Paper of Stephanie Fahey Ernst & Young Australia – Higher Education

Higher Education - Looking Forward
An Educator’s Perspective:
A thousand year old industry
on the cusp of profound change
21st Century Universities:
Performance and Sustainability
IUA Symposium, Dublin
29th September 2014
The University of the Future
Drivers for Change
Democratisation of Knowledge & Access
• Contestability of Market & Funding
• Digital Technologies
• Global Mobility
• Integration with Industry
Evolving University Models
The EY Education team
Our capabilities and service offerings
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Global education sector
The EY Education Team
Professor Stephanie Fahey
Oceania, Education Lead Partner
Formerly DVC Global Engagement Monash
University, Melbourne
[email protected]
Local EY partners, Dublin
John Higgins
[email protected]
Colm Devine
[email protected]
More than 300 staff globally with education
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Global education sector
The University of the Future
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Global education sector
The University of the Future
The higher education sector is undergoing a fundamental transformation in terms of its role in society,
mode of operation, and economic structure and value.
To explore these themes and future directions, EY worked closely with the University sector to identify
and categorise the main forces impacting the higher education industry globally and locally, and the
opportunities, challenges and implications, primarily for the University sector in Oceania.
The output from this process was a publication - ‘The University of the Future’ (2012) - which both
identifies the drivers of change in this brave new world and anticipates three broad lines of evolution
for institutions responding to these challenges.
Our primary hypothesis is that the dominant university model: a broad-based teaching and
research institution, supported by a large asset-base and in-house back-office, will prove
unviable, in all but a few cases over the next 3 to 5 years (we underestimated the pace of
change in our 2012 report).
At a minimum, universities will need to streamline their operations and asset base, and at the same time add new
teaching/learning delivery mechanisms. Explicit stakeholder expectations for increased impact will increase
At its extreme, private providers (and possibly some public universities) will create new products and markets
which effectively blur the line between education, media, technology, innovation and venture capital
What is worrying is that institutions appear to be in denial about the magnitude and the inevitability of the changes
What I would like to do today is review some of these challenges with a particular focus on the
implications for universities and policy makers in Ireland. My aim is to be provocative.
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Global education sector
The Drivers of Change
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Global education sector
Drivers for Change
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Global education sector
1: Democratisation of Knowledge and
Traditionally, universities held the key to knowledge, in both a physical and philosophical sense.
Today, access is expanding both in developed markets but even more fundamentally in emerging
University libraries, faculty domains and research institutes were where knowledge was created, stored and
shared and universities held a privileged status as originators and keepers of knowledge.
50 years ago access to universities in developed countries was restricted to modest levels of about 5% of school
leavers but with the ‘massification’ of HE, it has grown to comprise 40-50%. In emerging economies, access is still
restricted to a very narrow proportion of society, typically the elite.
In China participation trebled from 8.0% to 25.9% in the first decade of this century, and is likely to double again in
the next 10-15 years. Five years ago there were no Chinese universities in the top 200; now there are six. With
$250b a year being invested in Chinese universities, it is only a matter of time before these universities enter the
top 100.
The ‘massification’ of higher education is driving a global ‘education revolution’ within societies by creating
opportunities for millions of people and their families to increase their standards of living.
Increasingly knowledge is open to anyone globally with a device and connectivity — not just facts and figures, but
also analysis, interpretation, and curation of knowledge although credentials are still controlled mainly by the
For universities, this is driving new approaches to teaching and learning, creating opportunities for
entry to new markets and new global partnerships, stimulating new distribution approaches — and
also creating new sources of competition and sustainability challenges.
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Global education sector
1: Democratisation of Knowledge and
Implications for the University Sector in Ireland
The importance of equity of access, both as a foundation stone of social mobility and a means for
realising Ireland’s higher education skills targets is recognised both by the Hunt Report (2011) and in
the recent Higher Education System Performance Report (2014)
Democratisation of knowledge and access, especially as it ripples through the developing world will
create significant opportunities for those Universities who are globally competitive
The challenge for the University Sector in Ireland, as elsewhere, will be to maintain and grow student numbers in
this environment (as required by their performance compacts) but at the same time maintain quality
The compelling challenge for the Irish University Sector will be to address the opportunity that this creates in an
environment which is currently heavily fiscally constrained
While the Higher Education System Performance Report explicitly recognises the need for Irish
Universities to be globally competitive, less clear to an outsider is how this will be funded and how
this can be delivered in an environment where student numbers and staff:student ratios are both on
the rise.
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Global education sector
2: Contestability of Market and Funding
Since the global financial crisis, most developed economies have experienced a decline in State
funding per student, some more rapidly and deeper than others
The UK experienced one the most dramatic increases in the proportion of private expenditure on tertiary education from
2000-2011 (30-70%). The US and Australia showed marginal increases but were already about 65%.
In 2011, Australia ranked 24th out of 30 OECD countries for public investment in tertiary education (OECD 2014) but is still
above the UK and the US. The proportion dropped between 1995-2000 with the introduction of student funded HEC.
In Australia Government introduced a demand-driven funding model in 2012 in order to increase
access, drive competition and differentiation - numbers increased and distribution shifted.
A number of mainly lower ranked universities that had previously felt secure in their market shares found themselves
confronted by losses of 5-10% as some of the more highly ranked universities and those in niche areas increased their
intakes to take advantage of marginal gains. Competition is set to intensify if/when proposed deregulation of fees for
domestic undergraduate students is introduced by the current Coalition Government.
While efforts may be made to limit the fiscal implications of growth in enrolments, the deepening of
market contestability is unlikely to be reversed, either in Australia or internationally. The market will
drive much of the pace of change - not just government policy – unfortunately this is not well
understood across the sector.
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While the University environment is markedly different in Australia to that of Ireland (where I understand core expenditure
per student has declined by as much as 15% in recent years and not replaced by other revenue sources), the broader trend
whereby every dollar of government funding is contestable and securing funds from non-government sources — students,
industry, philanthropists, and global collaborations — is fiercely competitive
Global education sector
2: Contestability of Market and Funding
Implications for the University Sector in Ireland
As yet, there does not appear to be quite the same level of competition for domestic students in
Ireland as seen in other markets due to demographics – but as the Australian example has shown,
domestic demand is not static. Demand is also impacted by affordability/access.
Nor would it appear that there is the same aggressive pursuit of international students with the use of
agents as is the norm in Australia although the expectation is that Ireland should double the current
New funding models, as the Australian example has shown, are incredibly efficient tools for driving
behaviour and the challenge for Irish Universities will be to ensure that a workable and sustainable
funding model is arrived at by the recently established Working Group on Future Funding.
The level, nature and basis for any performance funding element of overall university funding
which is advocated should be considered carefully with reference to the international
experience in this area.
Finally, on the broader subject of funding, there is a quantum of system learning now within Australia
on the relative merits of alternative models of student-based charging (including the Australian
deferred loan model which I understand has been considered in the Irish context) and on the
opportunities and risks that growth in international students numbers present to a national education
system (ie non-educational considerations can crash demand in a short-period).
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Global education sector
3: Digital Technologies
Digital technologies will transform the way education is delivered and supported - education must be
available anywhere, anytime – and deliver real-time student feedback, learning analytics, seamless
student support systems, transparency of ROI and employability - both in the developed and
developing world.
Digital innovation has disrupted many established industry sectors (newspapers, music, retail, airlines etc) . While ‘online
education’ has been here since the 1990s, in the last 2-3 years the pace of change has accelerated and has impacted the role
of the academic – the role will become increasingly disaggregated as curriculum development, presentation, online design and
analysis of learning analytics become specialisations.
Efficiency gains delivered through the digitisation of the support functions of Finance, HR, IT, central procurement, student
services and research support are yet to be realised in many institutions.
Digital technologies will not cause the disappearance of the campus-based university of the future.
Campuses will still exist as places of teaching and learning, research, community engagement, and of
varied student experience — assuming universities can deliver a rich, on-campus experience.
Digital technologies will transform the way value is created within HE - new technologies will enable
public and private providers to specialise in parts of the ‘value chain’ content generation/aggregation
and new models of collaboration with media companies will evolve. This is where private or nonuniversity providers will compete.
Some of these models will decline and fail, others will create very substantial economic value. Winners
are likely to be a mix of new, pure play online businesses and traditional businesses with powerful
online models and capability.
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Global education sector
3: Digital Technologies
Implications for the University Sector in Ireland
As digital technologies and innovative approaches to teaching, learning, collaboration in research
and student services extend their reach into Irish Universities I would expect a near-transformation of
both the on-campus and off-campus student experience.
In this context it is heartening to see that a Teaching and Learning Enhancement Fund has been
established in Ireland which is focussed on digital capacity for the education sector …with Phase 1
reviews of proposals due tomorrow, I’m sure some of you will be getting good news but one should
not underestimate the long-term investment required in technology and skilled staff in order to deliver
quality outcomes.
While improving local teaching and learning delivery to on-campus students is a worthwhile and
necessary goal, the real challenge for Irish universities will be to:
leverage new technologies to satisfy student demand for flexibility of delivery and to grow their remote and
international student base (aligning with multiple goals under the performance compact)
to position themselves as an attractive partner with industry and to develop sustainable (read profitable) models of
collaboration with industry
Digital technologies, the growth of the importance of rankings and increasing participation rates in
developing countries will intensify the competition for and expectations of internationally mobile
students – the Irish university of the future will need to ensure that it is well positioned in terms of
teaching and research quality, student services and profile (rankings and marketing).
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Global education sector
4: Global Mobility
Global mobility will continue to grow for students, academic talent, and increasingly for university
brands. In the face of government cut-backs, international students have been the lifeblood of the
Australian higher education industry especially over the last 15 years.
Of the 1m plus HE students in Australia, 22.3% (240,000) are full fee paying international students studying
onshore. Several universities have more than 30-40% of the study body who are international students.
In addition, tens of thousands of international students are studying at Australian off-shore campuses in Malaysia,
Vietnam, Singapore, South Africa, India, China and the UAE; in twinning arrangements with off-shore partners;
and as external students on-line.
While the international student market is growing rapidly, it will fundamentally change in structure in
the coming decade as traditional source markets – China, Malaysia, Singapore, South Korea and
others – increasingly become global-scale destinations for international students.
Global mobility of academic ‘brands’ is increasing and ‘MOOC-based’ distribution of content by the
likes of Harvard/MIT, Stanford, Open University and others is creating a global brand impact (if not
revenue at this stage).
Global mobility of students, professionals and university brands is also creating pressure for global
recognition of accreditation. Who will determine global credential standards will be a contested area.
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Global education sector
4: Global Mobility
Implications for the University Sector in Ireland
The Irish National Strategy for Higher Education already recognises the existing and potential value
from increasing the internationalisation of both students and staff within Irish Universities.
More recently the 1st Higher Education System Performance report emphasised these benefits and
charted significant progress towards the achievement of the 15% target for full-time international
students by 2020
There are a number of challenges however for Irish institutions in maintaining and growing this sector
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As noted on the previous slide, many of Ireland’s tier one targets for student recruitment (China, India, Middle
East) will themselves transition from source to destination markets in the next 15 years
Recruiting international students requires a reputation for both academic quality and the quality of the student
experience – fiscal constraints have the potential to very quickly impact on standard rankings in both these areas
Global mobility may favour recruitment for those elite universities and those with the capability to grow and extend
the reach of their the brands.
Increasingly universities will have to compete aggressively for their talent as academic mobility becomes the norm.
This requires flexibility in the conditions of appointment, salary packages and access to research facilities, funds
and high calibre students.
Global education sector
5: Integration with Industry
The relationship between the higher education sector and industry will deepen – industry will be a key
partner, and also a competitor in specialist professional programs. This change is already in train with
industry now playing multiple roles: as customer and partner of higher education institutions and,
increasingly, as a competitor.
For universities to survive and thrive, they will need to build significantly deeper relationships with
industry in terms of curriculum design, employment outcomes and research collaboration.
Scale and depth of industry-based learning and internships will become increasingly critical as a source of
competitive advantage for those universities who have the industry partnerships and pedagogy to do it well.
Where industry is small, or comprised of branches of MNC, research will struggle to flourish unless global
research collaboration models are facilitated and incentivised.
Research degree programs /applied research will increasingly be run in partnership with industry
EY is a perfect example – we recruit 1000s of new graduates each year, we sponsor university activities > $20m
pa, we deliver 9.5m hours pa training to our staff and deliver millions of hours training to our clients.
In Australia we have seen the Australian Technology Network of Universities’ deliver a new industry-based PhD
program, and the mining industry establish tight research partnerships with the University of Queensland and the
University of Western Australia.
In Australia, research funding has been slashed by the current government with priority given to areas where
Australia is a global leader ie clinical medicine and in areas where industry leads.
Research commercialisation will go from being a fringe activity to being a core requirement to secure funding for
many universities’ research programs.
Increasingly industry will compete with universities in a number of specialist professional programs.
Professional organisations (engineering, pharmacy etc) may follow the lead of the accounting bodies
and provide a range of specialised post-graduate programs with a particular emphasis on their role as
certifiers and deliverers of content.
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Global education sector
5: Integration with Industry
Implications for the University Sector in Ireland
The clear intent of both the Irish National Strategy for Higher Education and the performance
compacts for Higher Education Institutions is to make HE much more market facing, both in terms of
their explicit focus on meeting Ireland’s human capital requirements and also in terms of enhancing
cooperation with industry and commercialisation activity
Increasing PhD activity in Science, Technology, Engineering and Mathematics and projected increase in Masters
by research align closely with national objectives and industry requirements.
More broadly we believe that the implications for the Irish University Sector of changes in this area
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The nature of the engagement between universities and industry will deepen, broaden and become more strategic
to both parties – though this will not apply equally across all institutions
The emphasis and focus on the value of commercialisation activity will grow significantly and with it the role for the
Central Technology Transfer Office (CTTO)
Closer involvement of industry in the ‘business of education’ will see industry participants emerge as both jointventure partners and competitors to universities in multiple domains
The challenge will be who will be responsible for funding blueskies research and that required to support tuition.
Global education sector
Broad Implications
Together, these drivers of change will mean a
significantly different education landscape 5 years
from now. If universities do not choose their niches
– the market will effectively “impose” niches upon
them - so the message is: choose now.
Universities will be compelled to create new, leaner
centred business models as competition increases for
staff, students, funding and partners.
Increasingly, public institutions will be run like
corporations, while maintaining the necessary freedom
of inquiry and academic rigour.
Private institutions will exploit profitable market niches,
while others will create new markets and sources of
value; for example, by specialising in select parts of the
education value chain.
Policy makers will seek to maintain steady growth in
access to university education. They will search for
policy levers and programs that put the higher
education sector at the centre of a genuine knowledge
economy while inevitably tightening the public purse
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These changes will force universities to adapt
in a number of ways:
Breadth of programs — Universities will need to
consider whether they can maintain a competitive
position across a broad range of programs, or whether
to concentrate resources on a smaller range of
Target customers — Universities will need to have a
clear strategy around target student segments and
their specific needs and preferences. Universities that
do not become more focused on segments will be
exposed to competitors with targeted student
Channels to market — Universities will need to
rethink the role of digital channels and third party
partnerships in recruiting students and delivering
teaching and research programs.
Back office — The asset base and university
administration will need to be significantly leaner than it
is today.
Global education sector
Evolving University Models
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Global education sector
EY Framework for Assessing and Designing a
Model for the Future
Universities should critically
examine their current model,
develop a vision of what a future
model might look like, and develop
a broad transition plan
Public universities need to consider a
series of strategic questions
related to the viability of their
institution’s current model,
Deliberations on future models need
to include customer segments to
focus on, services they need, and the
universities’ channels to market and
role within the value chain.
Support functions will also need to be
streamlined. Regardless of the path
chosen, reform will need to align to
the institution’s purpose and values.
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Global education sector
Evolving University Models
The dominant university model in Australia
and elsewhere, is a broad-based teaching
and research institution, supported by a
large asset base
Serve a broad mix of student segments
Offer a broad range of disciplines
Deliver teaching and learning programs
primarily - supplemented by various online
offerings, franchise arrangements, international
branch campuses.
Deliver and manage the vast bulk of student
services and back-office functions in-house.
We now expect a significant transformation
of university business models in the coming
decade and beyond, despite the historically
slow pace of change in the sector.
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Global education sector
Evolving Models - Streamlined Status Quo
Some universities will continue to operate as
broad-based teaching and research institutions,
but will transform the way they deliver their
services and administer their organisations
In this model, the university:
• Continues to serve a broad mix of student segments
and continues to offer a broad range of disciplines
• Discontinues a small number of sub-scale/unprofitable
disciplines (or merges those disciplines with a
‘competitor institution’ to achieve scale) - providing the
resources required to maintain international
competitiveness in other disciplines.
• Invests heavily in digital sales and delivery channels,
both ‘pure play’ digital channels and blended models.
• Forms a range of sales and delivery that open up new
markets — or more efficiently serve existing markets.
• Outsources some back-office functions to realise lower
operating costs, and/or drives efficiencies through
shared services arrangements with like-minded
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Global education sector
Evolving Models - Niche Dominators
Some universities will fundamentally reshape
and refine the services and ‘markets’ they
operate in, with a concurrent shift in their
business model, organisation and operations.
The drive towards this model will come from the
challenge of staying competitive — in domestic
and international markets — across a broad
range of disciplines and segments.
In this model, the university:
• Chooses particular customer segments to focus on enabling the targeted development of course offerings,
sales channels, delivery and related
• Significantly reduces its range of education disciplines,
- focus on areas of genuine global strength/credibility.
• Builds deep alliances with industry in its chosen fields,
including partnerships to support R&D,
commercialisation of research and innovation etc.
• Like Streamlined Status Quo, streamlines its back
office, including using outsourcing and/or shared
services models to drive efficiency & scale economies
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Global education sector
Evolving Models - Transformers
Private providers and new entrants will carve out
new positions in the traditional sector, creating
new markets that merge parts of the higher
education sector with other sectors.
The model opposite represents a range of possible
market positions to be pursued by innovators, rather than
a ‘model’ of a single institution.
The evolution of the Transformer model will be led by
private providers rather than public universities (this level
of ‘disruption’ is hard to lead from the inside) but savvy
public universities will create value in this space by
leveraging two of their critical assets: credibility and
academic capability.
With democratisation of knowledge, credibility and
increasingly curation is king and universities are uniquely
positioned to bring credibility and to act as curators of
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Global education sector
Evolving Models – The Implications for
The inevitable evolution of University Models has pushed educators, policy makers and private sector
entities to begin to question some of the scared cows of the University system in Australia. These
The number of ‘world-class’ universities that a country the size of Australia can realistically continue to support
The breath of disciplines that a University should focus on and the place for specialisation in education provision
The role of the academic and the continuing involvement of all academics in teaching/research/content development
The responsibility of HE sector not only to educate students but also prepare them for the workforce (technical vs
university training)
The traditional ethos surrounding decision making and governance in universities which are not suited to rapidly
changing circumstances
Universities in Ireland will not escape these competitive pressures and we would expect
An informed decision to be made as to whether to support any one Irish University to the degree required to be a truly
world-class university (as opposed to individual departments) – Australia, with 39 universities, faces this same
More generally we would expect, and already see evidence of a move to a streamlined status – evidenced by the
ongoing rationalisation of the Institutes of Technology and Initial Teacher Education, the regional clustering of higher
education institutes and initiatives in ‘Back Office’ reform such as the Procurement Reform Programme and the push
to shares back-office services Shared Services Plan for Education and Training Sector
The bigger, more difficult questions relate to the degree to which Irish universities will be allowed and will be supported
to further specialize and become ‘Niche Dominators’ – with the acceptance that such aspirations would need to be
clearly and appropriately recognized in institutional performance compacts and any new performance funding
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Global education sector
EYs capabilities and service offerings
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Global education sector
Our global EY Services and Capabilities
Due diligence
Market facing
Project finance
Financial Accounting
Advisory Services
Real estate
Business Tax
Asset management
Capital markets
Core business
Business modelling
— decision support
Audit and accounting
Global education sector
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Compliance and
Reporting (ACR)
International Tax
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