When Hal Friedlander, chief executive officer of the nonprofit Technology for Education Consortium (TEC), spoke last year to a roomful of school district procurement officers at a conference in Washington, D.C., he asked how many of them believed that educational technology represented a buyer’s market. Nobody raised a hand.
“They all believed that they are victims of stronger forces against them, but that’s not really the truth,” he said in an interview with EdScoop. “The truth is that it’s very competitive. … There are thousands of software providers out there, dozens in any particular category. Most of them, at least from our research, have very limited market share.”
A competitive market gives procurement officers an advantage when it comes to negotiating contracts and prices for technology products, said Friedlander, a former chief information officer at New York City’s Department of Education.
Yet TEC, a New York-based nonprofit dedicated to improving K-12 edtech procurement, estimated in a report issued last April that school districts across the country are being overcharged by at least $3 billion on hardware and software.
To help K-12 buyers navigate the market and become savvy negotiators, TEC has launched a series of online workshops aimed at equipping buyers with detailed pricing information and specific recommendations for prices to request from vendors. “Through these workshops, we can help level the playing field by giving districts a specific price to ask vendors for as they negotiate,” Friedlander said.
In putting together the report, TEC researchers surveyed 94 school districts in 18 states, representing annual edtech budgets of $131 billion total. They concluded that districts are being consistently overcharged by at least 20 percent and up to 80 percent on three of the top five software products used in schools.
The report attributed the overselling to a “lack of transparency” from companies that do not make price tags visible and the fact that schools often don’t have the resources to investigate prices and compare them. A key component in price variation comes from “seemingly random discounts” applied by vendors to the total cost of software licenses, which keeps the actual price paid per user or device unclear, TEC researchers said.
In the first workshop last month, TEC officials provided recommendations for prices per license to request from three vendors: Imagine Learning, Accelerated Reader 360 and Lexia Reading Core 5. The prices were based on TEC’s analysis of the highest and lowest prices paid per license, based on data collected from member school districts.
The next workshop, scheduled for Sept. 27, will cover price recommendations for Discovery Techbook, Canvas LMS and IXL Learning. TEC will publish reports on the content of each workshop on its website. Currently, it plans to stage a workshop every other month, “but we may do them more frequently as demand increases and data becomes available,” Friedlander said.
The online workshops are available only to TEC members, but Friedlander stressed that membership is free to school districts and schools, including charter, parochial and independent schools.
Friedlander said that variations in price are often unrelated to the size of the school district and the volume of the overall purchase, contrary to conventional wisdom.
“We find small districts buying limited quantities getting great prices, and we find big districts making complicated deals paying more for the same unit,” he said.
Prices can sometimes depend on the willingness of the school district to invest in a mutually beneficial relationship with the technology provider, he said. One small district with about 3,000 students got a 70 percent discount from a software provider based on an agreement to be a research partner.
“However [the district] evolved that deal and that relationship, it’s paid off pretty well for the district and [the vendor] is obviously comfortable with it as well or they wouldn’t have done the deal,” Friedlander said.
In preparing to negotiate with a vendor, procurement officials should educate themselves about price ranges for the products they seek and then set a target price, he said.
“As a district you can’t rely on the edtech companies to figure out what’s OK to charge you,” he said. “You have to tell them what you’re willing to spend. One tactic is state your price up front. And if you have a piece of paper showing that another district paid that price or a similar price then that gives you some confidence that you can achieve that price.”
Friedlander said procurement officials shouldn’t worry about being too aggressive in negotiations. “Obviously, the school district’s mission of educating kids is way more important than the company’s bottom line,” he said. “The district should have their program as detailed out as possible with all the various components they need to succeed and bring their price to the table. [Vendors] are not going to beat you up when you present that whole program and show them where they fit into it.”
He added that “more than anything, [vendors] need that partnership with the school district, and the more they understand where they fit in both from an implementation or rollout standpoint as well from a financial standpoint, the better planning they can do in terms of what they’re spending on various aspects of their operation.”