1. Exploring innovative revenue-generation models

Exploring innovative revenue-generation models

For generating revenues, private universities must invest in e-learning models, let the talented faculty take up consultancy projects, rent out unused areas of their campuses and explore university licensing programmes

By: | Published: July 27, 2015 12:05 AM
Currently, some IIMs and IITs have such facilities to generate additional revenue; however, the domain is still not explored well and so enough room exists.

Currently, some IIMs and IITs have such facilities to generate additional revenue; however, the domain is still not explored well and so enough room exists.

The recommendations of the Seventh Pay Commission are likely to be implemented with effect from January 1, 2016. Universities that are either completely managed or are aided by the government of India have reasons to cheer.

Universities with state governments can also relax a bit until pay commissions of state governments are formed.

Needless to mention, in order to attract potential faculty, retain existing quality faculty and staff, and survive in the cut-throat competition, private universities will also have to provide packages at least equal to or more than the benefits of the said pay commission, leave apart funds for infrastructure development and similar expenditure. The question is, from where will the required funds needed to finance this huge demand for liquid money come from?

Simply because raising fees beyond a point can be counterproductive, hamper the quality of education and thus skill formation.

It is true that there has been significant progress in the last few years in the domain of higher education in India, but still the rate of enrolment is only around 18%. Further, given the huge unmet demand for higher education, one of the major problems that has plagued the sector is shortage of faculty, amounting to around 40%. A recent EY report states that 48% universities and 69% colleges have infrastructure deficiencies. The problem is even more for private universities with no government support. While the established older private universities—though few in number—are doing well, but given the mounting costs, the alarm has already rung. Due to the huge unmet demand in higher education, new private universities are also coming up. A deeper introspection reveals that shortage of faculty does not really reflect the extent of the crisis, simply because hiring quality faculty with competitive package and adequate infrastructure for quality research and training is the major issue. More so, as it is a proven fact that appointment of ad hoc faculty at peanut packages close to minimum subsistence wages at a stretch for years only demoralises and deteriorates quality. The challenge is even greater for the private players to attract and retain quality faculty as the government is creating new IITs, IIMs, NITs and central and state universities along with research centres across the country.

A fee hike cannot support these burgeoning costs after a certain point. Thus, they need to think of alternatives. To retain competitive advantage, investment in IT or e-learning can be a strategic move for these institutes of higher learning. This may save cost for hiring teaching staff, classrooms and maintain the quality of teaching. Research reveals that such initiatives create positive network effects and have a huge potential for additional revenue at low provision cost, provided the quality of content is maintained. To maintain quality curricula, it is important that faculty engages itself in R&D. In fact, engaging in sponsored research can supplement their own salaries. But for this to happen successfully, institutes should attract quality faculty. Therefore, it’s a two-way process and the management of these private institutes should accept these hard facts. As a part of these revenue-generating models, these universities can use the huge pool of talented faculty and take up consultancy projects. In these, rather than one specific department taking up sponsored research, the institute may create a pool of faculty from various disciplines and float these interdisciplinary teams for taking up consultancy projects. There are successful examples of such consultancy models both in India and abroad. In this, the technical universities with an interdisciplinary pool of faculty might have an edge over other institutes of higher learning.

They need to seek consultancy projects and float the problem amongst students and faculty for probable solutions.

They may then provide this tray of solutions to the concerned vendor and charge only for the solution accepted by the vendor. The fee that the institute would charge can be well below the huge consultancy fee charged by established consultants. In the long run, the institute may engage a dedicated pool of faculty to cater to these consultancy projects with a backup of the rest of the faculty and student pool to fine-tune the initiatives and the outcome.

Currently, some IIMs and IITs have such facilities to generate additional revenue; however, the domain is still not explored well and so enough room exists. Nonetheless, in this process, the team involved may be rewarded by having a cash incentive mechanism when the project is accepted. Such a model will encourage the faculty, as apart from regular salary and promised benefits, the team would get a top-up benefit for every successful project. This model is expected to be beneficial for universities of higher learning as for consultancy firms there is not much option for a regular increase in salary through dearness allowances or secured yearly increase (3% secured yearly increase in salary after the recommendation of the Sixth Pay Commission), contingencies, professional development fund, adequate library facilities, access to journals, dedicated laboratories, flexible pool of think tanks in the form of students and peers and alike. But for all this to happen, the institutes should focus strongly on research and earn a competitive resume compared to the existing consulting firms.

There may be options for continuing education programmes, dual degree, work integrated learning programmes through web-based learning—all of which would increase enrolment and help increase the base for fees and revenue generation rather than pulling up the rates of fees for each programme. Through these, they may be able to attract more students and follow a model of widening the base through enrolment maximisation, rather the sky rocketing the fees and narrowing down the option to access higher education. Private universities having fully residential campuses may go a step forward and provide space for banks, retail outlets and alike to operate within the campus and also to the adjoining areas. The operating outlets only need to pay a rent for using the space to the university. As the university expands in terms of enrolment and staff, the business of these outlets will expand and so will the rentals in due course.

Some recent experiments with university licensing programmes have proved to be beneficial. In such a model, the university licences its name to a commercial firm that manufactures products such as diaries, stationary, t-shirts, sweatshirts, coffee mugs, etc, to use the university logo on them—of course, adequate quality control needs to be ensured. The manufacturing firm produces and distributes the products and a part of the generated revenue is provided to the university, ensuring a regular flow of income. The university may also create an e-platform for uploading advertisements in the e-portal and thus earn revenue.

For all this to happen, private institutes need to be bold enough to move from traditional lines to explore revenue-generating avenues. Given the timeline of the forthcoming pay commission, established private universities should start to successfully reap the benefits of such revenue models. But are they prepared to explore?

The author is assistant professor, Department of Economics, BITS Pilani KK Birla Goa Campus. Views are personal

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