Doing the Right Thing: Facing Externalities Head On

Externalities are the costs or benefits that impact society but are not included in the market price of a good or service. It is an economic term used to describe the residual impact of commerce. Specialization, motivated by self interests, creates externalities by the actions taken to produce and consume in a market driven economy. That is, organizations and individuals are drawn to specialize and concentrate effort in line with their self interests as they produce and trade with other parties monetized by the utility of products and services.

Industry focuses resources to maximize profit within a market driven economy. Governments tend to cover the societal implications of commerce or the lack thereof. Institutions, or generally any organization deemed to provide educational training and credentials, focus on sustainability and mission as they serve their communities or markets. The pendulum swings between freedom and regulation (whether through self-regulating or mandatory laws enacted) controlling the implications of responsibility.

Our orientation to and expectation of government evolves from these implications. The social and democratic perspectives of fairness, goodwill, safety and freewill pull and push to an unbalanced state similar to a Monopoly game where winner takes all. The loser walks away empty handed. Fairness is not in the cards.

Balancing motives and return is difficult in the competitive real world, even with shared values. The engine of our economy needs a carburetor to mix the right balance of fuel (what goes in), work (what comes out) and waste (the residuals unused) – which then has to be buffered by mufflers and exhaust systems to minimize the impact on the environment and our health. Think of the evolution of the automobile industry and its many changes since the first innovation brought the value of faster horses to the market. Producers and consumers made adjustments as the value/benefit/cost shifted and as we learned more about the impact of the automobile on our world. Think about the role governments played in the evolution of the automobile industry, from requiring gas mileage disclosure to bumper safety. And, think about how the industry banded together to fight against moves to regulate or require social responsibility.

Government generally focuses on what is the common good, depending on perspective, policy and orientation. What falls within or outside one’s commercial area of focus is external. Pollution is an example of a negative externality. Smoking and the impact of health is another. Driving while intoxicated is an externality created by the selling and consumption of alcohol. Global warming is another. Agriculture and planting stimulate the production of oxygen and the reduction of CO2. Education is an example of an externality benefit when members of society other than the students themselves benefit from a more educated population.

Government-sponsored educational organizations, influenced by industry to train and prepare people across our society for the work force, are the foundation of our growing economy. Most would agree the collaboration between government and industry is aligned to foster what is often called human capital in a state, region, or country.

Capital equates to resources that can be accumulated, saved, and spent. Capital is property. It is an asset; something we can buy and sell. In general, I don’t like the impersonal nature of calling people human capital, since it removes the obligation and responsibility to consider the feelings and needs of people across our society. We all have equal rights, but we don’t have equal intellect and aptitude. People can’t be bought and sold literally – like slaves prior to 19th century to facilitate industry, comfort or desire. However, when we refer to human capital, disconnecting ourselves from humanity, we are able to provide an abstract explanation for one of the most important ingredients in growing the economy – people with skills and knowledge ready to contribute. The economic incentives of profit and capital accumulation are what drive industry to invest in education and seek good returns. It is not a perfect system. The inputs, outputs and residuals have to be managed by its stakeholders including government, institutions and industry.

The American Dream promotes the benefits of improving one’s educational credentials for decades. It has created the finest postsecondary education system in the world fueled by research funding and government spending in order to foster educational opportunities. The stimulated drive to serve knowledge creation through research and knowledge sharing through teaching is rooted in economic development. We often call out the linkages between academic pursuit and work force as the means to justify the investment in educational aspirations, since theoretically we can make more money, if we are better educated. We would also pay more taxes and consume more products and services – thus making this a win/win for society overall.

The knowledge economy values innovation because it drives change, which is the catalyst for selling products and services between those that have them and those that desire them. The knowledge economy is rooted in the intellectual investment of education. The return on investment, when analyzed, reveals how interests are motivated and influenced by credentials, which is how we distinguish prior efforts in pursuit of knowledge and innovation. Thus, we place a high value on knowledge – often celebrated as “knowledge is power.”

Who is interested in helping reduce the “incompatibles” across the education industry that are contributing to confusion, frustration and inefficiency? Our decentralized higher education system conceived of institutional autonomy and academic freedom has resulted in the unintended consequences most discount as the “leaky faucet” in the supply chain. Students “flow” through K12, postsecondary education and into the workforce in fits of starts and stops as they manage day to day life circumstances. Many policy makers are attempting to stimulate changes in how educational organizations and government agencies work together to tighten up the joints, so to speak. This takes real data -- measured and reported to reveal gaps and cracks. And, with varying means of defining data, we often take the lowest common denominator abstracting the underlying differences meant to be measured.

Why? Well, there are millions of students completing course credentials from multiple providers as they aspire to complete their degree through various course offerings. Representing the higher education continuum (previously completed college courses from years ago, proficiency exams, and military training) adults are re-entering colleges and universities hoping to enhance their employability. Overwhelmingly, people are struggling to matter as they seek respect for their prior learning or credentials.

One thing we know for sure: Like no other generation before us, today’s learners are mobile. And, the data tracking their actions are disconnected, particularly between the systems most used by government, industry and education.

The cycle is repeated across time and location over and over again. Millions and millions of people are sold on the belief their course investment will have currency, value and will be worth something in the future as they pursue to improve their lives. They seek to compile prior learning across incompatible sources to reflect relevancy and purpose. We call them contemporary students because they are older, more mobile and generally employed - and they outnumber traditional students 7 to 1.

Nope, it is not our responsibility to address the incompatibilities of programs, courses and policies even though the today’s systems contribute to the confusion and frustration found on most college campuses. Institutions and States are responsible for aligning and tuning their curriculum, right?

The paralyzing impact of the confluence of data, process and people spanning thousands of institutions is outside our control and we are not interested in allocating resources on something we can’t make money from because no one is responsible. Bottom line, the economic success derived from selling and deploying proprietary systems is harmful to the community we are trying to serve the most – the student. The answer heard across the academy is often we don’t care enough about this problem to address the resources needed to solve it.

How can we fix the consequence of our industry’s myopic business plans that have so negatively affected the social welfare of so many others – namely the students? We have sold, deployed and maintained stand-alone, proprietary and often closed administrative and academic systems for decades without thinking about the consequences on students stopping and starting.

Thousands of institutions have deployed software designed to address resource management issues under the auspices of their institutional missions. Actually, in retrospect they were more likely satisfying institutional needs without consideration for the future impact of those decisions on our increasingly mobile, global, and diverse students. How could they have known? Can you help them?

Will you help?

We have limited resources is the most obvious answer. How can we expend resources on something that has no benefit to our organization directly is often the follow-up answer. We can't justify spending resources on fixing the implications of how localized systems can't help students and advisors map out academic pathways and progress because they are disconnected. Can we?

Thus, the PESC call for EdUnify. EdUnify is a concept that highlights our desire to keep systems decentralized, yet enable a means to connect, share and exchange data services to bridge the differences. Even though we all contribute to the externalities by producing systems apart from the entire ecosystem, we can contribute effort and respect the differences, instead of marginalizing them. Through the development of a simple and elegant automated look-up service, we can help stimulate the market forces to align organizational interests by bridging technologies that can enable collaboration and communications of interest. That is a good thing for industry, education, government and most importantly, the students we serve as they aspire to improve their lot.

The social contract for people spanning organizations, corporations and institutions has been debated for centuries. Rousseau's 1762 treatise, see The Social Contract, Or Principles of Political Right had a major impact on the formation of the United States of America and our constitution. It is time we recognize the need to form new governance on the rules of data in the virtual world of computing, education and commerce that balance our rights/interest to sustain the evolution of the academy.

This is what PESC is all about.

Come join us. www.pesc.org

The future of enterprise software in Higher Education

Today, the Higher Education software market is well saturated with enterprise software components and systems developed across decades of investment and deployment. I am describing student systems, financial management systems, human resource management systems, learning management systems, course management systems, grants management systems, email systems, document management systems, e-portals and business intelligence as enterprise software since the majority of the university and college community utilize and are dependent on the functions delivered from the software and interconnections.  We use to describe these systems as mission critical and covered the essential functions of an institution's operation. Some of the primary assumptions made by enterprise software rely on the value delivered through the combination of functions, the common look, the umbrella support and the shared resources. The integrated suite versus best of class software systems is not at issue. The philosophical boundaries have been crossed so it is greyer than black and white.

Enterprise software combines many functions into one system, like a home entertainment system I bought from RCA years ago. The pre-engineered unit allowed me to plug in the packaged components to play and watch my videos and music I acquire at local stores on CD and DVD. My laptop computer is similar. It comes bundled with CPU, disk, dvd/cd, memory, sound card, ports, screen, keyboard and configurable expansion options. Someone else put in all the effort to figure out what those components were, acquired or built them and made a single unit that I could affordably acquire. We pay the value for the combined unit which adds convenience over doing it all myself. My entertainment unit lives in my family room next to my plasma screen. My laptop is my business desktop and home computer.

From ERP (enterprise resource planning) to departmental to desktop to web, software is designed and built to serve functions and people that evolve from use.  Use is another way of reflecting behavior. Software systems deliver value only if they continue to evolve with the rest of the world.  Along comes disruptive changes and the assumptions once relied upon, break down. Like my RCA home entertainment system, enterprise software is at a fork in the road. I rarely use my home entertainment system these days, since I acquire music on iTunes and rarely acquire physical medium any more. The system has been marginalized by alternatives. And, soon, I will remove it from my family room, because it is just taking up space, power and can be supplanted by other specialized devices with superior convenience. My laptop has a useful life as well. I would average about two years with one. With new technical features to improve my convenience, many of us replace our laptops to improve speed, update operating systems and add the components newly introduced since my last acquisition. My new laptop has a nice camera, HDMI port and a huge amount of disk to store movies. Plus, the new N-network features improved by upload and download speed almost five fold over my old laptop and gave me greater distance from my access point.

We can debate the timeframe.  Traditional enterprise software vendors are like deer in headlights. The market is saturated from one perspective and growing more and more obsolete from another. We can debate what is disruptive enough to the install base and what future events will draw institutions to move away from hosting enterprise software systems and components. The inevitable pattern of obsolescence will continue as new innovations supplant older enterprise software solutions and functions. It may take another ten years when we think of the longevity of organizations and computing as an industry and discipline to shift.  But, the reason the present model of enterprise software will be supplanted by new open shared community based platforms seems inevitable to me in that the complexity of assembly, deployment, sales and support will make the enterprise single vendor, single platform obsolete and too costly compared to software as a service (SaaS) or on-demand components integrated along agile boundaries well defined by industry standards.  The question is just a matter of time.  Just as the rise and fall of video outlets, photo reproduction and distribution channels changed for autos, electronics and even legal services, we will see the evolution of digital utilities leveraging the network effect and viral adoption of components bringing value to the market as new computing services distribute greater value than controlling one's own technology stack through proprietary locks that are artificially reinforced because it is within the scope of the vendors offering or not.

Higher education, a niche that has long prided itself for sticking with traditions will be the last bastion of enterprise software managed in their localized data centers and controlled by each institution as if it was their own.  Many schools have already moved their ISP and email services outside. Industries outside higher education are on a fast track replacing proprietary enterprise systems with SaaS and on-demand components for the last decade breaking down the centralized control and oversight of IT. We are in a new cycle of evolution no doubt.  So, if you are an enterprise software company serving higher education, take heed.  Get it while you can.  Higher education is an industry leveraging their investment in software for extended periods.  More than than most industries because of the complexity of moving organizations beyond boundaries and the past the effort it takes to change.  It takes years and years to setup and implement software systems in higher education because of the committee decision.  And, it will take years and years for the investments made today to be replaced.  No great rush. 

Wait.  If that is the case, then why are the enterprise software companies serving higher education retrenching and pulling back?  Is it just the economy? Why are they struggling with reinvestment?  And, why are they fixated on proprietary behaviors like a caged animal with its food?  They control access to their environments like they are Fort Knox and protecting gold.  Unlike many new internet and web savvy companies, they lack integration and open technology to help institutions extend their investment. They promise that, but rarely deliver it as part of baseline services, because of the revenue they would be giving up. They pay lip service to open industry standards yielding slow adoption in general. This is part of the problem my RCA home entertainment had. If it had the ability to access iTunes, I would be still using it today. But, it is locked down with a proprietary box and no means to extend even though it is connected to my internet enabled TV. Maybe there is no alternative. Enterprise software vendors become buffered from reality that they sit patiently waiting for the next big thing, instead of inventing and innovating new products cannibalizing their own install base.  With business models evolving faster than software development life cycles, what is a company to do with stuff developed over twenty years that can't be re-written when the install base is seeking incremental steps?

Is open source a replacement for enterprise software? I don't think so. It confuses the discussion to degree. Because the debate between open source and proprietary is also grey. The future of enterprise software is not determined by how the software is developed and deployed. It could be freeware, shareware, and proprietary or home grown. Open source or community source or community shared resources are three different models. How software is designed, developed and deployed is really the issue. What point of view is it trying to serve? The issue is how will cloud computing, SaaS and on-demand functions hosted by digital utilities be integrated into enterprises eroding the one system source or vendor and the requirement to locally manage the technology, the stack, the servers and the connections?

Yesterday's software was designed as an extension and replacement for files, forms and actions that required input, processing, storage and reporting.  I remember replacing paper and manual processes with record keeping software systems managed by a drove of users thirty years ago. It is rare today to replace a manual and paper based system.  We always thought the ROI was the replacement of staff or the cost savings of reducing the labor to perform things like mail merges, because the old way of looking at things focused on the traditional work in an organization that required record keeping, archives, reporting, etc. Man, was that wrong.

Software evolved from table driven to procedure driven to event driven to user driven.  Self service and the dot.com era before the turn of the century reflected the hype cycle. Many still live in this realm of one stage or another.  I still can't believe how much COBOL based systems are still out there running. The effort to develop complex data models optimized for storage and retrieval were called enterprise systems and they had little to do with the value of what the software did for users or customers.  We think in terms of logical, physical and normalized structures now, requiring common steps organized to serve the machine or system design, not the users or customers.  This is what we are moving away from. When the organization decided to move to a new platform, everyone worked together to feed the system move. I still see this today. The effort expended sucks the wind out of the lungs of most organizations. Have you ever found an organization that really improved by implementing an ERP? Is the ERP really being used to better plan the use of resources in a university of college environment? This will change. That was the intent originally. It was over-hyped along with the dot.com run up. It does not have to be that way, as more and more evidence shows that software can be implemented with far less effort, when engineered in smaller components allowing the value to be gained in a few days, not months or years.

I recall designing application functions to support CRUD (create, read, update and delete), represent the relationships between tables and how users would serve the system collecting data which we would then transform into information through reports.  Looking back, I can remember thinking a certain way about functions and processes.  So, software from this bi-gone era, which is still in place across thousands of colleges and universities, is like the grass outside my house.  I have to keep feeding it, watering it, weeding it and cutting it.  It looks nice on the surface.  It is a huge expense – for what purpose? And, rarely does anyone come and value it or walk on it.  Each week, it raises the thought of what it would be like if I would let it grow.  Does it matter?  What I once thought was important, is now just a field of grass I pay little attention too.  The assumption of course is, I won't be living in this house forever and eventually will move because of the effort to keep up with things, like cutting the grass, painting and not needing all this space.

Is the shift from enterprise software to open platforms under way? I think the one-size-fits-all set of modules developed by a single vendor or community with limited connections is way too confining in today's internet world that is like entropy expanding in the universe. Even with proprietary API's (application programming interfaces) pre-built and hidden under the hood, enterprise software is constraining and overwhelms most institution's IT resources because they are designed from the process of satisfying what the "system" needs to continue to operate, and not the user or customer who needs to bring value working together. The whole premise of enterprise system over the last twenty years is inside out. The old premise is similar to railroad companies who never transitioned to making automobiles or other forms of transportation including airplanes, because they were in the rail business presuming the points of destination, confined by the method and not willing to risk challenging their install base of riders.

IT departments generally have little discretionary resources to attack new challenges, to answer the call for change. Nor, can they easily integrate new components into their environments without diverting limited resources and time to study the implications. Universities and colleges won't be able to compete or survive if they lack connectivity in the network world with applications that span their internal environments. Unifying and enabling IT to broker and manage decentralization, control of work flows spanning departments and intertwining a range of components hosted outside the enterprise, providing greater benefit from shared resources will be the challenge over the next decade. Vendors or systems offering support for open platforms will overtake those that lock down and hold back their clients desire for a new level of independence and flexibility. That is the future of enterprise software systems in higher education according to my perspective. It won't be overnight and a big rush. But, a slow march.

Launch of EdUnify

Educational institutions unite.

The business of learning is as large as the earth's oceans. Centered on the goal to help elevate human understanding, educational institutions have long developed unique Reservoirs of knowledge bounded by artificial lines of control. Learning in the 21st century is transforming to open commons, shared resources and communications that have allowed us to bridge the artificial boundaries of association and mission.