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Differences Between For-Profit and Non-Profit Providers are Slim

AUDIO | Differences Between For-Profit and Non-Profit Providers are Slim
While there is a wide variety of service providers competing in the higher education marketplace, deep down they may not be as different as they might appear on the surface.

The following interview is with Phil Hill, a market analyst with MindWires Consulting. Hill has been active over the course of his career with helping organizations, major corporations and higher education institutions implement key IT projects. Across the higher education space, there are a wide variety of service providers competing for business from postsecondary institutions, from profit-making centers run out of universities to non-profit organizations. In this interview, Hill discusses the array of competitors in this marketplace and shares his thoughts on how this diversity can breed mistrust among institutional leaders.

1. How would you define “vendor” in the higher education context?

If you look at the pure definition of vendor, it’s basically anybody who’s selling products or services within an industry. It’s a very broad array. However, as the word is commonly used within higher education, I think there’s an assumption that’s a little bit more based on software and hardware products or services that directly impact the operations of a university. Another way to look at it; these are consumable items where the assumption is we can buy this from several vendors and choose the best price for these products and services.

The common usage of the term vendor within higher education tends to be much narrower than what other industries might define it as.

2. Would you consider the use of the term “vendor” as having an implicit assumption regarding the product that’s being sold or the service that’s being purchased?

What I hear most commonly — and it’s something I hope changes over time — the assumption is that the vendor is providing a product or service that’s almost a necessary evil, from the viewpoint of a lot of higher education institutions. … There’s a desire to not think of vendors as being partners.

It’s more something like, “We’re going to buy something from you, we would appreciate your sponsorship at conferences or paying for things, but we don’t want to actually partner and think with you about where we should be going in the future.”

3. Do you feel there is a stigma attached to the term “vendor” in the postsecondary space?

The stigma is what I’m calling a necessary evil that people accept there’s a need for. … There’s a stigma that their contribution is purely what they offer, not in any kind of thought process, not in the ability to create partnerships and rethink what we should be doing. I would just phrase it, really, as a necessary evil.

By the same token, there’s an opposite side of this coin as well. Historically, vendors in higher education have often had a bad reputation by their sales approaches that actually back up this impression of a necessary evil, where they try to aggressively sell their product or their services as if that’s the most important thing, as opposed to working with institutions to understand, “Well, what are you needs and can we help you?” It’s sort of a technology-first type of approach.

So … yes, I do believe there is a stigma associated with the term that is somewhat deserved.

4. Is there a difference in the way institutions approach working with a private corporation than they would with a non-profit entity or with a profit center run out of a university?

I think there might be different approaches, but to a certain degree, I think the same stigma applies across this range of providers. … I think that across all of them, there’s certainly a wariness to work with groups outside of the institution itself. From that standpoint, I think it’s quite common.

Schools might be more open to a loose arrangement with a non-profit institution that’s providing services and they might be a little bit more willing to say, “Well, at least you’re not out looking for profits.” But I don’t see that as being a major distinction. I still think there’s wariness on how these approaches come into play. It also gets into other considerations; it’s not just what the institution considers their partners or their service providers, it’s also the aspect of how accreditation comes into play. There’s certainly a concern, definitely among accrediting agencies recently, about how far institutions are going in working with vendors and [whether that is] actually taking us away from institutional independence that is the basis of a lot of accreditation issues.

5. Do you think there’s an operational difference between non-profit entities and for-profit entities and units being run out of universities as compared to private corporations?

On the surface, you could argue that a for-profit company is really just looking for a profit out of whatever they’re providing, and so they want to maximize that profit, which may mean raising prices, locking in institutions to only use them, working with institutions but wanting to reuse whatever they come up with to sell at their own gain. [Also] on the surface, you could say if it’s a non-profit organization, foundation or another institution itself who is providing goods or services … that they’re not after a profit and therefore there should be more of a willingness to work things together because they’re not just out there for money.

But, if you dig deeper, some of … these non-profit organizations or institutions are trying to provide services so they can net their own revenue to help their own internal budget. I think the deeper you dig, there’s not as much difference as it might seem on the surface because you’re still dealing with organizations that want some form of revenue and have some of the similar motivations. …

So, long and short, I think there is some difference but it’s not as great as it might appear on the surface.

6. Is there anything you’d like to add about the diversity of vendors in the crowded higher education services marketplace and how those different providers interact with institutions to provide and service their product?

We’re in an area right now where higher education itself has got an existential crisis trying to figure out, “What are we and what do we need to be in the future?” There’s a lot of investigation of, “How do we need to change our business model in order for institutions to survive and flourish in the future?”

We’re getting into the field where there is a much greater willingness to partner with vendors and not just say, “We’re buying whatever commodity you have,” but, instead, to say, “We’ll, we’ve got to partner and will figure out how to change moving into the future.” I think we’re going to see a lot more attempts at new business models where there’s a true partnership between the institutions and the vendors. Some of those are going to work; some of those are not going to work.

One of my general comments is there’s going to be more partnerships, but we should expect there’s going to be a lot of trial and error as far as different types of vendors — and not all of them will work out. Some of them will be a flash in the pan; some of them will stick.

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