Campus cards in the cloud
Albion College wanted to add a flexible spending account to its campus ID card. The 1,600-student campus in Albion, Mich. had a homegrown student ID system and adding the account was proving difficult.
The school wanted to add that functionality while making sure existing features would still work. And we wanted to do it without deploying an entirely new infrastructure, says Todd Tekiele, director of auxiliary services at Albion. “The point was to have a good card program and improve the student experience in a way that wouldn’t cost a whole bunch,” he explains.
The school investigated a number of options and decided to go with Software as a Service product from CardSmith, Tekiele says. The solution enabled Albion to keep its infrastructure and add the flexible spending account without being a budget killer. “There is a service fee but if I hired one person and paid salary and benefits that would be more expensive than what we pay CardSmith,” he adds.
The cost of deploying and keeping up with upgrades of campus card systems is convincing more schools to look at the Software as a Service model. The cloud-based system has been CardSmith’s staple, but other providers in the space are looking at offering parts of their solution in this way.
Software as a Service, or cloud-based platforms, are accessed via the Internet and enable a school to deploy new systems without installing hardware and software on site. Universities pay a subscription fee for the service. The alternative is a hosted system where an organization buys the software and hardware required to run it. For Albion it was Software as a Service or nothing because of the labor costs associated with a hosted system. “We’re a small school with a limited budget so if we hadn’t gone with CardSmith, we might not have done anything,” Tekiele says. “I’ve seen what other campuses spend on labor.”
Albion doesn’t have a campus card office. Students have their photos taken during summer orientation and receive their ID cards when they arrive on campus in the fall. If questions or problems arise, they go to the information technology help desk. Students can get questions answered about their IDs or have their laptops fixed, Tekiele says
Albion deployed the CardSmith system in 2009. It integrated with the existing functions–dining hall use, library patron identification and physical access–and added the flexible spending account. Students use the magnetic stripe on the card to make purchases at the bookstore, vending machines, post office and 10 off-campus merchants.
CardSmith’s Web site enables student to keep track of their spending and parents to load funds to the account. “It’s been a good boost for use,” Tekiele says. “Our students feel that they have the features that are offered at bigger schools.”
A common refrain for Software as a Service is that it works fine for small and medium sized organizations but it doesn’t scale well. But scaling up has not been a problem for the University of North Florida, explains Tully Burnett, associate director of auxiliary service for the Jacksonville-based institution that has an enrollment more than ten times that of Albion.
When Burnett joined the school in 2004 its student ID used an offline, single-track magnetic ‘junk’ stripe for vending, copy and print applications. There was also a meal plan program that was separate. “Everything was pretty disjointed,” he added.
Burnett’s priority was to get the school a better system, get rid of the junk stripe, take everything online, and add an off-campus merchant program. But the other priority was keeping costs low. “Having come from a university that has hosted its own system I was aware of the overhead,” he says.
The Auxiliary Services Office at University of North Florida manages many functions for the 16,500-student campus. The office takes care of the campus ID program, bookstore, food services, copiers, parking services and shuttles, Burnett says. Staff in the office spend part of their time managing the campus card program while also working on other projects.
Students are enrolled in the campus card system during summer orientation. They fill out paper work and have a photo taken on the first day, and the cards are delivered the next day before the students leave campus, Burnett explains.
If the university decided to go with a centrally hosted system it would have had to add a couple of employees to manage and host the system, Burnett says. “We hadn’t done merchant settlement before and would have had to hire people,” he says.
CardSmith enabled the school to add the features without adding any employees, Burnett says. Students use the ID card for meal plans, copy and print, laundry, vending and an off-campus program.
North Florida is saving $240,000 a year by having its system with CardSmith opposed to hosting its own, Burnett says. This saving is achieved mostly through four salaries that school doesn’t have to pay, including two IT staff, an accountant and one card office staffer. Burnett estimates that his hosting fees are roughly $30,000 less per year than he would otherwise pay for software subscription and maintenance.
As for concerns that the school will pay more in services fees over time than if they would have hosted it, Burnett says the math didn’t work out that way. “In my experience with traditional systems, I’ve never seen annual maintenance and software costs decrease,” he says. North Florida signed a five-year contract with two one-year renewals.
The CardSmith-run Web site that students and parents can use to add funds to the account on the card was also attractive for the university, Burnett says. Putting that together and maintaining it would have been a challenge for the school.
CardSmith also markets the programs and provides the value stations around campus that can be used to add funds to the card, which can bring in extra revenue. “We’re doing $40,000 a year with the value stations,” he says. For the 2010-2011 school year the school had a total of $1.3 million in total deposits.
CardSmith has built its business around the Software as a Service model, but others are going to start offering parts of their products in this way. Since 2004, Cardsmith has been providing campuses with card systems and transaction capabilities and now has more than 100 school signed, says Jay Summerall, CEO and founder of the company. “There’s nothing with a transaction that we can’t do,” he says.
Summerall saw an opportunity when he founded CardSmith. The campus card systems were built on proprietary locally hosted systems. CardSmith took its cues from the global payments industry, he explains. “There’s a reason the payments business isn’t managed by each bank individually but by third-party processors.”
CardSmith is all based on Web technology. Customer’s access reports through an interface and students and parents access their accounts through a secure Web portal.
One of the biggest savings from a Software as a Service model is staff costs. CardSmith handles all phone calls regarding transactions from parents and students, Summerall says. The customer service agent is in CardSmith’s office but has access to the staff on campus to remedy issues. Normally this would require a full-time employee at each school but it’s included in CardSmith’s contract.
System upgrades can be costly and time consuming for schools, but CardSmith can rollout updates easily and quickly, says Taran Lent, co-founder and vice president of product management and development for the company. Traditionally updates and patches are released a couple of times a year, but Software as a Service enables quicker innovation. An update can be installed overnight and made available in the morning.
Though some say Software as a Service will cost more than a hosted system over time because of annual service fees, Summerall disagrees. Hosted systems need to be upgraded every few years or they’re not supported anymore, he explains suggesting users are forced to upgrade. “You spend a lot of money in year one and not as much the following years, but then in year five you have to upgrade and spend a lot of money again.”
But the costs that never go away are the employees, Summerall says. “The more complex the system the more people you need and the more upgrades you’ll need,” he says. “Your cost to operate grows dramatically as you grow a system.”
Schools that look at the long-term costs realize Software as a Service is a better way to go, Summerall says. “They do the full analysis and over five to 10-years we come out ahead,” he adds. This is starting to show as the company launched more than 20 new schools this fall and Summerall points out has yet to lose an existing client.
But a financial comparison might not always be apples to apples. “Prospects sometimes compare the cost of our service to just the licensing fees for their card system,” Summerall explains. “On that basis, we may be comparable.”
CardSmith’s service includes system and database administration, 24/7 monitoring, free updates and other functions that traditional card systems typically don’t include or would incur additional cost. A campus may pay for–and possibly budget–separately for the staff and resources required to perform these functions. CardSmith’s service optionally includes cardholder care, marketing and communications, merchant settlement, off-campus management and other tasks and functions schools manage on their own with a traditional card system.
Still, it can be difficult to make the switch. Existing systems are tied to others and switching them out can be time consuming and expensive. There may also be a hardware issue. “The process of de-installation and re-installation of terminals and equipment is time and labor intensive and can be expensive,” says Summerall. “Since card systems frequently use proprietary terminals, a switch often requires virtually 100% new hardware,” he adds.
“There needs to be a catalyst for schools to want to switch out systems … that can be a mandatory upgrade, change in personnel, or dissatisfaction with the incumbent provider,” he says.
Blackboard will be rolling out its first Software as a Service offerings this fall, says Kirsten Butzow, vice president of product management and marketing at the company. Blackboard’s Web deposit applications will be the first to be offered via remote hosting with the entire Transact product line offered somewhere down the line.
“Some of the technical hurdles with Software as a Service have been solved and our full compliment of features will be offered that way in the next few years,” Butzow says.
The decision to go Software as a Service versus a hosted solution is based on a school’s ability to pay the upfront capital costs associated with such a system, Butzow says. “It’s a personal preference,” she adds. “Some would prefer to do it and others would have it be someone else’s responsibility.”
Blackboard already has some schools lined up to use the new cloud-based system. Initially it expects to see more demand for the new product from smaller schools. “We anticipate higher adoption from smaller schools because of the economies of scale, however we expect it won’t leave out larger schools,” Butzow explains.
Some universities might opt for a mix of hosted and Software as a Service. “Campuses might want the retail functions Software as a Service whereas security features are hosted on campus,” Butzow says.
Blackboard has spend a lot of time making sure these new remotely-hosted products have the same functionality as the traditional version. “We want to deliver based on client requirements,” Butzow adds. “We’re doing this in a thoughtful methodical way with the initial rollout.”
CBORD has enabled some Software as a Service functionality for card systems and also for food service and menu planning products, says Read Winkelman, vice president of sales at the CBORD Group. “We have products in the area and see opportunities to deliver more in that kind of model,” he says.
Its off-campus UGryd offering operates via Software as a Service as does its online depositing product and reporting tools, Winkelman says. “From a vendor perspective there’s not a lot of difference between the two,” he says. “From a customer perspective it’s easier to get started and there’s generally lower or no upfront licensing fees (with Software as a Service).”
The difficulty with switching from a hosted campus card system to the Software as a Service model is the amount of hardware in the field, Winkelman says. “You have all these card readers out there and not just on desktops but at doors,” he adds.
CBORD has held off in this area because it’s waiting for customers to ask for it, Winkelman says. “We follow a customer driven development model. We know how to deliver SaaS and when it makes sense it’s something we’ll pursue,” he explains. “We’re doing it in some areas and most likely we’ll do more.”
The upside to a cloud-based model makes it difficult to figure out why more campuses haven’t made the switch. Winkelman suggests that one reason is the strong obligation campuses feel to protect student data. Providing this data to a third-party has traditionally made administrators uneasy. “You really have to make sure all that information is secure,” he adds.
As the cloud-based model has become an accepted architecture across computing environments, such security concerns have eased. With businesses and campuses outsourcing more operations in an effort to increase functionality and reduce overhead, campus card systems in the cloud seem destined to become more of a norm. While CardSmith pioneered the efforts, it appears that other providers are, or soon will be, joining the ranks.