In-depth: Plenty of activity in the education market

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In-depth: Plenty of activity in the education market

Microscope contributor

For those resellers prepared to take it on, the education market has always looked like an attractive prospect: schools and higher education institutions will always pay their bills, and are likely to be loyal customers, writes Simon Vail.

At first glance this year's BETT show at London's Olympia - the 26th - seemed to confirm that long-held hunch: there were more than 30,000 visitors, many of them from overseas, and over 700 exhibitors.  

New versions of smartboards, projectors, screens, interactive handsets, educational software, learning platforms and managed services - which have served distributors and resellers well for years - were there in abundance.

RM, for example, featured its new Windows 7-based RM Slate 100, a touch screen tablet machine with two USB ports, and SD slot and mini HDMI port running Windows 7 for £399, as well as its miniTablet, a small £350 notebook with swivelling screen, camera and keyboard.  

Also on the RM stand was the innovative Isis school furniture range with a cantilevered chair that balances on a wheeled school table, and a portable Isis Power Hub, an ingenious, rechargeable six user power supply that fits neatly inside a set of desks, or will work outside - as long as it isn't raining.  RM bought Isis last May, adding to its increasing portfolio of educational suppliers.

Screen and projector suppliers were pushing 3D technology - visitors to the Panasonic stand could see themselves in 3D via the Panasonic AG-3DDA1 broadcast camera, and the full HD professional TH-85VX200W plasma display.

3D software developer Amazing Interactives displayed two 3D systems for schools, one with a single 3D projector and Active glasses which generate a left and right image, the other with two stacked projectors that use simpler polarising filters familiar to 3D film goers in cinemas.

"Schools seem to be more interested in the double system - but what really sells 3D is the educational software," said Amazing Interactives sales director Pravin Jethwa. "People like our £5,200 system which combines projector, software, and mobile stand.  They don't seem to be worried by budget cuts," he said.

But while suppliers at the show looked as confident as ever, the market for technology in schools is changing. The public money spent on technology inside schools will be spent by head teachers themselves, rather than by Local Authorities. County-wide deals on hardware and software will become rarer, although it's possible that new Academies and even newer 'free' schools will join together in lose buying consortia.

There will also be less money spent on technology in schools, but there was considerable debate at the Show about how just how much, with guesses ranging from two to three per cent to 20 to 40 per cent.

The schools market is also waiting for the results of an independent review into capital spending in schools, set up last July, and being carried out by Sebastian James, group operations director of DSG International.

"You can't turn round and say that budgets are reduced by X per cent across the board as the way the funding has changed means some schools will get the pupil premium. Two apparently identical schools a couple of miles apart may have massively different budgets," said Martine Dodwell-Bennett, Steljes group sales and business development director.

She added that several of the Local Authority educational advisors she used to deal with have been made redundant, and that the advisory and purchasing roles they carried out on behalf of schools in their region have disappeared.

 'Resellers will be able to command a better price for giving an advisory service to their schools. But resellers will have to understand the technology on offer, more so than ever before,' she said.

The most obvious signs of change are the axing of the BECTA agency, due to close its doors in March, which had advised schools and local authorities on what they should buy and how to buy it.   

The cancellation of many, but not all, Building Schools for the Future (BSF) projects led to suppliers losing money last year - RM, for example, announced a £1.5 million charge in July last year after the Chancellor's emergency budget led it to cancel work on new BSF contracts, even though it will continue to supply schools under existing BSF contracts.

Tim Loughton MP, Parliamentary Under Secretary for Children and Young Families, told BETT that schools should make procurement decisions based on knowledge of their own pupils. "We don't think teachers or school business managers should come to BETT with a shopping list from central government. The world of technology is simply too fluid for Whitehall to be able to decree what should, or shouldn't be in the classroom."

He added that the government would continue to help schools achieve value for money through bulk software licencing, and would identify and share "best practice as it evolves in the classroom."

BECTA's advisory role, which undoubtedly helped several suppliers grow their business in the education market, will be taken over by the Department for Education. Microsoft, for example, renewed its commitment to a 20 per cent discount on schools software by signing a memorandum of understanding with the Department for Education in December - rather than BECTA.

Gareth Davies, managing director of Frog, a learning platform supplier, said he would not miss BECTA at all. "We have grown by between 40 and 200 per cent a year for the last four years, but in 2006 we were not on the BECTA framework as were too small at the time." Frog turnover for 2010 was £5 million.

He said that while BECTA had helped schools to buy commodity items cheaply, it was less successful at creating frameworks for products that were more complex. "BECTA's idea of what a learning platform should be was not a good one, but everyone did what they were told.  We listened to our customers and have a much stronger product."

Anticipating cuts to educational budgets, several suppliers announced interest-free leasing schemes for kit: network supplier D-Link said its zero per cent BudgetWise payment plan for schools would help educational institutions "innovate in spite of the wide public sector budget cuts that are affecting education".

Steljes said that it would offer the £4,000 SMART table interest-free.

Another supplier, Northgate Managed Services, said it was trying to persuade schools that its cloud services were 'affordable'. Chris Wiseman, Northgate sales director, pointed out that schools and higher education institutions buy technology that is used for just half a year.  "Schools pay for investment in capital upfront for infrastructure and storage that is not used at night or during the school holidays. Our new pay per usage service will help to balance this out," he said.

Wiseman says that schools will not put all their services in the cloud, but are interested in email and storage.

Schools remain concerned remains about just where any student data might actually be held in a cloud-based service, a fear that Microsoft's education marketing manager Ray Fleming says is unjustified. "Universities and Local Authorities have rolled out our free Live@Edu collaboration and messaging service confident that their data is kept in Europe, that the relevant data protection rules apply and that we manage their data securely," he said.  The primary data centre for Microsoft's UK education customers is in Dublin, with the back-up in Amsterdam, according to Fleming.

Microsoft announced a new software arrangement for schools under which schools would pay for software according to the number of staff using its products, rather than by the number of computers used by the school. "In the UK we are seeing reductions of more than 50 per cent, as UK staff tend to have far more computers than they do staff," he said.

Yolanta Gill, chief executive at managed services company European Electronique, said her company had taken advantage of the Microsoft Live@Edu service to reduce the price of its own service offerings. "We see great potential in remotely hosted, and cloud based services," she said.

Her company has sold managed services to more than 50 Academies, a result she says of the high bidding costs incurred when trying to win business under the old Building Schools for the Future program. In one instance, a £12 million BSF contract for seven schools - which the company lost  by a narrow margin after a two year process - she said European Electronique ran up £300,000 of costs.

"In the same month we heard we had won a contract for three Academies worth £6 million - and our costs were just £30,000," she said. Many of the BSF costs were run up by lawyers and consultants engaged by Local Authorities and by other members of the bid consortia.

The continuing dependence of suppliers on government spending on technology in education was underlined last year when smart board suppliers PrometheanWorld and SMART Technologies, both of which floated last year, saw their share prices collapse after both warned that sales of smartboards would be less than expected.

SMART raised $660 million in July last year and floated at $17 a share; it is now trading at $9.60 a share.

Speaking at the BETT show, where she launched the new 800 series SMART Board, SMART Technologies chief executive Nancy Knowles said the last year "had not been an easy ride for us." She acknowledged that there had been "fear, uncertainty and doubt in investors' minds, but that the fundamentals of SMART business had not changed."

The 800 series SMART Board allows two children to resize and move objects on the screen at the same time, and to use ordinary objects to manipulate the board's software - a real paintbrush moved over the board displays virtual brushstrokes, for example. Children with poor motor skills could also use a tennis ball to draw and select objects on the screen.

PrometheanWorld launched its new 500 series white board on the same day that it announced a restructuring plan and a forecast that its 2010 earnings would be line with analyst' expectations.

Shares in Promethean rose to 70p, still a long way off its £2 per share price launch last March.

"We believe that what has happened to our share price, and those of other organisations in the industry, is a product of market uncertainty about government spending and education," said Ian Curtis, Promethean head of UK and Ireland, who added there was a "period of downturn on a global basis in government spending on education, but we think that will grow again."

The Promethean 500 series board, available in 87 or 95 inch sizes, lets users draw on the board with their fingers, as well as pen. "The pen and touch board is new for us - traditionally we have only had pen technology," said Curtis.  "It is a reflection of what consumers are expecting on the basis of what Apple has delivered with the iPad."

Stone Computers, privately held, said the education market had been very unnerved by the Government spending review, but that it had now settled down. Practically all of Stone's business has come from the public sector. "In the schools' market our customer will probably see a shortfall of perhaps 20 to 30 per cent in funding, but we still intend to grow our business in 2011 by nine or 10 per cent," said chief executive James Bird.

He said that Stone would continue win business in the education market by finding deals overlooked by larger industry players HP and Dell. "We are more expensive that tier one players like HP and Dell, but we keep our customers for a very long time through services levels, our own delivery vehicles, installation services and five-year parts and labour warranty for schools," he said.

For suppliers who understand education, the signs look good.  The market will not be an easy one, but for at least this year the IT spend on technology should continue, even if nobody is quite sure of the level of spend.

Wyse Technology marketing director David Angwin said he had seen revenues from education sales grow four-fold in the last twelve months, as education suppliers buy the thin client story of high reliability, long service life, low energy usage and an appliance that works straight away.   

A 30 seat classroom running Wyse thin client applications might cost £400 to £500 per student, estimated Angwin.

Whether school head teachers have the purchasing and IT skills - or the time and inclination - to take advantage of deals like this is open to question, now that BECTA and other public sector IT advisors are on the way out.

Microsoft's Fleming thought a new generation of schools IT manager would emerge: "IT managers will have to learn a new set of skills to preserve their position, and not be seen as cost centres. They will have to describe business benefits of school IT more clearly, it will be no different from business."

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