Education
Global Industry Primer
What is the education industry?
Industry definition and key segments
The education industry is the group of organizations that provide
learning for citizens. It is comprised of what can be referred to
as traditional education institutions and nontraditional or new
education models. Traditional education institutions include primary
and secondary schools, institutions of higher education, state or
national departments or ministries of education. Nontraditional
models include charter schools, online learning academies,
corporate for-profit institutions and so on.
Educational institutions are critical for providing the talent pool
for tomorrow, which is necessary for the survival and innovation
of nations and cities competing in a global economy. They
represent 5 percent of global gross domestic product (GDP)
and typically 30 plus percent of state budgets.1 Yet, in many
regions, they fall short of expectations. Educational institutions
struggle to deliver required skills for a changing workforce. They
typically have limited resources, which can be poorly managed.
Many of them come under great regulatory scrutiny and testing
requirements. Finally, in some parts of the world, there are not
enough schools to keep up with demand.
One way to look at key segments of the industry is by the
various stakeholders:
The consumers. Students and parents are demanding better
education and outcomes in graduation, employment and value
returned for their investment, as are government officials in
employable skills, new business ventures and an improved tax
base. In all markets, youth unemployment and the need to reskill
workers are visible concerns. Students are also demanding
that education be delivered to them in a personalized, mobile,
and technology-rich manner, similar to their experience in retail
for example.
The institutions. Educational systems must balance efficient
use of limited resources while reducing dropouts, improving
student learning outcomes, aligning to workforce skill needs
and keeping up with the technology expectations of students.
1. IBM MDI Industry Insights, 2016
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They increasingly use information resources, such as financial and
student data, to plan, evaluate, recruit, raise funds, report and run
their operations. In addition, they often manage large organizations
that are labor intensive, yet strive to drive innovation, meet regulatory
responsibilities and attract more students.
The workers. Faculty and administrations are expected to
make good use of resources to deliver continually improving
results. They must improve learning outcomes while maintaining
reasonable cost of operation, focusing on maximizing operational
efficiency and effectiveness. Furthermore, they are pressured to
understand the use of new technology, and new educational
models overall, to keep up with the learners they serve.
How big is the education industry
and what is the opportunity size?
The education industry is a global market with half the opportunity
in mature segments, such as Europe and the United States.
The other half is in emerging markets, such as Africa and parts
of Latin America. It has an estimated gross market value of
USD 21 billion, and 3.8 percent adjusted gross revenue. Its a
growing industry due to the ever-increasing importance of
academic performance and its vital link to economic development.
The industry is in transformation, such as deploying new
technology, and this growth trend is likely to continue. Analysis of
the growth shows four key plays in education: cognitive capabilities,
the mobile student, modernizing administrative systems and
high-performance computing with research and innovation.
Advancements in digital content, connected devices and mobility
will contribute to the growth of global education. A deeper
view from IBMs own analysis indicates a USD 6.3 trillion global
education expenditure in 2017, growing at a compound
annual growth rate (CAGR) of 23 percent from 2013 - 2017.
In major markets, the higher education segment accounts for
60 percent of the opportunity, while in the growth markets the
opportunity is split 50/50 between higher education, and primary
and secondary education.
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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
in the education industry?
There are a number of major trends impacting the global education
industry. One is the increasing demand for consumerism
educational leaders are challenged to meet rising expectations
from students, communities and parents. Another trend is the
focus on career readinessbusinesses have high expectations
around workforce skills that must be met, while dealing with
limited and increasingly constrained resources.
A third major trend is the expansion of education focus on a talent
pool tied directly to state economic development. Educational
systems provide students with the skills and knowledge they need
to compete economically in a rapidly changing environment. Over
the next decade, the education industry will continue to face
evolving challenges in shaping its relationships with society
and employers. Changes in technology, commerce, politics and
demographics require educational systems to adapt in order to
serve their citizenry and to contribute to the future economic
success of nations, states and regions.
A fourth big trend is the extent of technology immersion in
education, which creates a number of subtrends in educational
systems. A major focus today in education is on the now possible
personalization of learning. Technology exists today to provide
every student with a customized learning pathway. Some of these
technologies include:
The rising adoption of mobile devices across various industries
is transforming education. Mobile platforms drive student
response systems, enable virtual study and discussion
forums, and increase the availability of study material.
The support of cloud-based learning tools, combined with an
increasing number of connected devices and online learning
forums, such as massive open online courses (MOOCs), are
enabling access to education from virtually anywhere.
Use of machine learning and data analytics in education
unveil powerful insights about student learning.
The education industrys transition to digital content will
proliferate in the education industry.
Connected devices enable students and teachers to create and
share content over mobile devices at any time from virtually
anywhere, while enabling instant access to the outside world.
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There is a trend toward the blending of formal and informal
learning, which includes:
Redesigned learning spaces to induce active and flexible
learning, while enabling a better team environment
Increased interest and pressure in measuring learning and
education outcomes
Advanced learning environments that enable increased
flexibility, agility and collaboration to drive innovation
Increased collaboration between multiple higher education
institutions
Finally, there are also other significant global trends that are
affecting the education industry as a whole:
Distance learning is increasing in relation to on-campus study.
Online, cloud-based education platforms will disrupt
expensive, traditional on-campus and textbook models.
Adoption of mobile education and competency-based
learning experiences will continue to increase.
Game-based learning adoption is increasing.
What are the major
challenges and imperatives
faced by educational systems?
Historically, and continuing today, educational systems
fundamental imperative is to improve teaching effectiveness and
student outcomes while maintaining operational efficiency and
effectiveness. These improvements include the application of
new tools, for example analytics and performance management,
to more accurately track achievement, identify problems early
and measure outcomes.
However, education as an industry now finds itself facing much
of the same challenges found in many other industries. Cost
pressures and an increasing focus on return on investment are
pressuring educational systems to explore new models. Changing
population demographics are requiring educational systems to
modify their approaches to accommodate the learning needs of
a wider variety of backgrounds. Data management is becoming
increasingly critical, as information about students and their
academic progress is growing exponentially. Educational
achievement levels have become important factors in rating the
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
is having a profound impact on how educational systems are
developed and instruction is delivered. Educational systems
must accelerate the progress of discovery and innovation by
enabling researchers with cutting-edge technology. Many
higher education systems will be forced to evolve or look for
new models of sustainability.
Consider the following challenges of this industry:
The cost of education is growing as much as four times the
inflation rate.
A growing global middle class and increased skill needs
require a huge capacity increase.
There is increased competition for grant and national funding,
as well as competition for top-tier faculty at research institutions.
Educators need to transform institutional services and
learning to engage digitally literate students, either to enroll,
retain or progress.
All these drivers and challenges create specific industry
imperatives that educational systems must address to achieve
the expected results.
What are the key performance
indicators for education?
Because of a tighter relationship between education providers,
government and key stakeholders, educational institutions have
had to answer to greater levels of accountability. Key factors include:
A growth in public funding that brings with it the need to
demonstrate value for taxpayers
Pressure to apply private-sector management approaches
Competitive pressures on institutions from national and global
drivers of change
Pressure to modernize education and adopt more technology
To track this accountability, many educational systems are turning
to key performance indicators (KPIs) to measure performance.
While there are many KPIs that could and should be measured,
they are not universal in interpretation or in application. However,
in the primary and secondary K-12 segment, some areas where
KPIs are most likely to be deployed include:
Graduation and matriculation rates
Attendance rates
Student drop-out rates
Standardized test scores
Cost per student
Professional development
Student-per-teacher ratios
Technology deployment
Budgeting
For higher education, the KPIs will be different from those found
at the primary and secondary level. In broad terms, KPIs for higher
education will be focused in key areas, including:
Student applications, enrollment and retention
Market position
Institutional sustainability, endowment
Faculty awards and research projects
Knowledge transfer
Financial health
Systems of governance
Capital and institutional projects
In the end, KPIs will be institutionally specific. For example, a
research-based institution might have KPIs focused on:
Achievement of high marks from research accreditation and
regulatory bodies, which varies by geography and research
discipline
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
within the education industry?
Competition in the education industry varies. In some areas of the
world, there is no competition amongst educational providers,
and students have no choice where they go to school. In other
parts of the world, students have multiple sets of choices. The
choices that students have and the decisions made on the
educational services they seek vary greatly based on the segment.
In the primary and secondary segment, the level of competition
amongst providers is going to be greatly determined by the
choices parents and students have in deciding where to receive
their educational services. A competitive educational market
does exist in countries like the United States, where parents and
students can choose between public, charter, private schools
and online academies. Factors in the competitive landscape are
elements, such as affordability, convenience and safety, which
are not necessarily factors educational providers can directly
control. In other parts of the world, there is no choiceand
therefore no competitionin primary and secondary education.
In higher education, the competition can be fierce. Universities
try to attract students by promoting their academic results,
focusing on qualified staff, investing in technology and developing
attractive academic programs. For-profits and online institutions
are newer entrants to the market, which offer expanded flexibility,
especially for the nontraditional or returning learner. Beyond the
recruiting of students, higher education institutionsespecially
those with strong research capabilitiesface tough competition
from other institutions for grant and capital funding. Institutions that
can capitalize on technology and provide stronger environments for
development and innovation are more apt to secure grant funding
and realize economic return when their research projects can
be commercialized.
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What is IBMs point of view
and roadmap for education?
Through decades of work with major educational institutions
around the world, IBM has developed a point of view that reflects
the challenges confronting educators today and vision of the
opportunity for progress. The core elements of the roadmap are:
Focus on improved student outcomes
IBM believes the information management capabilities and
analytics expertise exist today to fundamentally transform
education to an individualized, or personalized, model. This
personalization provides every learner with a unique learning
pathway and real-time feedback for the faculty on how the learner
is doing. This process, in turn, helps optimize learner outcomes.
IBM also believes the student experience with the institution is
critical to the success of that student. An exceptional student
experience is technology rich, offers collaboration opportunities,
is social in nature, leverages mobile technology and applications,
and gives the student clear feedback on his or her role and
journey in the institution. This feeling of engagement, fueled by
technology tools, has a direct impact on student retention and
student success.
We help institutions develop the talent for the future by looking
at education as the supply chain connecting the student
experience to better outcomes, which develops better talent.
IBM Watson offers the ability to do this at scale. Big data is
critical and student data is abundant. However, what institutions
do with this data and how they protect the privacy of their students
is crucial. IBM is able to help manage the data securely and
privately and not monetize data for other purposes.
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Drive efficiencies in
administration and operations
Efficiencies exist in the back-office or operations side of the
institution that can save the institution cost and help it focus on
front-office or classroom initiatives. Doing so requires becoming
an agile institution by leveraging methods like cloud computing,
green data center initiatives and infrastructure modernization.
Leading innovators can help transform their operational and
financial environments by leveraging new methods, emerging
technologies and performance management to improve
operational outcomes in a meaningful, efficient and transparent
way. Administrators can integrate data and insights for use in
operations, giving administrators more information about
institutional performance, such as asset management, financial
trends and risk exposures.
These changes in improving student outcomes and driving
efficiencies in administration and operations must be made for
the long-term viability of the institution, especially in higher
education. They help the institution remain cost competitive
while providing tighter linkage to workforce requirements and
regional economic vitality.
What are the key IBM plays
for education and proof points?
Improve student experiences for better outcomes
IBM helps educational institutions integrate data from various
sources and leverage analytics and cognitive solutions to improve
outcomes from the classroom, to campus, to careers. These
solutions transform institutional services and learning to engage
digitally literate students, either to enroll, retain or progress.
Leveraging open standards, IBMs approach is to create a
cloud-based platform grounded in a single view of student,
across administrative, learning, social and other data sources,
and advanced curation and a repository for educational content.
This is all tied together by analytics and presented in a case
management frame to support decision making by teachers,
students and administrators.
IBM leverages its leadership in information management, analytics
and enterprise content management. We establish ecosystem
leadership by initially targeting the major vendors in education.
Cognitive solutions, such as IBM Watson, have high mindshare
in education and provide more insights for educators. Clients
desire a single partner for their data and analytics needs, which
IBM Watson provides.2
2. The IBM Watson Education Business Unit is being announced in October, 2016.
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IBM differentiates itself from its peers in education by forming
relationships with digital disruptors and collaboration education
platform providers to offer industry-specific cloud solutions.
These solutions are powered by IBM capabilities in the Internet
of Things (IoT), IBM Watson and big data.
Client proof point: Gwinnett County Department of Education
is the largest school system in Georgia. To evaluate school
performance and better understand how to improve that
performance, GCDE needed to gain new technology capabilities
and become a knowledge-driven organization. GCDE enlisted
IBM to help them understand the paths that children take through
the education system. Using predictive analytics allows the school
system to identify the contributing factors to success and failure,
keeping students on a path to success and intervening quickly
when they stray.
Drive operational efficiency and effectiveness
Institutions must repurpose their budgets to address the growing
cost of education while improving overall cost efficiency. Optimizing
the back office enables an increase in operational responsiveness
and eliminates costs that can be used to drive critical future
investments. This optimization can include consolidating and
integrating education services, such as infrastructure, support
and stakeholder services, leveraging best practice business
processes, and using a cloud delivery model.
One example is how IBM leverages the migration of enterprise
resource planning (ERP) systems to the cloud to gain new
implementation business. At the same time, we can identify and
close opportunities to migrate legacy workloads to the cloud.
Another example is IBMs implementation of smarter buildings
and the IoT on campus to do such functions as optimize space
utilization and minimize utility expense.
Client proof point: Keller Graduate School, part of DeVry
University, offers undergraduate and graduate degree programs
within five colleges of study. It is one of the largest private-sector
universities in North America and Keller Graduate School is one
of the largest graduate management schools in the US. The
school wanted to identify students at risk of dropping out or
those with low performance so they could offer them additional
support. By collecting and integrating information from a variety
of sources and applying data analytics, the school was provided
a single view of each student with dashboards displaying
real-time analysis. The school is now able to intervene with
students at risk of dropping out to improve retention rates and
the student experience.
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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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