Education

Global Industry Primer

What is the education industry? They increasingly use information resources, such as financial and
student data, to plan, evaluate, recruit, raise funds, report and run
Industry definition and key segments their operations. In addition, they often manage large organizations
The education industry is the group of organizations that provide that are labor intensive, yet strive to drive innovation, meet regulatory
learning for citizens. It is comprised of what can be referred to responsibilities and attract more students.
as traditional education institutions and nontraditional or new
education models. Traditional education institutions include primary The workers. Faculty and administrations are expected to
and secondary schools, institutions of higher education, state or make good use of resources to deliver continually improving
national departments or ministries of education. Nontraditional results. They must improve learning outcomes while maintaining
models include charter schools, online learning academies, reasonable cost of operation, focusing on maximizing operational
corporate for-profit institutions and so on. efficiency and effectiveness. Furthermore, they are pressured to
understand the use of new technology, and new educational
Educational institutions are critical for providing the talent pool models overall, to keep up with the learners they serve.
for tomorrow, which is necessary for the survival and innovation
of nations and cities competing in a global economy. They How big is the education industry
represent 5 percent of global gross domestic product (GDP) and what is the opportunity size?
and typically 30 plus percent of state budgets.1 Yet, in many The education industry is a global market with half the opportunity
regions, they fall short of expectations. Educational institutions in mature segments, such as Europe and the United States.
struggle to deliver required skills for a changing workforce. They The other half is in emerging markets, such as Africa and parts
typically have limited resources, which can be poorly managed. of Latin America. It has an estimated gross market value of
Many of them come under great regulatory scrutiny and testing USD 21 billion, and 3.8 percent adjusted gross revenue. Its a
requirements. Finally, in some parts of the world, there are not growing industry due to the ever-increasing importance of
enough schools to keep up with demand. academic performance and its vital link to economic development.
The industry is in transformation, such as deploying new
One way to look at key segments of the industry is by the
technology, and this growth trend is likely to continue. Analysis of
various stakeholders:
the growth shows four key plays in education: cognitive capabilities,
The consumers. Students and parents are demanding better the mobile student, modernizing administrative systems and
education and outcomes in graduation, employment and value high-performance computing with research and innovation.
returned for their investment, as are government officials in
employable skills, new business ventures and an improved tax Advancements in digital content, connected devices and mobility
base. In all markets, youth unemployment and the need to reskill will contribute to the growth of global education. A deeper
workers are visible concerns. Students are also demanding view from IBMs own analysis indicates a USD 6.3 trillion global
that education be delivered to them in a personalized, mobile, education expenditure in 2017, growing at a compound
and technology-rich manner, similar to their experience in retail annual growth rate (CAGR) of 23 percent from 2013 - 2017.
for example.
In major markets, the higher education segment accounts for
The institutions. Educational systems must balance efficient 60 percent of the opportunity, while in the growth markets the
use of limited resources while reducing dropouts, improving opportunity is split 50/50 between higher education, and primary
student learning outcomes, aligning to workforce skill needs and secondary education.
and keeping up with the technology expectations of students.

1. IBM MDI Industry Insights, 2016

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USD billion
22.0 23.0
20.6 21.2

4.6%
3.8%
3.1%
2.7%

2015 2016 2017 2018

Figure 1. Global education industry total opportunity

USD billion
2015
12.5
11.8 2016
11.3
10.8
2017
CAGR 2015 - 2018 = 3.74% 2018

3.8 3.8 3.9 3.9

2.2 2.2 2.2 2.2

1.8 1.9 2.0 2.1
1.0 1.1 1.1 1.2
0.6 0.6 0.6 0.6 0.4 0.4 0.4 0.4

NA Europe Japan AP LA GCG MEA

Figure 2. Global education industry opportunity by IOT

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What are the major trends There is a trend toward the blending of formal and informal
learning, which includes:
in the education industry?
Redesigned learning spaces to induce active and flexible
There are a number of major trends impacting the global education
learning, while enabling a better team environment
industry. One is the increasing demand for consumerism
Increased interest and pressure in measuring learning and
educational leaders are challenged to meet rising expectations
education outcomes
from students, communities and parents. Another trend is the
Advanced learning environments that enable increased
focus on career readinessbusinesses have high expectations
flexibility, agility and collaboration to drive innovation
around workforce skills that must be met, while dealing with
Increased collaboration between multiple higher education
limited and increasingly constrained resources.
institutions
A third major trend is the expansion of education focus on a talent
Finally, there are also other significant global trends that are
pool tied directly to state economic development. Educational
affecting the education industry as a whole:
systems provide students with the skills and knowledge they need
to compete economically in a rapidly changing environment. Over Distance learning is increasing in relation to on-campus study.
the next decade, the education industry will continue to face Online, cloud-based education platforms will disrupt
evolving challenges in shaping its relationships with society expensive, traditional on-campus and textbook models.
and employers. Changes in technology, commerce, politics and Adoption of mobile education and competency-based
demographics require educational systems to adapt in order to learning experiences will continue to increase.
serve their citizenry and to contribute to the future economic Game-based learning adoption is increasing.
success of nations, states and regions.
What are the major
A fourth big trend is the extent of technology immersion in
challenges and imperatives
education, which creates a number of subtrends in educational
systems. A major focus today in education is on the now possible faced by educational systems?
personalization of learning. Technology exists today to provide Historically, and continuing today, educational systems
every student with a customized learning pathway. Some of these fundamental imperative is to improve teaching effectiveness and
technologies include: student outcomes while maintaining operational efficiency and
The rising adoption of mobile devices across various industries effectiveness. These improvements include the application of
is transforming education. Mobile platforms drive student new tools, for example analytics and performance management,
response systems, enable virtual study and discussion to more accurately track achievement, identify problems early
forums, and increase the availability of study material. and measure outcomes.
The support of cloud-based learning tools, combined with an
However, education as an industry now finds itself facing much
increasing number of connected devices and online learning
of the same challenges found in many other industries. Cost
forums, such as massive open online courses (MOOCs), are
pressures and an increasing focus on return on investment are
enabling access to education from virtually anywhere.
pressuring educational systems to explore new models. Changing
Use of machine learning and data analytics in education
population demographics are requiring educational systems to
unveil powerful insights about student learning.
modify their approaches to accommodate the learning needs of
The education industrys transition to digital content will
a wider variety of backgrounds. Data management is becoming
proliferate in the education industry.
increasingly critical, as information about students and their
Connected devices enable students and teachers to create and
academic progress is growing exponentially. Educational
share content over mobile devices at any time from virtually
achievement levels have become important factors in rating the
anywhere, while enabling instant access to the outside world.
economic vitality of nations and cities, putting more pressure on
educational systems to drive high performance from students.

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The evolving influence that technology has on all of society To track this accountability, many educational systems are turning
is having a profound impact on how educational systems are to key performance indicators (KPIs) to measure performance.
developed and instruction is delivered. Educational systems While there are many KPIs that could and should be measured,
must accelerate the progress of discovery and innovation by they are not universal in interpretation or in application. However,
enabling researchers with cutting-edge technology. Many in the primary and secondary K-12 segment, some areas where
higher education systems will be forced to evolve or look for KPIs are most likely to be deployed include:
new models of sustainability. Graduation and matriculation rates
Consider the following challenges of this industry: Attendance rates
Student drop-out rates
The cost of education is growing as much as four times the Standardized test scores
inflation rate. Cost per student
A growing global middle class and increased skill needs Professional development
require a huge capacity increase. Student-per-teacher ratios
There is increased competition for grant and national funding, Technology deployment
as well as competition for top-tier faculty at research institutions. Budgeting
Educators need to transform institutional services and
learning to engage digitally literate students, either to enroll, For higher education, the KPIs will be different from those found
retain or progress. at the primary and secondary level. In broad terms, KPIs for higher
education will be focused in key areas, including:
All these drivers and challenges create specific industry
imperatives that educational systems must address to achieve Student applications, enrollment and retention
the expected results. Market position
Institutional sustainability, endowment
What are the key performance Faculty awards and research projects
indicators for education? Knowledge transfer
Financial health
Because of a tighter relationship between education providers,
Systems of governance
government and key stakeholders, educational institutions have
Capital and institutional projects
had to answer to greater levels of accountability. Key factors include:
A growth in public funding that brings with it the need to In the end, KPIs will be institutionally specific. For example, a
demonstrate value for taxpayers research-based institution might have KPIs focused on:
Pressure to apply private-sector management approaches Achievement of high marks from research accreditation and
Competitive pressures on institutions from national and global regulatory bodies, which varies by geography and research
drivers of change discipline
Pressure to modernize education and adopt more technology Growth in the number of research students
Growth in research contract revenue
Number of grants awarded and funding received

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What is competition like What is IBMs point of view

within the education industry? and roadmap for education?
Competition in the education industry varies. In some areas of the Through decades of work with major educational institutions
world, there is no competition amongst educational providers, around the world, IBM has developed a point of view that reflects
and students have no choice where they go to school. In other the challenges confronting educators today and vision of the
parts of the world, students have multiple sets of choices. The opportunity for progress. The core elements of the roadmap are:
choices that students have and the decisions made on the
Focus on improved student outcomes
educational services they seek vary greatly based on the segment.
IBM believes the information management capabilities and
In the primary and secondary segment, the level of competition analytics expertise exist today to fundamentally transform
amongst providers is going to be greatly determined by the education to an individualized, or personalized, model. This
choices parents and students have in deciding where to receive personalization provides every learner with a unique learning
their educational services. A competitive educational market pathway and real-time feedback for the faculty on how the learner
does exist in countries like the United States, where parents and is doing. This process, in turn, helps optimize learner outcomes.
students can choose between public, charter, private schools
and online academies. Factors in the competitive landscape are IBM also believes the student experience with the institution is
elements, such as affordability, convenience and safety, which critical to the success of that student. An exceptional student
are not necessarily factors educational providers can directly experience is technology rich, offers collaboration opportunities,
control. In other parts of the world, there is no choiceand is social in nature, leverages mobile technology and applications,
therefore no competitionin primary and secondary education. and gives the student clear feedback on his or her role and
journey in the institution. This feeling of engagement, fueled by
In higher education, the competition can be fierce. Universities technology tools, has a direct impact on student retention and
try to attract students by promoting their academic results, student success.
focusing on qualified staff, investing in technology and developing
attractive academic programs. For-profits and online institutions We help institutions develop the talent for the future by looking
are newer entrants to the market, which offer expanded flexibility, at education as the supply chain connecting the student
especially for the nontraditional or returning learner. Beyond the experience to better outcomes, which develops better talent.
recruiting of students, higher education institutionsespecially IBM Watson offers the ability to do this at scale. Big data is
those with strong research capabilitiesface tough competition critical and student data is abundant. However, what institutions
from other institutions for grant and capital funding. Institutions that do with this data and how they protect the privacy of their students
can capitalize on technology and provide stronger environments for is crucial. IBM is able to help manage the data securely and
development and innovation are more apt to secure grant funding privately and not monetize data for other purposes.
and realize economic return when their research projects can
be commercialized.

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Drive efficiencies in IBM differentiates itself from its peers in education by forming
administration and operations relationships with digital disruptors and collaboration education
platform providers to offer industry-specific cloud solutions.
Efficiencies exist in the back-office or operations side of the
These solutions are powered by IBM capabilities in the Internet
institution that can save the institution cost and help it focus on
of Things (IoT), IBM Watson and big data.
front-office or classroom initiatives. Doing so requires becoming
an agile institution by leveraging methods like cloud computing, Client proof point: Gwinnett County Department of Education
green data center initiatives and infrastructure modernization. is the largest school system in Georgia. To evaluate school
Leading innovators can help transform their operational and performance and better understand how to improve that
financial environments by leveraging new methods, emerging performance, GCDE needed to gain new technology capabilities
technologies and performance management to improve and become a knowledge-driven organization. GCDE enlisted
operational outcomes in a meaningful, efficient and transparent IBM to help them understand the paths that children take through
way. Administrators can integrate data and insights for use in the education system. Using predictive analytics allows the school
operations, giving administrators more information about system to identify the contributing factors to success and failure,
institutional performance, such as asset management, financial keeping students on a path to success and intervening quickly
trends and risk exposures. when they stray.

These changes in improving student outcomes and driving Drive operational efficiency and effectiveness
efficiencies in administration and operations must be made for
Institutions must repurpose their budgets to address the growing
the long-term viability of the institution, especially in higher
cost of education while improving overall cost efficiency. Optimizing
education. They help the institution remain cost competitive
the back office enables an increase in operational responsiveness
while providing tighter linkage to workforce requirements and
and eliminates costs that can be used to drive critical future
regional economic vitality.
investments. This optimization can include consolidating and
integrating education services, such as infrastructure, support
What are the key IBM plays
and stakeholder services, leveraging best practice business
for education and proof points? processes, and using a cloud delivery model.
Improve student experiences for better outcomes
One example is how IBM leverages the migration of enterprise
IBM helps educational institutions integrate data from various resource planning (ERP) systems to the cloud to gain new
sources and leverage analytics and cognitive solutions to improve implementation business. At the same time, we can identify and
outcomes from the classroom, to campus, to careers. These close opportunities to migrate legacy workloads to the cloud.
solutions transform institutional services and learning to engage Another example is IBMs implementation of smarter buildings
digitally literate students, either to enroll, retain or progress. and the IoT on campus to do such functions as optimize space
utilization and minimize utility expense.
Leveraging open standards, IBMs approach is to create a
cloud-based platform grounded in a single view of student, Client proof point: Keller Graduate School, part of DeVry
across administrative, learning, social and other data sources, University, offers undergraduate and graduate degree programs
and advanced curation and a repository for educational content. within five colleges of study. It is one of the largest private-sector
This is all tied together by analytics and presented in a case universities in North America and Keller Graduate School is one
management frame to support decision making by teachers, of the largest graduate management schools in the US. The
students and administrators. school wanted to identify students at risk of dropping out or
those with low performance so they could offer them additional
IBM leverages its leadership in information management, analytics
support. By collecting and integrating information from a variety
and enterprise content management. We establish ecosystem
of sources and applying data analytics, the school was provided
leadership by initially targeting the major vendors in education.
a single view of each student with dashboards displaying
Cognitive solutions, such as IBM Watson, have high mindshare
real-time analysis. The school is now able to intervene with
in education and provide more insights for educators. Clients
students at risk of dropping out to improve retention rates and
desire a single partner for their data and analytics needs, which
the student experience.
IBM Watson provides.2

2. The IBM Watson Education Business Unit is being announced in October, 2016.

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Accelerate research and innovation Additional client proof points for education
IBM provides world-class support to faculties and administrations Baylor College of Medicine: IBM helped increase its research
focused on research and innovation. We leverage our systems and innovation, and speed the time to find answers, contributing
technology and expertise to deploy large research systems in to the universitys transformation that will sustain the institution
higher education. This work helps educational institutions for years to come.
demonstrate meaningful improvements to the regional economy
and societal needs through spinoffs, startups and other actions. Australian National University: ANU decided to reboot its
analytics strategy, building new planning, reporting and modeling
Client proof point: North Carolina State University is one of the capabilities based on a combination of IBM software, a skilled
largest technical universities in the Southeast. It integrates teaching, in-house analytics team and expert partners.
research and active engagement with businesses to give students
real-world experiences in uncovering new business opportunities. Purdue University: Purdue has democratized access to
NC State business students are given class assignments information across the institution, enabling better-informed
that include working with local businesses to see how new decision making for improved academic success with IBMs help.
technologies, such as big data analytics, can be applied.
Students gain real-world experiences while the businesses
benefit from the new insight these advanced technologies offer.
By using the IBM analytics solution, the students were able to
help businesses by telling them where to invest in research and
uncover potential partners for business opportunities 200 times
faster than before.

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Where can I learn more about the education industry and what IBM offers?
Education CollaborationHUB
Think Academy
ibm.com/education

Learn and build your eminence:

Understand education industry solutions | Industry Solution Sales Kits
Use latest client-facing assets and offers | Education Asset Inventory
Learn about the education industry | Know Your Industry
Learn about the education industry | Education Industry Training
Understand market trends | Education bluemine
Thought leadership | Pursuit of relevance | Personalised education

Connect with industry experts:

Know key IBM education contacts | Education Contacts
Follow the latest on Twitter | @IBMEducation
Join the Smarter Education group on LinkedIn | LinkedIn
Share insights | Education blogInsights on Business

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