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Educause Western Regional ConferenceEducause Western Regional ConferenceSacramento, CASacramento, CA
March, 2004March, 2004
Report of the EDUCAUSE Report of the EDUCAUSE IT Funding Working GroupIT Funding Working Group
Copyright Educause, 2004. This work is the intellectual Copyright Educause, 2004. This work is the intellectual property of Educause. Permission is granted for this material property of Educause. Permission is granted for this material
to be shared for non-commercial, educational purposes, to be shared for non-commercial, educational purposes, provided that this copyright statement appears on the provided that this copyright statement appears on the
reproduced materials and notice is given that the copying is by reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to permission of the author. To disseminate otherwise or to
republish requires written permission from the author.republish requires written permission from the author.
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Report of the EDUCAUSE Report of the EDUCAUSE IT Funding Working GroupIT Funding Working Group
H. David ToddH. David ToddUniversity of San DiegoUniversity of San Diego
Educause Educause Western Regional ConferenceWestern Regional Conference
5 March 20045 March 2004
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Presentation OutlinePresentation Outline
Working Group ProcessWorking Group Process IT Funding as an Institutional ChallengeIT Funding as an Institutional Challenge Funding and Budgeting for ITFunding and Budgeting for IT Funding Models and PracticesFunding Models and Practices Assessing the Value of ITAssessing the Value of IT Recommended IT Funding PracticesRecommended IT Funding Practices
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Working Group OverviewWorking Group Overview
GoalsGoals Examine and identify higher ed IT funding Examine and identify higher ed IT funding
strategies and practices through a series of strategies and practices through a series of dialogsdialogs
Research and discuss successful strategies Research and discuss successful strategies to refine observationsto refine observations
Document and publicize results to encourage Document and publicize results to encourage broader adoptionbroader adoption
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Working Group OverviewWorking Group Overview
TimeframeTimeframe Invitations to participate – Spring 2002Invitations to participate – Spring 2002 Online discussion – 6/02 through 9/02Online discussion – 6/02 through 9/02 Face to face meeting – 10/02Face to face meeting – 10/02 Wrap-up online discussion – 10/02 - 12/02Wrap-up online discussion – 10/02 - 12/02 ITF moderator content extraction – 3/03 – ITF moderator content extraction – 3/03 –
8/038/03 Leadership briefing and Web page – 12/03Leadership briefing and Web page – 12/03
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Working Group OverviewWorking Group Overview
ParticipantsParticipants Nearly 100 invited (CIOs, CFOs, ITFOs)Nearly 100 invited (CIOs, CFOs, ITFOs) More than four dozen acceptedMore than four dozen accepted Diverse demographics representedDiverse demographics represented
All Carnegie ClassesAll Carnegie Classes Broad range of sizes (FTE)Broad range of sizes (FTE) Public and private controlPublic and private control National geographic distributionNational geographic distribution
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Working Group OverviewWorking Group Overview
MethodologyMethodology Four moderated subgroups:Four moderated subgroups:
- Planning- Planning - Costs- Costs
- Practices- Practices - Charging- Charging
Discussion topics shared in advanceDiscussion topics shared in advance One set of topics per week, seven weeksOne set of topics per week, seven weeks Final round of discussion of key Final round of discussion of key
extracted pointsextracted points
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Working Group OverviewWorking Group Overview
ModeratorsModerators Laurie Antolovic, Indiana UniversityLaurie Antolovic, Indiana University Ardoth Hassler, Georgetown UniversityArdoth Hassler, Georgetown University Karen Leach, Hamilton CollegeKaren Leach, Hamilton College Allan MacDougall, South Orange County Allan MacDougall, South Orange County
Community College DistrictCommunity College District H. David Todd, University of San DiegoH. David Todd, University of San Diego Julie Rudy, Educause (group facilitator)Julie Rudy, Educause (group facilitator)
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An Institutional ChallengeAn Institutional Challenge
Basic Working PrinciplesBasic Working Principles
1.1. IT is a critical IT is a critical campuscampus resource resource
2.2. IT funding must be IT funding must be comprehensively and comprehensively and centrallycentrally planned and coordinated planned and coordinated
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An Institutional ChallengeAn Institutional Challenge
IT Funding LeadershipIT Funding Leadership
Not just the CIO’s jobNot just the CIO’s job Must include executive leadersMust include executive leaders Key campus stakeholdersKey campus stakeholders Advisory groupsAdvisory groups
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An Institutional ChallengeAn Institutional Challenge
Cost and ValueCost and Value Must be understood and communicatedMust be understood and communicated
• technologytechnology isn’t “free” isn’t “free”• the cost of the cost of people people cannot be overlookedcannot be overlooked
Need to set priorities appropriate for the Need to set priorities appropriate for the institutioninstitution
Need to make spending choicesNeed to make spending choices Need to assess value of investmentsNeed to assess value of investments
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An Institutional ChallengeAn Institutional Challenge
IT PlanningIT Planning IT planning must be part of institutional IT planning must be part of institutional
strategic planningstrategic planning• IT unit must still have internal plansIT unit must still have internal plans
In the absence of an institutional plan, IT In the absence of an institutional plan, IT plans must be aligned with institutional plans must be aligned with institutional goalsgoals
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Funding and Budgeting for ITFunding and Budgeting for IT
Fundamental PrinciplesFundamental Principles1.1. Long-term IT financial planning should Long-term IT financial planning should
be an integral part of overall be an integral part of overall institutional financial planninginstitutional financial planning institutional capital and operational institutional capital and operational
financial planning must include ITfinancial planning must include IT institutional funding and governance institutional funding and governance
issues must be consideredissues must be considered
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Funding and Budgeting for ITFunding and Budgeting for IT
2. IT investments must align with 2. IT investments must align with institutional strategies and prioritiesinstitutional strategies and priorities
begins with aligning IT strategic priorities begins with aligning IT strategic priorities with institutional strategic prioritieswith institutional strategic priorities
funding allocations are based on prioritiesfunding allocations are based on priorities regular communication with campus leadersregular communication with campus leaders gather feedback, review and re-aligngather feedback, review and re-align
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Funding and Budgeting for ITFunding and Budgeting for IT
3. A comprehensive knowledge of 3. A comprehensive knowledge of institutional IT spending is neededinstitutional IT spending is needed
leverage total institutional investment leverage total institutional investment plan cohesively for IT investments plan cohesively for IT investments account for central and distributed IT account for central and distributed IT
costscosts
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Centralized vs. DecentralizedCentralized vs. Decentralized
Percentage of Total Centralized IT Funding Percentage of Total Centralized IT Funding Relative to Total Campus IT ExpendituresRelative to Total Campus IT Expenditures
ALLALL DRDR MAMA BABA AAAA
MeanMean 81%81% 70%70% 85%85% 90%90% 84%84%
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Centralized vs. DecentralizedCentralized vs. Decentralized
Percentage of Central IT Staff Expenditures Percentage of Central IT Staff Expenditures Relative to Total Campus IT Staff ExpendituresRelative to Total Campus IT Staff Expenditures
ALLALL DRDR MAMA BABA AAAA
MeanMean 88%88% 76%76% 90%90% 96%96% 92%92%
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Funding and Budgeting for ITFunding and Budgeting for IT
IT Requires Life-cycle FundingIT Requires Life-cycle Funding not a one-time expensenot a one-time expense an on-going operational expensean on-going operational expense cost includes continued maintenance and cost includes continued maintenance and
upgradesupgrades different cycles for different technologiesdifferent cycles for different technologies different cycles for different institutionsdifferent cycles for different institutions
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Funding and Budgeting for ITFunding and Budgeting for IT
CIO’s Need to Get Better at Providing CIO’s Need to Get Better at Providing “The Numbers” to Campus Leaders“The Numbers” to Campus Leaders develop accurate and realistic cost figures develop accurate and realistic cost figures include the cost of ongoing staff training include the cost of ongoing staff training
and professional developmentand professional development include the cost of staffinginclude the cost of staffing assess value (more later)assess value (more later)
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Funding Models and PracticesFunding Models and Practices
Current IT Funding ModelsCurrent IT Funding Models Centralized funding (“free,” library model)Centralized funding (“free,” library model) Usage-based charges (chargeback)Usage-based charges (chargeback) Charging fees (“tax” model)Charging fees (“tax” model) Some combination of the aboveSome combination of the above
Adapted from Smallen and McCredie, “Getting Beyond Budget Dust to Sustainable Models for Adapted from Smallen and McCredie, “Getting Beyond Budget Dust to Sustainable Models for Funding Information Technology”Funding Information Technology”
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Funding Models and PracticesFunding Models and Practices
Potential IT Funding SourcesPotential IT Funding Sources
Central operating and capital budgetsCentral operating and capital budgets Debt financing / bondsDebt financing / bonds Special technology fees / tuition add-onsSpecial technology fees / tuition add-ons Chargeback / revenue generating Chargeback / revenue generating
activitiesactivities For-profit subsidiesFor-profit subsidies
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Funding Models and PracticesFunding Models and Practices
Potential IT Funding SourcesPotential IT Funding Sources
External revenues (sale of products or External revenues (sale of products or services)services)
New monies (grants, gifts)New monies (grants, gifts) Vendor arrangements (discounts, leases)Vendor arrangements (discounts, leases) Consortial / partnership arrangementsConsortial / partnership arrangements
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Funding Models and PracticesFunding Models and Practices
ChargebackChargeback Significant differences in charging practices Significant differences in charging practices
by institutional typeby institutional type A way to ration, control expenses, measure A way to ration, control expenses, measure
demanddemand It costs less to recover costs than a service It costs less to recover costs than a service
costscosts Don’t charge when instituting changeDon’t charge when instituting change … … but it’s hard to charge once it’s been freebut it’s hard to charge once it’s been free
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Funding Models and PracticesFunding Models and Practices
Reevaluating Funding ModelsReevaluating Funding Models
Disappearing / changing revenueDisappearing / changing revenue telephone line revenuetelephone line revenue long-distance resale long-distance resale computer resalecomputer resale cellular phonescellular phones phone cardsphone cards
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Funding Models and PracticesFunding Models and Practices
Reevaluating Funding ModelsReevaluating Funding Models
Cross-subsidization has funded:Cross-subsidization has funded: campus networkscampus networks residence hall networksresidence hall networks campus modem pools (remote access)campus modem pools (remote access) student computing laboratoriesstudent computing laboratories general IT organization supportgeneral IT organization support general campus administration, …general campus administration, …
Minimize cross-subsidizationMinimize cross-subsidization
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Funding Models and PracticesFunding Models and Practices
Developing Indirect Funding SourcesDeveloping Indirect Funding Sources
Cost-shiftingCost-shifting Re-allocation of fundsRe-allocation of funds Sunsetting technologiesSunsetting technologies Knowing when to quitKnowing when to quit Consortial arrangements / partnershipsConsortial arrangements / partnerships
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Funding Models and PracticesFunding Models and Practices
Addressing the “Tyranny of the New”Addressing the “Tyranny of the New”
One-time funding for exciting new projects One-time funding for exciting new projects but no funding for on-going operating costsbut no funding for on-going operating costs
Maintenance and operating costs assumed Maintenance and operating costs assumed to be covered by IT budgets if considered to be covered by IT budgets if considered at allat all
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Funding Models and PracticesFunding Models and Practices
Accurately Costing IT ProjectsAccurately Costing IT Projects
Full on-going costs of major systems such Full on-going costs of major systems such as ERP must be understood and fundedas ERP must be understood and funded
Staff costs are a significant portion of the Staff costs are a significant portion of the budgetbudget
Increasing staff costs -- and increased Increasing staff costs -- and increased numbers of staff for new projects -- must numbers of staff for new projects -- must be included in project budget planningbe included in project budget planning
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Percentage of IT Budget Percentage of IT Budget Devoted to StaffDevoted to Staff
Ratio of Total Central Staff Compensation Ratio of Total Central Staff Compensation to Total Central IT Budgetto Total Central IT Budget
ALLALL DRDR MAMA BABA AAAA
MeanMean 51%51% 50%50% 51%51% 51%51% 55%55%
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Funding Models and PracticesFunding Models and Practices
Developing Standard PracticesDeveloping Standard Practices
Standard equipment lifecyclesStandard equipment lifecycles Sustainable revenue modelsSustainable revenue models Project lifecycle budgetingProject lifecycle budgeting Standard hardware, software, support Standard hardware, software, support
practices for baseline service deliverypractices for baseline service delivery
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Assessing the Value of ITAssessing the Value of IT
Fundamental PrinciplesFundamental Principles
1.1. Assessment is an institutional challengeAssessment is an institutional challenge—not an IT challenge—not an IT challenge
2.2. Assessment must be done on both the Assessment must be done on both the administrative and academic side; the administrative and academic side; the latter is difficult!latter is difficult!
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Assessing the Value of ITAssessing the Value of IT
What We Want to AssessWhat We Want to Assess
It is It is not not justjust number of servers supportednumber of servers supported megabits to the desktopmegabits to the desktop calls handled by the help desk per hourcalls handled by the help desk per hour ……
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Assessing the Value of ITAssessing the Value of IT
What We Want to Assess:What We Want to Assess:
What it What it isis:: When you called the help desk, did your When you called the help desk, did your
question get answered?question get answered? Are we making the right development Are we making the right development
choices at the right time?choices at the right time? Have we built the right infrastructure?Have we built the right infrastructure? Does the user community feel “empowered” Does the user community feel “empowered”
when technology choices are made?when technology choices are made?
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Assessing the Value of ITAssessing the Value of IT
ReturnReturn on Investment vs. on Investment vs.
ValueValue on Investment on Investment
ROI – “hard,” measures tangiblesROI – “hard,” measures tangibles VOI – “soft,” measures intangiblesVOI – “soft,” measures intangibles
From Gartner Research Note, 14 November 2001From Gartner Research Note, 14 November 2001
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Assessing the Value of ITAssessing the Value of IT
Metrics and Benchmarks:Metrics and Benchmarks:
Inputs not the answer but they play a partInputs not the answer but they play a part EDUCAUSE Core Data ServiceEDUCAUSE Core Data Service
643 institutions participated in 2002 survey643 institutions participated in 2002 survey Database service accessible to participants with tools Database service accessible to participants with tools
to do actual peer comparisons to do actual peer comparisons COSTS ProjectCOSTS Project The Campus Computing ProjectThe Campus Computing Project
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Assessing the Value of ITAssessing the Value of IT
EDUCAUSE Core Data Service EDUCAUSE Core Data Service www.www.educauseeducause..eduedu//coredatacoredata
COSTS Project COSTS Project www.www.costsprojectcostsproject.org.org
The Campus Computing Project The Campus Computing Project www.www.campuscomputingcampuscomputing.net.net
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Recommended IT Funding PracticesRecommended IT Funding Practices
Determine strategic directions for IT in Determine strategic directions for IT in partnership with campus leaders and in partnership with campus leaders and in conjunction with campus planning conjunction with campus planning processprocess
Ensure that long-term IT financial Ensure that long-term IT financial planning is part of institutional financial planning is part of institutional financial planning (including operating and capital planning (including operating and capital budgets)budgets)
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Recommended IT Funding PracticesRecommended IT Funding Practices
Determine priorities for IT funding based Determine priorities for IT funding based on value and alignment with campus goalson value and alignment with campus goals
Match investment to benefits, match Match investment to benefits, match benefits to institutional goals and benefits to institutional goals and strategiesstrategies
Measure outcomes, not just inputsMeasure outcomes, not just inputs Include value on investment in Include value on investment in
assessment efforts assessment efforts
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Recommended IT Funding PracticesRecommended IT Funding Practices
Develop standard renewal cycles for all Develop standard renewal cycles for all technologies with funding committed for technologies with funding committed for replacement (life-cycle budget)replacement (life-cycle budget)
Establish a good working relationship Establish a good working relationship between the CIO and CFObetween the CIO and CFO
Standardize hardware, software, and Standardize hardware, software, and support practices for baseline services as support practices for baseline services as much as possiblemuch as possible
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Recommended IT Funding PracticesRecommended IT Funding Practices
Determine sustainability of IT investments Determine sustainability of IT investments and full cost of projects up frontand full cost of projects up front
Don’t forget significant personnel costs!Don’t forget significant personnel costs! Do cost analysis / metrics for all servicesDo cost analysis / metrics for all services Educate leaders and the campus Educate leaders and the campus
community about actual costscommunity about actual costs Ongoing staff costsOngoing staff costs Accurate initial funding projectionsAccurate initial funding projections Commitment of funds for life of projectCommitment of funds for life of project
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Recommended IT Funding PracticesRecommended IT Funding Practices
Re-evaluate “legacy” funding models in Re-evaluate “legacy” funding models in the face of changing environmentsthe face of changing environments
Sunset technologies / know when to quitSunset technologies / know when to quit Explore the potential of consortia / Explore the potential of consortia /
partnerships to reduce some IT costspartnerships to reduce some IT costs
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THANKS! And AcknowledgmentTHANKS! And Acknowledgment
Laurie, Karen, Allan, Ardoth & Laurie, Karen, Allan, Ardoth & Especially JulieEspecially Julie
And all those who participated in the And all those who participated in the roundtablesroundtables
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For Further ReadingFor Further Reading
L. Antolovic and M. McRobbie, “Implementing Life-cycle L. Antolovic and M. McRobbie, “Implementing Life-cycle Funding,” Funding,” EDUCAUSE ReviewEDUCAUSE Review, September/October , September/October 2001, pp. 28-30, 34-38 [www.educause.edu/ir/library/ 2001, pp. 28-30, 34-38 [www.educause.edu/ir/library/ pdf/erm0152.pdf]pdf/erm0152.pdf]
K. Harris, M. Grey, and C. Rozwell, “Changing the View K. Harris, M. Grey, and C. Rozwell, “Changing the View of ROI to VOI – Value on Investment,” GARTNER of ROI to VOI – Value on Investment,” GARTNER Research Note, 14 November 2001.Research Note, 14 November 2001.
R. N. Katz, “The ICT Infrastructure: A Driver of Change,” R. N. Katz, “The ICT Infrastructure: A Driver of Change,” EDUCAUSE ReviewEDUCAUSE Review, July/August 2002, pp.51-61 , July/August 2002, pp.51-61 [www.educause.edu/ir/library/pdf/erm0243.pdf][www.educause.edu/ir/library/pdf/erm0243.pdf]
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For Further ReadingFor Further Reading
J. McCredie, “Does IT Matter to Higher Education?” J. McCredie, “Does IT Matter to Higher Education?” EDUCAUSE ReviewEDUCAUSE Review, November/December 2003, , November/December 2003, pp. 14-22 pp. 14-22 [www.educause.edu/ir/library/pdf/erm0361.pdf][www.educause.edu/ir/library/pdf/erm0361.pdf]
R. A. Phipps and J. V. Weldman, R. A. Phipps and J. V. Weldman, Funding the Funding the “Infostructure,” “Infostructure,” Lumina New Agenda Lumina New Agenda Series,Volume 3, Number 2, April 2001 Series,Volume 3, Number 2, April 2001 [www.luminafoundation.org/ [www.luminafoundation.org/ publications/infostructure.pdf]publications/infostructure.pdf]
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For Further ReadingFor Further Reading
D. Smallen and J. McCredie, “Getting Beyond Budget D. Smallen and J. McCredie, “Getting Beyond Budget Dust to Sustainable Models for Funding Information Dust to Sustainable Models for Funding Information Technology, in P.A. McClure, ed., Technology, in P.A. McClure, ed., Organizing and Organizing and Managing Information Resources on Your CampusManaging Information Resources on Your Campus (San Francisco: Jossey-Bass, 2003), pp.45-58. (San Francisco: Jossey-Bass, 2003), pp.45-58. [www.educause.edu/ir/ library/pdf/erm0323.pdf][www.educause.edu/ir/ library/pdf/erm0323.pdf]
D. Ward and B. Hawkins, “Presidential Leadership for D. Ward and B. Hawkins, “Presidential Leadership for Information Technology, Information Technology, EDUCAUSE ReviewEDUCAUSE Review, , May/June 2003, pp. 36-47 May/June 2003, pp. 36-47 [www.educause.edu/ir/library/pdf/ erm0332.pdf][www.educause.edu/ir/library/pdf/ erm0332.pdf]