Monday, May 20, 2002

Technology Companies Report Continued Spending by Colleges; Analysts Doubt It Will Last By FLORENCE OLSEN In the midst of a general downturn in new spending on technology, officials at several technology companies say that colleges and universities have been the exception. Unlike many large corporations, colleges have continued to invest in new information systems and networks. In some cases, money for those systems was allocated before the recession hit; in others, the colleges are counting on the new systems or networks to pay for themselves in greater operating efficiency. Some higher-education analysts, however, say they doubt that such spending, particularly at public institutions, will continue at current levels. Public colleges and universities in North Carolina have been especially hard hit and are re-evaluating information-technology projects across the board. Still, higher education seems to have defied the slump in technology spending, says Kevin Horigan, managing director for higher education at PeopleSoft Inc., a business-software maker. A new license with the University of Maine System, to be formally announced in June, is the most recent in a string of multi-institutional licensing deals for PeopleSoft in higher education, he says. In recent weeks, industry analysts have portrayed PeopleSoft as having had a disappointing first quarter, in which sales of new software licenses were 20 percent lower than expected. On April 2, news of the company's scaled-back licensing revenue sent the price of PeopleSoft stock down 33 percent, to $25.16 a share. But Mr. Horigan maintains that the company's higher-education business has never been better. Last month, the Wisconsin Technical Colleges, a consortium comprising Wisconsin Indianhead, Lakeshore, and Mid-State Technical Colleges, signed a five-year outsourcing deal totaling $3.3-million with CollegisEduprise, a technology-services company. The outsourcing company will provide the software, server hardware, and technical expertise to run the consortium's financial, human-resources, and student-records systems, which use PeopleSoft software. Also last month, Datatel Inc. and the SCT Corporation, two companies that -- like PeopleSoft -- sell integrated financial, human-resources, and student-records software to colleges, reported record revenues and record profits from higher education. Datatel announced profits totaling more than $16-million from its higher-education business in 2001. SCT reported that software-licensing revenues from its higher-education business grew 23 percent in the first half of its current fiscal year, which began in October, compared with the same period a year earlier. The University of Hawaii System is one of eight new licensees. Boston College has just announced that it will spend a total of $1-million on a campuswide project with Enterasys Networks Inc. The network project involves a complete redesign of the college's infrastructure of routers and switches. "Higher-education institutions are not holding back on IT investment," says Mark A. Danis, senior vice president of KPMG Consulting Inc.'s higher-education practice. Colleges are still signing contracts for new spending on information technology, but they are being much more selective about the types of projects they pursue, he says. Officials at Datatel say that their higher-education business has not been affected by the recession, but that buyers now tend to be four-year colleges. A few years ago, most of the company's business came from two-year colleges, particularly public ones. Now that is changing. "It's coming more from private than public colleges," says Jayne W. Edge, vice president for strategic planning and marketing. Even if private colleges are not hurting, public ones will see lean years ahead, says Kenneth C. Green, founder and director of the Campus Computing Project, an annual survey of colleges' information-technology use. "When times were good, as they were during most of the '90s, technology expenditures fared well," he says. At least 38 states are now running deficits, Mr. Green says, and for them, technology spending will be a low priority. One reason is simply that states spent a lot on technology from 1993 to 2000, he says. Another is competition for state funds from other priorities, such as health care and elementary and secondary education. "If PeopleSoft is having a good [year], good luck to them," Mr. Green says. "My reading of the tea leaves -- and the stars and the budgets -- for public-sector institutions over the next three years is that it's going to be tough." Background articles from The Chronicle: U. of Michigan Cancels Portal Project (4/26/2002) Virginia's Community Colleges Mull Higher Technology Fee (4/26/2002) In Oregon, Budget Woes Make Campus Technology Spending a Likely Target for Cuts (4/24/2002) Technology on a Shoestring (3/29/2002) Recession and Reality Set In at Private Colleges (3/1/2002) Indiana Governor Seeks to Cut Technology Spending (1/25/2002) States Face Year of Famine After a Decade of Plenty (1/11/2002) Easy-to-print version E-mail this article

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