The time is ripe for privatisation in higher education, argue Paul Clark and Mike Baxter, while Jonathan Rutherford says universities need state aid.

Like many recent crusades in the name of the market economy, unbundling has its roots in the 1980s when many monopoly suppliers were forced to unbundle by legislation. Other unbundling happened as a direct result of market forces. Until recently, a computer, for example, was something you bought from IBM. Now your computer can be built from a range of named and branded components.

At the heart of unbundling is the notion that bundled services can hide inefficiencies. An organisation may be excellent at providing several aspects of its service but less good at providing others. If the elements of the service are identified and individually priced, alternative providers have the opportunity to move in and offer a better deal.

It sounds like anathema to the traditional idea of the university. The integrity of the "academy" has been the core of the university system for centuries: students are recruited, taught and mentored by staff who themselves are informed through scholarship. But let us, in the true spirit of scholarship, explore what an unbundled higher education sector might look like.

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Teaching, as the core function of higher education, is probably a good place to begin. If teaching were to be unbundled, it would require all activities contributing directly to course delivery to be separately identified, costed, priced and offered to students as a distinct service that they might seek to obtain from an alternative supplier.

For a course to be delivered by a third party, course development must be unbundled. Crucially, each element of any unbundled service would need to be designed to meet its own independent objectives so that it could be held accountable by independent organisations specialised in the areas concerned. Other clear candidates for unbundling include assessment and student recruitment, pastoral support and guidance.

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To see unbundling work successfully (against specific criteria) you need only to look to the rapidly growing for-profit sector of United States higher education. Richard Ruch has worked as a professor and dean in the for-profit and non-profit sectors of American higher education. His book Higher Ed Inc examines differences in the business and academic cultures between the two sectors.

The for-profit sector, he concludes, is able to respond to the market in ways that the non-profit sector would find unimaginable. "Whole new programmes sometimes go from development to launch within a matter of months in for-profit universities," he says. The decisions are made by the business side of the organisation as part of a team effort involving people from marketing, admissions, financial aid and placement as well as by academics, who are seen as "experts in teaching and delivery, (but) not necessarily in creating a curriculum or developing a new degree programme".

Academic debates about discipline content and programme ownership still occur "but they are short-lived". The original impetus for John Sperling to take his first steps towards founding the University of Phoenix, America's biggest for-profit university, was being told that the non-profit university that employed him at the time would take at least three years to approve his proposed new degree programme.

In another example of unbundling, the more customer-focused for-profit sector employs "professional receptionists and customer-relations specialists" to understand and then meet the needs, interests and demands of students.

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Ruch emphasises that costs are painstakingly measured and controlled in the for-profits. In general, they offer no-frills education and minimise expenditure on sports facilities and expensive student residences. But by unbundling the services provided by the university, faculty time released for non-teaching activities, for example, is also minimised. The financial consequences are staggering. The cost of undergraduate education for a for-profit institution is, on average, 60 per cent lower than for non-profit providers.

So what are the likely implications for higher education in the United Kingdom? Technological change is already pushing us towards unbundling. E-learning, for example, necessitates unbundling, if only so that the educational provision can be rebundled in a different form. Academic research is already producing assessment packages that could be offered as customised online services. Technology push, however, rarely produces substantial change without market pull. For students, the prospect of an unbundled university sector could have obvious attractions. Faced with the choice of a University of Poppleton degree or a Harvard University degree delivered by Poppleton, there would be little hesitation in the minds of today's brand-conscious students.

The potential pull from the financial markets could be considerable. Richard Ruch notes that between 1994 and 1999, $4.8 billion (?3.4 billion) of private finance was invested in new companies entering into the US for-profit higher education sector. In business terms, he explains, higher education has huge attractions: customers are retained and continue to pay for three years; on completion, higher education has added much more value, in terms of career earning potential than it has cost; as a consequence demand is plentiful provided the costs and risks are managed, making it a "buying" rather than a "selling" market. For academic staff the prospect of unbundling seems less attractive. Loss of control, loss of autonomy and increased job insecurity under the threat of outsourcing might make unbundling the last straw in this hard-pressed employment climate. But would it really be that bad? A significant part of the hardship of contemporary academic life is being a jack-of-all-trades with time to be master of none. To have a job with a clear, crisply focused and readily achievable function as well as having the opportunity to do that job well would be willingly traded for some loss of autonomy by many academics. Job insecurity becomes an issue only if you are not able to do your job well and deliver efficiency to your organisation.

Unbundling higher education services in our own way and under our own control may provide a lot more long-term job security than being forcibly unbundled by incoming for-profit companies with the ruthless efficiency that goes with their big brand names and even bigger budgets.

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Mike Baxter was, until recently, dean of Ravensbourne College of Design and Communication. He runs the consultancy firm Working Learning Ltd.