Software business profits from influence, good timing

The Industry

September 20, 2004|By Alec MacGillis | Alec MacGillis,SUN STAFF

In benefiting from No Child Left Behind, the education software industry can point to two factors: influence in Washington and plain old good timing.

The industry -- a $2.3 billion-per-year concern, according to Eric Bassett of Eduventures, a Boston market research firm -- is well-connected in Washington. Its companies include several former high-ranking federal education officials on their boards and have given to both parties in recent years, including to George W. Bush when he ran for president.

The industry's main lobbying arm, the Software and Information Industry Association, offered frequent input during the drafting of No Child Left Behind, urging that schools be given more leeway to spend federal funding on technology and arguing against stringent requirements that schools buy only programs with evidence of effectiveness.

It won on both fronts: Language requiring evidence was softened, and the law provides for "unprecedented flexibility in the use of program funds," according to an upbeat 2002 summary of the law that the association provided to its members.

After the law passed in late 2001, the group sent Bush a letter congratulating him, and it later organized "fly-ins" for industry executives to be briefed by Bush education officials on the law's fine points. This month, the group helped organize a lobbying push against an attempt by House Republicans to cut $91 million from one technology funding program.

"We were very effective in explaining how technology can help meet No Child Left Behind's goals," said the association's director of education policy, Mark Schneiderman. The association "did have a lot of impact on the law."

But industry observers and government officials say companies also benefited from being in the right place at the right time.

No Child Left Behind is the combination of two approaches to improving schools: increased testing and accountability, and increased federal funding. Both encourage schools to buy more educational software. While federal funding supports only 8 percent of local school budgets, it pays for a third of all school technology spending.

The law's timing was also fortunate for the industry because of broader trends in classroom technology.

During the 1990s, most school technology spending went toward computers and Internet hook-ups, a reflection of the Clinton administration's eagerness to wire schools for the "Information Age." Today, most districts, even poor ones, are relatively well-equipped with hardware -- there is, on average, one computer for every five students, and virtually every school is connected to the Internet -- so schools are free to spend more of their technology budget on software.

The software industry has benefited as well from the Bush administration's general encouragement of partnerships between public education and the private sector.

"The focus is on innovation and the private sector's role ... in providing funding outside the public sector to drive that innovation," said Trace Urdan, an industry analyst with Think-Equity Partners in San Francisco.

Finding new ways to respond to No Child Left Behind was one of the topics at this year's industry association gathering, at San Francisco's elegant Palace Hotel, where software executives met to discuss, among other things, outsourcing, marketing and lobbying. In between, they networked over canapes and enjoyed a black-tie gala on the final night.

At one seminar, Bernie Trilling, a senior director at Oracle's Web site, noted that the hotel's location was appropriate: on a block between Market and Mission streets. It was fitting, he said, because the industry has long been trying to "build a bridge" between the market's profit demands and a broader public mission of improving education.

Trilling hadn't finished when others began to chuckle. "We're closer to Market [Street], though," interjected one executive, David Moore, a vice president at Plato Learning.

Trilling picked up on the skepticism and conceded, to more laughs, that as nice as his metaphor was, "You can go all the way into the bay, and the [two streets] still don't meet."

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