University administrators are scaling back campus developments as physical and digital investments become “increasingly an either-or proposition”, research suggests.
A survey of over 50 chief operating officers (COOs) in Australia, Canada, New Zealand and the UK has revealed qualms about “spending big” on bricks and mortar, with just 31 per cent of respondents considering “on-campus student experience” a strategic priority – down from 78 per cent three years ago.
Fifty-six per cent say they have reduced their capital investment plans while just 25 per cent proposed spending more on physical infrastructure.
Administrators are forced to “choose between physical and digital environments”, despite mounting scepticism that information technology overhauls deliver productivity improvements, according to the analysis by the Nous Group management consultancy.
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The study is Nous’ third probe of the views of professional services leaders in tertiary institutions. It finds that administrators simply could not ignore the disruptive inevitability of artificial intelligence and automation.
“We are on a steam train as a society when it comes to digital,” said Nous principal Zac Ashkanasy. “The steam train is going downhill and it’s getting faster.”
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Cyber protection, in particular, could not be disregarded because attacks could be “devastating”. Yet administrators had bitter experience of “digital disappointments”, including half-hearted adoption of learning management systems and difficulties integrating student management software with pre-existing systems and data.
Core corporate services systems had been particularly disappointing, Ashkanasy said. “You usually see an overspend and you don’t see the benefits realised in any material way.”
An unnamed Australian COO cited in the report had a similar view. “This belief that digital transformation creates productivity gains is not real.”
Nevertheless, administrators tend to support digital investments over “campus redevelopment”, amid widespread misgivings about the cost-effectiveness of physical infrastructure. The report cites research findings that about five in 10 seats in US university classrooms – and more than nine in 10 seats in one Australian institution’s lecture theatres – are typically empty.
It says administrators are increasingly using campus space for student accommodation and commercial income while eyeing savings through cuts to academic offices – the “holy grail” of space utilisation, according to one respondent.
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Universities’ finances are “on the precipice” of snowballing costs, constrained earning opportunities and greater global uncertainty, the report says. Meanwhile they are subject to “greater operational complexity” because of growing expectations from students, regulators and policymakers, along with rapid technological change.
“A twenty-year golden age of growth for the university sector has ended,” it says, with 57 per cent of university leaders now expecting their institutions’ financial performance to deteriorate – up from 25 per cent three years ago.
Many administrators have accepted the need for “collaborative procurement” and shared backroom services, while institutional mergers are also becoming “inevitable” – particularly in the UK. “The question is when, not if,” the report says, explaining that closures may be the only alternative.
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COOs have largely accepted the political imperative of containing their foreign enrolments, the survey finds. The proportion ranking “international enrolment expansion” as a key financial sustainability strategy plunged from 63 per cent in 2023 to 34 per cent this year.
Instead, administrators are looking for savings by cutting “low margin” courses – something long considered “anathema”, particularly in Canada and the UK, but now under consideration as other administrative efficiencies prove elusive. Over one-half of respondents in the UK and two-thirds in Australia now consider removing low-enrolment programmes a “useful strategy”, the report finds.
Ashkanasy said the days when universities could “grow their way out of trouble” were over, requiring them to “think much more carefully about mission and margin”. But severing the “long tail of low-enrolment courses” is “incredibly risky”, he warned.
“Academic identity and the delivery of a course are quite intertwined,” he said. “It’s not the same in other sectors. If we don’t deliver this course, who will?”
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