/8) My institution’s sourcing decisions are centralised and have visibility over all major procurement life cycle activities, across Departments 20 30% 18 25% 16 22% Number of respondents 14 12 NOT ALIGNED 17% UNIVERSITY ALLIANCE 10 MILLION+ UKADIA 8 1994 GROUP 6 4 RUSSELL GROUP 7% 2 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    20. 20. Survey Questions – Strategy & Environment (7/8) Shared services with other Universities presents a superior sourcing option when compared to outsourcing to the private sector 30 47% 25 Number of respondents 20 NOT ALIGNED UNIVERSITY ALLIANCE 22% 15 MILLION+ UKADIA 1994 GROUP 17% 10 5 RUSSELL GROUP 8% 7% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    21. 21. Survey Questions – Strategy & Environment (8/8) Outsourcing aspects of teaching provision is likely to take place in the short to medium term for my institution 30 40% 25 Number of respondents 20 NOT ALIGNED 22% 15 25% UNIVERSITY ALLIANCE MILLION+ UKADIA 1994 GROUP 10 RUSSELL GROUP 8% 5 5% 0 Disagree completely Disagree slightly Neither agree or disagree Agree slightly Agree completely
    22. 22. In terms of academic service delivery, what are the top 1-3 challenges your institution will face in the next 10 years? HE Sector Response 1. Improving teaching delivery, 2. Improving student engagement and satisfaction, 3. Enhancing ICT (includes innovation in teaching and learning) These priorities are common priorities across Mission Groups, although University Alliance managers also gave importance to issues around 'General operational performance and quality', and Non-Aligned were also concerned about ‘national and international competition’ Impact on future direction of Strategic Sourcing? Academic Service Delivery Knowledge creation (Research) Knowledge sharing (Teaching) Knowledge utilisation (Tech Transfer) 0% 3% 0% 3% 5% 34% Leadership & Planning Professional Services Support Services Leadership & Planning Professional Services Operational Support Services Operational Support Services 5% 34% 58% 58% Knowledge Sharing
    23. 23. Summary of findings • • • • • Some HEIs are now recruiting experienced procurement professionals from the private sector, however the sector needs to invest in skills, training and capability to develop robust business cases and strengthen contract management Despite the need to establish sound governance arrangements, many HEIs fail to integrate such arrangements into their contracts, undermining the ability to maintain the level of relationship required to leverage benefits. Strong programme management is needed from the centre to ensure procurement is aligned to strategic objectives and expected benefits are realised Academic delivery and revenue generation not commonly identified as areas benefiting from strategic sourcing - HEIs could prioritise these benefits to offset the reduction in central government funding, improving their ability to differentiate themselves both nationally and internationally. Where there is potential for growth, collaborative sourcing models such as joint ventures may present new strategic options and help improve HEI competitiveness.

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