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It does seem logical, but my experience indicates that there are factors that have to be considered with any charge-back model.  As a result, over the years, I've tried to eliminate all charge-backs.  Would your university commit to the budget without allowing exceptions? 

One factor to consider is competition, in terms of perceived price-per-service.  I use the word perceived thoughtfully, as folks outside central IT, without any deep understanding of technology, can analyze costs very differently from an experienced IT view.  If your university doesn't enforce a centralized view of cost analysis, the price of your service and the price of what might appear to be the same service provided by an outside company can be compared by the client community.  For example, a few years back we had charge-back long distance telephone service at the same time long-distance calls could be made on purchased calling cards.  So the community bought the long distance calling cards to use to avoid paying the long distance charges on campus.  But the campus long-distance charges had a surcharge that funded the telecom infrastructure, and when the campus moved to the cards to avoid paying us, our funding to maintain the infrastructure declined.  It wasn't just our department; campus mail services suffered the same way.  If you are going to charge-back or put subscription pricing in place for all services, you need to price those services competitively, and that may not be enough to cover the cost of providing the service.  If the campus community can go around your area and independently contract for a lower price service, your area may not even get to be involved in the conversation.  If the client is empowered to do price comparison shopping, and to buy the best service at the lowest cost as they perceive it, you've cut your department out of the conversation. 

I am trying to maintain relationships so that my department is a value-added partner in those conversations and decisions, not just another vendor (an internal vendor) from which to purchase solutions.  I've found that the clients often do not consider the things we consider when we look at solutions, such as:
  • How will identity access management be handled (login ID creation and termination, password reset, etc.)
  • Ongoing contract management (periodic cost assessment, contract termination, service reassignment)
  • Monitoring (who is monitoring quality of service to contract)

We've tried allocation funding, subscription pricing, or charge-backs for phones, departmental printing, encrypted storage shares, special service coverage, fees for co-locating in the datacenter, only to find the campus community avoiding us as a result. We've eliminated phone billing and all surcharged services and even allocations.  If you want us to help or offer a service, we will do it if we have it in the installed base.  If we don't have the product, we create a specific transparent budget request.

I do try to submit budget requests that are specifically linked to visible projects.  That isn't difficult for me to do on my campus, as we are so terribly underfunded that just about any new project that comes along requires me to go into a mode of building a specific and transparent business case for funding.  Some universities have IT budgets that are a large bucket and perhaps that seems like more of a black hole.  My budget is a teacup, and every project results in a' la carte budget requests, so we are less of a black hole.


Interesting to think about -

Theresa



Comments

John,

So much depends on the culture of the campus and the campus budget model... is it distributed, centralized, cost recovery...

I think you have to structure your budget to clarify the cost of services for clients and for the institution... instead of a $4.5M budget, it is more useful to have a budget that reflects the cost of services
  • Web Services
  • Campus Network
  • User Services (which could reflect the cost per user)
  • Conferencing
  • ...
and of course this is needed to justify and be accountable for "charges" if in fact a cost recovery model is required (which you have already pointed out).

In addition, you should always consider what is good for the institution as well as the individual.  As you know, some services cannot survive without scale and some services are required for the institution to be viable and competitive...

and of course, outsourcing is always an option as appropriate - but with cloud services, I view outsourcing more as a public/private partnership... yes our LMS is in the cloud, but we provide first line support and instructional services...

Floyd Davenport CIO/Director Information Technology Services Washburn University floyd.davenport@washburn.edu http://blog.washburn.edu/technology 785-670-2066
On 1/3/2013 10:08 PM, John Kaftan wrote:
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

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John,

Whether or not the money spent on IT is seen as going into a black hole, the finance folks generally don't want to see IT as a black box. In other words they want to see the bits and pieces on which money is being spent. So I'm not going to get away with a formal budget request that looks like what you describe. On the other hand I think that what you are describing would be an excellent way of crafting the narrative that goes along with the budget request to explain in relatively simple terms the value of what's being done, particularly if you can compare it directly with the cost of outsourcing and show value for in-sourcing. 

 - Mark
--
Mark Berman, Chief Information Officer
Siena College
515 Loudon Road
Loudonville, NY  12211
(518)782-6957,  Fax: (518)783-2590
Siena College is a learning community advancing the ideals of a liberal arts education, rooted in its identity as a Franciscan and Catholic institution.

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--- On Thu, 3 Jan 2013, John Kaftan wrote:
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

-- 
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

John,

                I think that is where IT needs to be able to market itself to campus. I think rather than the notion of IT being a black hole, it is more of the question “What have you done for me lately?” As long as e-mail, network drives, and users computers are working, IT is not part of the users normal thought process. They don’t see the dark computer rooms with switches or gears, and frankly they don’t care. If they flip a switch and the power comes on then everything is working. If it doesn’t, then IT must have been doing something to cause the issue.

                IT needs to look at having a marketing arm where we can tell our story to campus. This can include making sure that every IT member has the resources or ability to interact with the customer that will have a positive impact on the IT organization. This does not always mean that IT answer is always yes, but should instead be a partner with the institution and the other faculty, staff, and students to find the best solution for the campus community. It also means that IT should take the lead and over communicate when new projects or systems are being changed and taking responsibility when things don’t go as planned. A change board and alerting campus of planned changes is one way that communication can help clear up the black hole syndrome.

                If we are not willing to market our services and advantages to campus then there are companies in every magazine that your executives read that are. IT is no longer just a differentiator, it is a necessity. While IT organizations have good programmers that like to hide in their darkened cubes and pump out code, we also need a champion that can go out to the rest of the institution and market IT so that people will not have to think of IT as a black hole.

 

Thanks,

 

Randall Alberts, PMP

Institutional Technology

Ringling College of Art and Design

2700 North Tamiami Trail

Sarasota, FL 34234

Office: 941-893-2054

Fax: 941-359-7615

Web: www.ringling.edu

 

Ringling College – Changing the Way the World Thinks about Art and Design

 

--- On Thu, 3 Jan 2013, John Kaftan wrote:

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.

 

I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.

 

Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 

 

I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.

 

I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?


-- 

John Kaftan

IT Infrastructure Manager

Utica College

 

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I’ll also affirm the value of reporting the cost of IT Services – not only the budget categories that comprise them.  IU has long used Activity-based Costing (ABC) along with a Quality of Services survey to compile an annual Cost and Quality of Services (16 years of data linked below).

 

We find it an invaluable exercise in the process of doing it as well as the value of the final report.  We use simple, perceptual estimates and financial data to keep it lightweight.

 

For example, let’s say that the manager of System Administrators allocates 20% of the personnel cost for System Administrators to the Student Systems, 30% to Research Systems, and 50% to other services.  The Service Owner for Student Systems may say, hey, I’m not get 20% of the Sys Admin’s time and I need it.  This prompts a healthy conversation between the service owner and the service provider to get that cost allocation and personal allocation right.

 

Once we know all the personnel, operational, and capital costs going into a service, say Exchange or the Help Desk/Support, we can then assess it by a number of divisors such as # of users, # of mailboxes or # of service contacts, etc.

 

The ABC approach allocates all the budgetary expenditures in the financial model to the set of services, and they reconcile together.  Over the years, we’ve automated much of the data roll up of this process.  We have chosen to run it on a cash, rather than accrual basis so it does have some spikes for large capital expenses (e.g., larger server refresh), but over time, it really shows the cumulative cost of a particular service for managerial decision making.

 

BUT MORE IMPORTANTLY…

 

The value of having the data is immensely helpful for the very heart of John’s questions.  It makes IT expenditures more understandable for others, and helps us better understand sourcing strategies for internal, outsourcing, or collaborative partnerships with other institutions.  It puts many debates on a factual basis rather than everyone making up their own views for what X or Y does or should cost.  Reporting Cost and Satisfaction measures together is also helpful.

 

I should also note that this ABC work began in the mid 1990s with Laurie Antolovic’ and the late Chris Peebles.  Their leadership of it has been invaluable.

 

The public reports are at http://go.iu.edu/6wH

 

--Brad

----------------------------------------------------------------------

IU Vice President for IT & CIO, Dean, and Professor

Indiana University, http://ovpit.iu.edu 

 

 

 

 

Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Hey all,

 

  Good points all around, when I get frustrated, I try and remember that it’s only been 30 or 40 years from I.T.’s inception as an entity that now commands one of the highest, if not the highest, operational budget.  Beyond the brass saying that we are a black hole, I have an equal (many times greater) issue from faculty and staff, who commonly say things like ‘your SAN cost the same amount of x amount of professors’ without enough floor time to defend that cost as I have to educate people on what a SAN is. 

 

  If the requests are big enough, I generally need to present in three tiers: technical specifics, middle of the road, and black box.  I’m lucky that I can delegate the technical specific ‘sales’ to one of my directors most of the time.  That technical specific tier is always problematic regardless of who your audience is as many times you and your team have been researching the details of a solution so even a very technically savvy person will question the reasoning on it.  I’m dealing with that right now on our VDI project[s] – when I go full disclosure on the technical ends which I am sometimes forced to do I get pushback on using widget A as opposed to widget B when in reality it was only after a year of research that we ourselves concluded that Widget A was required.  By the time I feel like I start being effective in my educating the ‘client’s’ eyes are glazed over.  So we typically lose the battle when we go into such specifics but it’s generally with a demographic that we can ultimately say ‘it’s our problem not yours, so please don’t worry about it, our supervisors will hold our feet to the fire’.  <-  Still, we’ve given those people the opportunity to hear the details so when they complain to the brass those people can’t use the common tropes of us not being transparent, cooking some conspiracy or being stand-offish on the matter.

 

  So the lynchpin in this area is unfortunately many times luck-of-the-draw:  for us it’s all about our support in management.  I’m lucky to have a CFO and a president that don’t [always] question us when we say we have an item that is sorely needed.   Enough that when they get other VPs / faculty /staff complaints they help us say ‘we support IT’s decision’ even without really knowing the technical specifics.  It’s also a close enough relationship that they help identify pushback before it happens – we are presenting to the trustees this week about general IT operations and to help promote an IT driven community project, and that is part of the ‘marketing’ John talks about but also sends a message to the college that a controversial (and expensive) decision is being backed from the top down.  I’ll follow up that black-box presentation after the trustees break up with my directors present if someone wants to ask a technical question or have a follow up meeting to drill down even though I know it typically generates confusion I still feel the need to offer the technical explanation for those that seek it. 

 

  Best,

    Greg

 

AVP of I.T. / CIO

Cape Cod Community College

West Barnstable, MA 02668

 

Bob:
 
I ordered the book.  Thanks.

Message from slowe@1610group.com

Bob,

I couldn't agree with you more about the need to reframe the "less with more" discussion as something else.  As you state, that becomes a never-ending situation.  For the first round, most of us can probably some *something* that we can cut from our budgets that may not be noticeably impactful on the services provided and that cry act has the outcome of demonstrating to the leadership that the "more with less" scenario is constantly possible.

What I believe leadership often fails to realize is that IT is perfectly positioned to enable a more with less outcome across the institution, but only with the right strategic technology investment in tools and in people.  Good leadership will recognize the possibilities that exist in turning to IT as a business enabler/multiplier and reasonably funding the unit to that aim.  There are unending numbers of stories out there about companies that have invested in IT in order to reduce their overall cost of doing business.  In many places, higher ed has yet to catch up in this way and continues to view IT with great skepticism.

This has been a great discussion!  Although I'm not a CIO at present, I provide consulting services to CIOs and find these discussions invaluable.

Scott Lowe
Founder and Managing Consultant
The 1610 Group
(530) 330-5693

On Jan 4, 2013, at 11:12 AM, Bob Gagne <bgagne@YORKU.CA> wrote:

I've come to the importance of communicating IT's value in a way that may be relevant to some - a defence to deal with shrinking budgets.  As budget allocations get squeezed we can get into an unending "more for less" situation that is simply untenable.   I positioned the situation to my team as not ceding to do "more with less" but instead aim to do "less with less" or "more with more".  The common requirement for either of those scenarios is a visible demonstration of value for investment that we can use to change the conversation from simply cutting costs to one that appreciates that those cuts eventually have an impact on service.

What we are beginning to do is bring together our service catalog with metrics and costing to communicate what services are used and what they cost.  An important aspect of this work is the way we articulate our services and that is in a way that is appreciated and understood by the users of the services (as others have pointed out or intimated - a faculty member may appreciate the value of an LMS - they're not so interested in the servers, storage etc. keep it running).

Last thing - a book that I've found helpful on the topic is "The Real Business of IT" by Richard Hunter and George Westerman.   Interestingly in searching for references for the book I came across an entry from Timothy Chester's blog wherein he relates a visit by one of the authors to a retreat at Pepperdine ... http://www.accidentalcio.com/2011/02/day-with-richard-hunter.html

Happy new year all,
Bob G


-------------
Bob Gagne   |  Chief Information Officer  |  University Information Technology  
108 Steacie Science and Engineering Library  |  York University    |   4700 Keele St. ,  Toronto ON  M3J 1P3 Canada
T: 416.736.5818   |  F: 416.736.5830  | bgagne@yorku.ca |  www.yorku.ca

NOTE: York UIT will NEVER send unsolicited requests for passwords or other personal information via email.   Messages requesting such information are fraudulent and should be deleted.



From: John Kaftan <jkaftan@UTICA.EDU>
To: CIO@LISTSERV.EDUCAUSE.EDU,
Date: 2013/01/04 11:40 AM
Subject: Re: [CIO] IT as a Budget Black Hole
Sent by: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>




Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Excellent blog post, will order the book!

 

Sheryl

               

 

From: The EDUCAUSE CIO Constituent Group Listserv [mailto:CIO@LISTSERV.EDUCAUSE.EDU] On Behalf Of John Kaftan
Sent: Friday, January 04, 2013 1:22 PM
To: CIO@LISTSERV.EDUCAUSE.EDU
Subject: Re: [CIO] IT as a Budget Black Hole

 

Bob:

 

I ordered the book.  Thanks.

John,

We are attempting to reformulate our services in terms of what we we call 'basic' services. The plan is to have the faculty IT committee certify the list of basic services by faculty , staff (knowledge workers and non k w) and students. Services that are basic would be paid for from the central IT budget. Services that are not basic would be eliminated or changed to fee-for services. The budget and fees would be computed annually. Anyone wishing to take the covers off a pricy service will be buried in paperwork documenting the cost. Note that this costs the services but does not say how such costs are recovered. Whether IT costs are taken off the top or distributed out is a financial decision not an IT decision.   

I don't think administrators really believe this Black hole stuff. Not any more really. It's a red herring and when IT shows the cost of its services it will be so labeled  again. The real fear on the part of administrators is facing the truth that if the whole university were to do this math, that is look at true costs then ugly secrets would be revealed and hard decisions would be demanded. Overhead would be scrutinized, money losers would be outed, cross subsidies would need to be defended. And the whole cottage industry mom and pop model even as augmented(but not changed) by technology would be thrown into question. It's a whole lot easier to vilify the I T budget than to work on revenue generation and/ or tuition reduction. Most ( but not all) of IT infrastructure will move to the cloud over time, and administrators will need to find a new Black hole.

Larry Frederick, CIO, UMSL

Sent from my iPhone

John,

You bring up a great topic, that's especially relevant to this time of year. We have started a process that will view our costs by services (as you've indicated below). In other words; how much does it cost to run Banner (you can choose to break this down further into the various services i.e. Finance, A/P, HR, SIS, etc.). These costs would included hardware, software, maintenance, personnel, etc.—total cost of ownership. An example of another service is the cost to support the technology in the classrooms or in teaching/learning.

In all instances, we will be taking these costs and dividing it by the number of constituents that use the systems (or benefit from them). So, if someone asks, "How much does it cost to support technology for teaching/learning?" We can answer with an exact number and how much it costs per student. 

Folks don't care about the components, but they do care if the service is reliable, available, and easy to use.

Mark

______________________________________________
Mark Staples
Vice President & Chief Information Officer
Wentworth Institute of Technology
Division of Technology Services

Williston Hall | 550 Huntington Avenue | Boston, Ma 02115
Office Phone: 617-989-4592 | Mobile: 617-543-4184
email: staplesm@wit.edu | Twitter: markstaples_cio
LinkedIn: http://www.linkedin.com/in/markallenstaples
blog: http://blogs.wit.edu/cio
http://www.wit.edu

______________________________________________

"The conventional view serves to protect us from the painful job of thinking." -John Kenneth Galbraith

From: John Kaftan <jkaftan@UTICA.EDU>
Reply-To: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>
Date: Thursday, January 3, 2013 11:08 PM
To: "CIO@LISTSERV.EDUCAUSE.EDU" <CIO@LISTSERV.EDUCAUSE.EDU>
Subject: [CIO] IT as a Budget Black Hole

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I have a few related thoughts. One, it is important to make IT services “real” by relating in tangible things where particular costs go. E.g. “If we don’t purchase these WAPs, wireless will be saturated with next round of freshmen moving in the dorms. Would you like to roll out Health Records self-service? We’ll need to replace that old firewall to remain secure.  Did you say you want to accept credit cards for event tickets? We will need to purchase a PCI-compliant package.” This doesn’t always work but is a good start and of course it also depends on the relationship IT has with key decision-makers.

 

Chargebacks seem like an attractive approach to evaluating and funding IT but there are mines all around this approach. Chargebacks breed more chargebacks and overhead and before you know it areas that didn’t use to bill you suddenly turn around and charge you for facilities, personnel, etc. The expectations can also rise substantially. My take is IT chargebacks should be few rather than lots and they should be focused on controlling high use of resources. This perspective might change with the size of an institution. On the other hand, being able to show costs per user or per service can be very effective.

 

Last thought, I recently found a calculator on Amazon’s Web site for their storage and other cloud services (http://aws.amazon.com/calculator/). It is quick-and-dirty but is a nice way to compare some internal costs with cloud alternatives when feasible. Recently I had to find the best way to add 10TB of storage and for now an internal solution is less expensive and less troublesome but next year that might change.

 

Ilya Yakovlev

Chief Information Officer

University of Wisconsin-Parkside

 

From: John Kaftan <jkaftan@UTICA.EDU>
Reply-To: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>
Date: Thursday, January 3, 2013 11:08 PM
To: "CIO@LISTSERV.EDUCAUSE.EDU" <CIO@LISTSERV.EDUCAUSE.EDU>
Subject: [CIO] IT as a Budget Black Hole

 

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.

 

I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.

 

Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 

 

I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.

 

I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?


--

John Kaftan

IT Infrastructure Manager

Utica College

 

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This is a very interesting thread. ECAR collected data about measuring IT costs in November for a study we'll publish later this year. We were, among other things, interested in learning about your readiness and interest in various IT cost metrics. A (very) preliminary look at the data suggests a couple of things: 1. The most desired IT cost metrics are for staff salaries, comparing IT costs with other sourcing options, estimating the TCO of a service/application, comparing estimated costs of alternative enterprise application solutions, and justifying IT spending for a specific population or mission. 2. People's ability to actually do this effectively is still maturing. Fewer than half of respondents reported they are able to obtain these metrics effectively. 3. Only 18% said they're able to effectively estimate the TCO of a service/application (and 48% are measuring the cost of services currently, with another 15% planning to). 32% are measuring quality of services, with another 24% planning to. -Susan Susan Grajek Vice President Data, Research, and Analytics EDUCAUSE Uncommon Thinking for the Common Good 1150 18th Street, NW, Suite 900 Washington, DC 20036 direct: 202.331.5350 | main: 202.872.4200 | educause.edu From: , Mark > Reply-To: EDUCAUSE Listserv > Date: Friday, January 4, 2013 2:24 PM To: EDUCAUSE Listserv > Subject: Re: [CIO] IT as a Budget Black Hole John, You bring up a great topic, that's especially relevant to this time of year. We have started a process that will view our costs by services (as you've indicated below). In other words; how much does it cost to run Banner (you can choose to break this down further into the various services i.e. Finance, A/P, HR, SIS, etc.). These costs would included hardware, software, maintenance, personnel, etc.—total cost of ownership. An example of another service is the cost to support the technology in the classrooms or in teaching/learning. In all instances, we will be taking these costs and dividing it by the number of constituents that use the systems (or benefit from them). So, if someone asks, "How much does it cost to support technology for teaching/learning?" We can answer with an exact number and how much it costs per student. Folks don't care about the components, but they do care if the service is reliable, available, and easy to use. Mark ______________________________________________ Mark Staples Vice President & Chief Information Officer Wentworth Institute of Technology Division of Technology Services Williston Hall | 550 Huntington Avenue | Boston, Ma 02115 Office Phone: 617-989-4592 | Mobile: 617-543-4184 email: staplesm@wit.edu | Twitter: markstaples_cio LinkedIn: http://www.linkedin.com/in/markallenstaples blog: http://blogs.wit.edu/cio http://www.wit.edu Publication: Making Room for Yes: It Starts at the Top ______________________________________________ "The conventional view serves to protect us from the painful job of thinking." -John Kenneth Galbraith From: John Kaftan > Reply-To: The EDUCAUSE CIO Constituent Group Listserv > Date: Thursday, January 3, 2013 11:08 PM To: "CIO@LISTSERV.EDUCAUSE.EDU" > Subject: [CIO] IT as a Budget Black Hole Every time I hear IT referred to as a budget black hole I cringe. I think I have heard this from senior management at every institution for which I've worked. IT being seen as a budget black hole means that senior management does not see the value in what we are doing. If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced. I used to work for an application service provider (ASP). We were "cloud" before cloud was cool. One thing we did was to simplify our cost model by making our offerings a per user charge. Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit. Our line was, "Let us take care of all of that. You're in the construction business not the IT business." Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you. Why couldn't we do this kind of budgeting in-house? The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center. He just wants his technology to work and be available. So we could bust out our services into a subscription like fee. You want Banner? Ok that will be $300/concurrent user/year. You want a desktop for your personal assistant? Ok that will be $200/yr. Printing is $.01/page for black and white and $.14/page for color. I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross. The other important piece is that it would give us an metric to measure ourselves. We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk. With application, desktop, and storage virtualization we are able to do it for $150/yr. I think that might be eye opening to our staff as well and motivational. We also need to see the value of what we are doing. I wonder if anyone has gone down this road already and what challenges arose. Do any organizations actually have the flexibility to budget in this way? Would it just be too much work to pull it off? Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers? -- John Kaftan IT Infrastructure Manager Utica College ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.
John You've already received lots of good suggestions from some of the best minds in the IT field. Let me add a few more cents. My natural inclination is being analytical but I'd suggest that the problem you describe is less about data and more about relationships. That is, the data may provide logic but still be irrelevant to addressing the central issues. Looked at from a different perspective the "black hole" comment suggests that there does not exist strong relationships between IT leadership and senior management (at least the particular people who expressed that opinion). That leads to lack of trust, etc. and trust isn't built on just data. Relationships are built over time based on things like demonstrated concern, delivering on promises, being willing to be vulnerable and take responsibility when things don't go well, etc. There are lots of books and articles about how to build effective relationships. I would agree with Theresa and say setting up a charge-back system is definitely a bad idea. As I learned back in the 80s the main purpose of a charge back system is to "control" resources. Every such system has overhead and unintended consequences. We had the same experience as Theresa with phone services and we ultimately decided that there wasn't a need to control this and we stopped all the internal charging. Especially at small institutions control is better handled by developing good relationships. More than fifteen years ago Karen Leach and I attempted to come up with benchmarks for IT services (http://costsproject.org/Articles&Presentations.htm) and a lot of that work has migrated to the Educause Core Data Service. For example, what would we charge per year/per user for providing a call-in help desk service or a computer repair service? As a number of people have suggested this is complex given the variations in approaches taken at different institutions. Having unit costs is a great idea in theory but harder to implement in practice. And it doesn't address the relationship issue. My recommendation would be to sit down one-on-one with the people who believe that "IT is a black hole" to better understand their point of view. It isn't easy to ask people to give you genuine feedback but when they do you often find out interesting things and you start the relationship building. Good luck, Dave On 1/3/2013 11:08 PM, John Kaftan wrote: > Every time I hear IT referred to as a budget black hole I cringe. I > think I have heard this from senior management at every institution > for which I've worked. IT being seen as a budget black hole means > that senior management does not see the value in what we are doing. > If that is the case, it is only a matter of time when someone comes > along and knocks us off our block and "poof" IT is outsourced. > I used to work for an application service provider (ASP). We were > "cloud" before cloud was cool. One thing we did was to simplify our > cost model by making our offerings a per user charge. Our potential > customers had in-house IT guys telling them they need $100K for a new > drive array, $50 for a tape library, and $80K for a new CRAC unit. > Our line was, "Let us take care of all of that. You're in the > construction business not the IT business." Every service we had was > charged in a way that was simple to understand and we never went back > and told them we needed a Recapitulator, Turbo Thruster or Packeteer > or what have you. > Why couldn't we do this kind of budgeting in-house? The President > doesn't need to know about virtualizing servers, or what SAN we want > to get or BTUs in the data center. He just wants his technology to > work and be available. So we could bust out our services into a > subscription like fee. You want Banner? Ok that will be > $300/concurrent user/year. You want a desktop for your personal > assistant? Ok that will be $200/yr. Printing is $.01/page for black > and white and $.14/page for color. > I think if we could put it in those terms we may be seen as an enabler > or partner rather than an albatross. The other important piece is > that it would give us an metric to measure ourselves. We could say at > some point, "5 years ago it cost us $300/yr to put a computer on > someone's desk. With application, desktop, and storage virtualization > we are able to do it for $150/yr. I think that might be eye opening > to our staff as well and motivational. We also need to see the value > of what we are doing. > I wonder if anyone has gone down this road already and what challenges > arose. Do any organizations actually have the flexibility to budget > in this way? Would it just be too much work to pull it off? Are we > afraid of lifting the curtain of obscurity only to show that we are > not a good value, i.e, can we compete with outside providers? > > -- > John Kaftan > IT Infrastructure Manager > Utica College > > ********** Participation and subscription information for this > EDUCAUSE Constituent Group discussion list can be found at > http://www.educause.edu/groups/. > ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.
John, As is usually the case, I find myself in strong agreement with Dave's comments on this topic - especially those about the importance of relationships. We humans are fundamentally intuitive decision-makers even though nowadays we are increasingly aware of the power of analytics in higher education and in the IT domain. Because of the pervasive use of IT infrastructure and services in just about every college and university, there are many constituencies to be served and many relationships to be cultivated. This, together with such things as the rate of change of technology and associated needs for life-cycle replacement funding, the substantial impact of IT costs on overall institutional budgets, and the increasing array of service providers on and off campus, provides IT leaders with a great deal of important work. Several others in this thread have written about services and service catalogs. Just as there has been a shift in higher education conversations from teaching and related inputs to learning and outcomes assessment, I think we in IT are now engaged in a shift toward more and better data and information about our services. I also think IT leaders nowadays will benefit from the development of service-centric AND multiple budget views. These views might include, for example: - Overall IT budget, expenditure and staffing data including benchmarked trends - Total expenditures for personnel and all other - Total expenditures for in-sourced and outsourced services - Total expenditures to run, grow and transform IT services - Total expenditures by functional area within the IT organization - Total expenditures in the institution's general ledger view - Total expenditures by key services provided So, developing a deep understanding of IT budgets including a service-oriented view, listening carefully to IT's many constituencies, and actively engaging with others (especially key decision makers) about those budgets over the long haul might be helpful. All the best in 2013, Randy ________________________________________
Hi All

    I am late to this conversation because of a visit to India :)
 
    This is indeed a challenging and important topic and many great ideas have been already posted. 

     I strongly favor data driven decision making and conversations, but on this one, I am in total agreement with David Smallen. Data on matters like this create problems because they are hard to compare. For eg. someone mentioned the total cost of ownership of Banner. I am sure each of us can calculate this in whatever unit that is appropriate, but there will be considerable variability based on the cost of personnel (due to geographical location, for eg.) or investments in particular hardware/OS that the institution is comfortable with (not necessarily cheap, therefore) etc. And soon, one will find himself/herself on the defensive trying to explain this. 

    Good to hear that an ECAR paper on this is in the works. I would be very interested to see the cost metrics to have two components - a weighting factor for staff salaries & hardware costs (regional consortia & state institutions have preferable pricing); and the fact that there is a base cost for any of the IT service that is independent of the size of the constituent base (for eg. It takes a certain amount of minimum staff/hardware resources to support ERP regardless of constituent base, so a unit cost based on constituents will be skewed). 

     I think we need something like the Sightlines Facilities survey which actually does a pretty good job of helping compare facilities cost with comparable institutions as well as longitudinally compare it for the institution. 

     What I have done is to follow along David's & Randy's ideas to engage in strong relationship building with the senior leadership team as well as the advisory committee & to be as transparent as possible about our budget. Part of this trust-building involves willingness to reduce budgets when there is a crisis.

     Frankly, these ideas may work well in a small liberal arts college and may not scale well in much larger organizations, a point to consider. 




-- Ravi
CIO, Wellesley College
Google Voice - 860-631-RAVI


Thank you all who responded to this thread.  I am working on a summary of all the responses that I will share with you.  

John

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

It does seem logical, but my experience indicates that there are factors that have to be considered with any charge-back model.  As a result, over the years, I've tried to eliminate all charge-backs.  Would your university commit to the budget without allowing exceptions? 

One factor to consider is competition, in terms of perceived price-per-service.  I use the word perceived thoughtfully, as folks outside central IT, without any deep understanding of technology, can analyze costs very differently from an experienced IT view.  If your university doesn't enforce a centralized view of cost analysis, the price of your service and the price of what might appear to be the same service provided by an outside company can be compared by the client community.  For example, a few years back we had charge-back long distance telephone service at the same time long-distance calls could be made on purchased calling cards.  So the community bought the long distance calling cards to use to avoid paying the long distance charges on campus.  But the campus long-distance charges had a surcharge that funded the telecom infrastructure, and when the campus moved to the cards to avoid paying us, our funding to maintain the infrastructure declined.  It wasn't just our department; campus mail services suffered the same way.  If you are going to charge-back or put subscription pricing in place for all services, you need to price those services competitively, and that may not be enough to cover the cost of providing the service.  If the campus community can go around your area and independently contract for a lower price service, your area may not even get to be involved in the conversation.  If the client is empowered to do price comparison shopping, and to buy the best service at the lowest cost as they perceive it, you've cut your department out of the conversation. 

I am trying to maintain relationships so that my department is a value-added partner in those conversations and decisions, not just another vendor (an internal vendor) from which to purchase solutions.  I've found that the clients often do not consider the things we consider when we look at solutions, such as:
  • How will identity access management be handled (login ID creation and termination, password reset, etc.)
  • Ongoing contract management (periodic cost assessment, contract termination, service reassignment)
  • Monitoring (who is monitoring quality of service to contract)

We've tried allocation funding, subscription pricing, or charge-backs for phones, departmental printing, encrypted storage shares, special service coverage, fees for co-locating in the datacenter, only to find the campus community avoiding us as a result. We've eliminated phone billing and all surcharged services and even allocations.  If you want us to help or offer a service, we will do it if we have it in the installed base.  If we don't have the product, we create a specific transparent budget request.

I do try to submit budget requests that are specifically linked to visible projects.  That isn't difficult for me to do on my campus, as we are so terribly underfunded that just about any new project that comes along requires me to go into a mode of building a specific and transparent business case for funding.  Some universities have IT budgets that are a large bucket and perhaps that seems like more of a black hole.  My budget is a teacup, and every project results in a' la carte budget requests, so we are less of a black hole.


Interesting to think about -

Theresa



John,

So much depends on the culture of the campus and the campus budget model... is it distributed, centralized, cost recovery...

I think you have to structure your budget to clarify the cost of services for clients and for the institution... instead of a $4.5M budget, it is more useful to have a budget that reflects the cost of services
  • Web Services
  • Campus Network
  • User Services (which could reflect the cost per user)
  • Conferencing
  • ...
and of course this is needed to justify and be accountable for "charges" if in fact a cost recovery model is required (which you have already pointed out).

In addition, you should always consider what is good for the institution as well as the individual.  As you know, some services cannot survive without scale and some services are required for the institution to be viable and competitive...

and of course, outsourcing is always an option as appropriate - but with cloud services, I view outsourcing more as a public/private partnership... yes our LMS is in the cloud, but we provide first line support and instructional services...

Floyd Davenport CIO/Director Information Technology Services Washburn University floyd.davenport@washburn.edu http://blog.washburn.edu/technology 785-670-2066
On 1/3/2013 10:08 PM, John Kaftan wrote:
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

John,

Whether or not the money spent on IT is seen as going into a black hole, the finance folks generally don't want to see IT as a black box. In other words they want to see the bits and pieces on which money is being spent. So I'm not going to get away with a formal budget request that looks like what you describe. On the other hand I think that what you are describing would be an excellent way of crafting the narrative that goes along with the budget request to explain in relatively simple terms the value of what's being done, particularly if you can compare it directly with the cost of outsourcing and show value for in-sourcing. 

 - Mark
--
Mark Berman, Chief Information Officer
Siena College
515 Loudon Road
Loudonville, NY  12211
(518)782-6957,  Fax: (518)783-2590
Siena College is a learning community advancing the ideals of a liberal arts education, rooted in its identity as a Franciscan and Catholic institution.

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--- On Thu, 3 Jan 2013, John Kaftan wrote:
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

-- 
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I do think that John has point. No matter how detailed the explanation of need (using English instead of techno-babble) there is still this sense on the part of senior colleagues that technology just is consuming too much of the university's available resources. If we stop and think about what is accomplished today without the use of some IT service (whether in the classroom or the business office) it is very little. And whatever services we are providing it is for the good of the community not the IT staff. It costs the community to not have some of the resources we manage – just take the number of calls to the help desk when something is wrong with an application, email is down, the ERP is down for maintenance (even if in the middle of the night there are complaints it is not available!) I think Mark's point about using John's outline for a detailed budget narrative makes good sense as well, it is how we submit our budget based on relative costs associated with each service (with the budget submission detailing the technical) the narrative tends to place our requests in perspective that my colleagues on senior staff will better understand. Tom Thomas H. Carnwath Vice President Technology and Information Services Hamilton Hall 320 South Broad Street Philadelphia, PA 19102 Tel: 215-717-6440 [cid:E6843D09-5AD4-4232-BC0A-BD01024CE190] Need Assistance? Call Oops (215-717-6677) to get answers. OTIS will never ask for your personal information or password in an email. Never share this information with anyone. This message and any attachment may contain confidential or privileged information and is intended for the intended individual named as addressee. If you are not the intended recipient of this message, please notify the sender immediately by return email and delete this message and all attachments from your system. Any unauthorized disclosure, use, distribution, or reproduction of this message or any attachments is prohibited and may be deemed unlawful. Please consider the environment before printing this email. From: John Kaftan > Reply-To: The EDUCAUSE CIO Constituent Group Listserv > Date: Thursday, January 3, 2013 11:08 PM To: "CIO@LISTSERV.EDUCAUSE.EDU" > Subject: [CIO] IT as a Budget Black Hole Every time I hear IT referred to as a budget black hole I cringe. I think I have heard this from senior management at every institution for which I've worked. IT being seen as a budget black hole means that senior management does not see the value in what we are doing. If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced. I used to work for an application service provider (ASP). We were "cloud" before cloud was cool. One thing we did was to simplify our cost model by making our offerings a per user charge. Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit. Our line was, "Let us take care of all of that. You're in the construction business not the IT business." Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you. Why couldn't we do this kind of budgeting in-house? The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center. He just wants his technology to work and be available. So we could bust out our services into a subscription like fee. You want Banner? Ok that will be $300/concurrent user/year. You want a desktop for your personal assistant? Ok that will be $200/yr. Printing is $.01/page for black and white and $.14/page for color. I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross. The other important piece is that it would give us an metric to measure ourselves. We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk. With application, desktop, and storage virtualization we are able to do it for $150/yr. I think that might be eye opening to our staff as well and motivational. We also need to see the value of what we are doing. I wonder if anyone has gone down this road already and what challenges arose. Do any organizations actually have the flexibility to budget in this way? Would it just be too much work to pull it off? Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers? -- John Kaftan IT Infrastructure Manager Utica College ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

John,

                I think that is where IT needs to be able to market itself to campus. I think rather than the notion of IT being a black hole, it is more of the question “What have you done for me lately?” As long as e-mail, network drives, and users computers are working, IT is not part of the users normal thought process. They don’t see the dark computer rooms with switches or gears, and frankly they don’t care. If they flip a switch and the power comes on then everything is working. If it doesn’t, then IT must have been doing something to cause the issue.

                IT needs to look at having a marketing arm where we can tell our story to campus. This can include making sure that every IT member has the resources or ability to interact with the customer that will have a positive impact on the IT organization. This does not always mean that IT answer is always yes, but should instead be a partner with the institution and the other faculty, staff, and students to find the best solution for the campus community. It also means that IT should take the lead and over communicate when new projects or systems are being changed and taking responsibility when things don’t go as planned. A change board and alerting campus of planned changes is one way that communication can help clear up the black hole syndrome.

                If we are not willing to market our services and advantages to campus then there are companies in every magazine that your executives read that are. IT is no longer just a differentiator, it is a necessity. While IT organizations have good programmers that like to hide in their darkened cubes and pump out code, we also need a champion that can go out to the rest of the institution and market IT so that people will not have to think of IT as a black hole.

 

Thanks,

 

Randall Alberts, PMP

Institutional Technology

Ringling College of Art and Design

2700 North Tamiami Trail

Sarasota, FL 34234

Office: 941-893-2054

Fax: 941-359-7615

Web: www.ringling.edu

 

Ringling College – Changing the Way the World Thinks about Art and Design

 

--- On Thu, 3 Jan 2013, John Kaftan wrote:

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.

 

I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.

 

Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 

 

I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.

 

I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?


-- 

John Kaftan

IT Infrastructure Manager

Utica College

 

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I’ll also affirm the value of reporting the cost of IT Services – not only the budget categories that comprise them.  IU has long used Activity-based Costing (ABC) along with a Quality of Services survey to compile an annual Cost and Quality of Services (16 years of data linked below).

 

We find it an invaluable exercise in the process of doing it as well as the value of the final report.  We use simple, perceptual estimates and financial data to keep it lightweight.

 

For example, let’s say that the manager of System Administrators allocates 20% of the personnel cost for System Administrators to the Student Systems, 30% to Research Systems, and 50% to other services.  The Service Owner for Student Systems may say, hey, I’m not get 20% of the Sys Admin’s time and I need it.  This prompts a healthy conversation between the service owner and the service provider to get that cost allocation and personal allocation right.

 

Once we know all the personnel, operational, and capital costs going into a service, say Exchange or the Help Desk/Support, we can then assess it by a number of divisors such as # of users, # of mailboxes or # of service contacts, etc.

 

The ABC approach allocates all the budgetary expenditures in the financial model to the set of services, and they reconcile together.  Over the years, we’ve automated much of the data roll up of this process.  We have chosen to run it on a cash, rather than accrual basis so it does have some spikes for large capital expenses (e.g., larger server refresh), but over time, it really shows the cumulative cost of a particular service for managerial decision making.

 

BUT MORE IMPORTANTLY…

 

The value of having the data is immensely helpful for the very heart of John’s questions.  It makes IT expenditures more understandable for others, and helps us better understand sourcing strategies for internal, outsourcing, or collaborative partnerships with other institutions.  It puts many debates on a factual basis rather than everyone making up their own views for what X or Y does or should cost.  Reporting Cost and Satisfaction measures together is also helpful.

 

I should also note that this ABC work began in the mid 1990s with Laurie Antolovic’ and the late Chris Peebles.  Their leadership of it has been invaluable.

 

The public reports are at http://go.iu.edu/6wH

 

--Brad

----------------------------------------------------------------------

IU Vice President for IT & CIO, Dean, and Professor

Indiana University, http://ovpit.iu.edu 

 

 

 

 

Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Hey all,

 

  Good points all around, when I get frustrated, I try and remember that it’s only been 30 or 40 years from I.T.’s inception as an entity that now commands one of the highest, if not the highest, operational budget.  Beyond the brass saying that we are a black hole, I have an equal (many times greater) issue from faculty and staff, who commonly say things like ‘your SAN cost the same amount of x amount of professors’ without enough floor time to defend that cost as I have to educate people on what a SAN is. 

 

  If the requests are big enough, I generally need to present in three tiers: technical specifics, middle of the road, and black box.  I’m lucky that I can delegate the technical specific ‘sales’ to one of my directors most of the time.  That technical specific tier is always problematic regardless of who your audience is as many times you and your team have been researching the details of a solution so even a very technically savvy person will question the reasoning on it.  I’m dealing with that right now on our VDI project[s] – when I go full disclosure on the technical ends which I am sometimes forced to do I get pushback on using widget A as opposed to widget B when in reality it was only after a year of research that we ourselves concluded that Widget A was required.  By the time I feel like I start being effective in my educating the ‘client’s’ eyes are glazed over.  So we typically lose the battle when we go into such specifics but it’s generally with a demographic that we can ultimately say ‘it’s our problem not yours, so please don’t worry about it, our supervisors will hold our feet to the fire’.  <-  Still, we’ve given those people the opportunity to hear the details so when they complain to the brass those people can’t use the common tropes of us not being transparent, cooking some conspiracy or being stand-offish on the matter.

 

  So the lynchpin in this area is unfortunately many times luck-of-the-draw:  for us it’s all about our support in management.  I’m lucky to have a CFO and a president that don’t [always] question us when we say we have an item that is sorely needed.   Enough that when they get other VPs / faculty /staff complaints they help us say ‘we support IT’s decision’ even without really knowing the technical specifics.  It’s also a close enough relationship that they help identify pushback before it happens – we are presenting to the trustees this week about general IT operations and to help promote an IT driven community project, and that is part of the ‘marketing’ John talks about but also sends a message to the college that a controversial (and expensive) decision is being backed from the top down.  I’ll follow up that black-box presentation after the trustees break up with my directors present if someone wants to ask a technical question or have a follow up meeting to drill down even though I know it typically generates confusion I still feel the need to offer the technical explanation for those that seek it. 

 

  Best,

    Greg

 

AVP of I.T. / CIO

Cape Cod Community College

West Barnstable, MA 02668

 

I've come to the importance of communicating IT's value in a way that may be relevant to some - a defence to deal with shrinking budgets.  As budget allocations get squeezed we can get into an unending "more for less" situation that is simply untenable.   I positioned the situation to my team as not ceding to do "more with less" but instead aim to do "less with less" or "more with more".  The common requirement for either of those scenarios is a visible demonstration of value for investment that we can use to change the conversation from simply cutting costs to one that appreciates that those cuts eventually have an impact on service.

What we are beginning to do is bring together our service catalog with metrics and costing to communicate what services are used and what they cost.  An important aspect of this work is the way we articulate our services and that is in a way that is appreciated and understood by the users of the services (as others have pointed out or intimated - a faculty member may appreciate the value of an LMS - they're not so interested in the servers, storage etc. keep it running).

Last thing - a book that I've found helpful on the topic is "The Real Business of IT" by Richard Hunter and George Westerman.   Interestingly in searching for references for the book I came across an entry from Timothy Chester's blog wherein he relates a visit by one of the authors to a retreat at Pepperdine ... http://www.accidentalcio.com/2011/02/day-with-richard-hunter.html

Happy new year all,
Bob G


-------------
Bob Gagne   |  Chief Information Officer  |  University Information Technology  
108 Steacie Science and Engineering Library  |  York University    |   4700 Keele St. ,  Toronto ON  M3J 1P3 Canada
T: 416.736.5818   |  F: 416.736.5830  | bgagne@yorku.ca |  www.yorku.ca

NOTE: York UIT will NEVER send unsolicited requests for passwords or other personal information via email.   Messages requesting such information are fraudulent and should be deleted.



From: John Kaftan <jkaftan@UTICA.EDU>
To: CIO@LISTSERV.EDUCAUSE.EDU,
Date: 2013/01/04 11:40 AM
Subject: Re: [CIO] IT as a Budget Black Hole
Sent by: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>




Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Bob:
 
I ordered the book.  Thanks.

Message from slowe@1610group.com

Bob,

I couldn't agree with you more about the need to reframe the "less with more" discussion as something else.  As you state, that becomes a never-ending situation.  For the first round, most of us can probably some *something* that we can cut from our budgets that may not be noticeably impactful on the services provided and that cry act has the outcome of demonstrating to the leadership that the "more with less" scenario is constantly possible.

What I believe leadership often fails to realize is that IT is perfectly positioned to enable a more with less outcome across the institution, but only with the right strategic technology investment in tools and in people.  Good leadership will recognize the possibilities that exist in turning to IT as a business enabler/multiplier and reasonably funding the unit to that aim.  There are unending numbers of stories out there about companies that have invested in IT in order to reduce their overall cost of doing business.  In many places, higher ed has yet to catch up in this way and continues to view IT with great skepticism.

This has been a great discussion!  Although I'm not a CIO at present, I provide consulting services to CIOs and find these discussions invaluable.

Scott Lowe
Founder and Managing Consultant
The 1610 Group
(530) 330-5693

On Jan 4, 2013, at 11:12 AM, Bob Gagne <bgagne@YORKU.CA> wrote:

I've come to the importance of communicating IT's value in a way that may be relevant to some - a defence to deal with shrinking budgets.  As budget allocations get squeezed we can get into an unending "more for less" situation that is simply untenable.   I positioned the situation to my team as not ceding to do "more with less" but instead aim to do "less with less" or "more with more".  The common requirement for either of those scenarios is a visible demonstration of value for investment that we can use to change the conversation from simply cutting costs to one that appreciates that those cuts eventually have an impact on service.

What we are beginning to do is bring together our service catalog with metrics and costing to communicate what services are used and what they cost.  An important aspect of this work is the way we articulate our services and that is in a way that is appreciated and understood by the users of the services (as others have pointed out or intimated - a faculty member may appreciate the value of an LMS - they're not so interested in the servers, storage etc. keep it running).

Last thing - a book that I've found helpful on the topic is "The Real Business of IT" by Richard Hunter and George Westerman.   Interestingly in searching for references for the book I came across an entry from Timothy Chester's blog wherein he relates a visit by one of the authors to a retreat at Pepperdine ... http://www.accidentalcio.com/2011/02/day-with-richard-hunter.html

Happy new year all,
Bob G


-------------
Bob Gagne   |  Chief Information Officer  |  University Information Technology  
108 Steacie Science and Engineering Library  |  York University    |   4700 Keele St. ,  Toronto ON  M3J 1P3 Canada
T: 416.736.5818   |  F: 416.736.5830  | bgagne@yorku.ca |  www.yorku.ca

NOTE: York UIT will NEVER send unsolicited requests for passwords or other personal information via email.   Messages requesting such information are fraudulent and should be deleted.



From: John Kaftan <jkaftan@UTICA.EDU>
To: CIO@LISTSERV.EDUCAUSE.EDU,
Date: 2013/01/04 11:40 AM
Subject: Re: [CIO] IT as a Budget Black Hole
Sent by: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>




Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Excellent blog post, will order the book!

 

Sheryl

               

 

From: The EDUCAUSE CIO Constituent Group Listserv [mailto:CIO@LISTSERV.EDUCAUSE.EDU] On Behalf Of John Kaftan
Sent: Friday, January 04, 2013 1:22 PM
To: CIO@LISTSERV.EDUCAUSE.EDU
Subject: Re: [CIO] IT as a Budget Black Hole

 

Bob:

 

I ordered the book.  Thanks.

John,

We are attempting to reformulate our services in terms of what we we call 'basic' services. The plan is to have the faculty IT committee certify the list of basic services by faculty , staff (knowledge workers and non k w) and students. Services that are basic would be paid for from the central IT budget. Services that are not basic would be eliminated or changed to fee-for services. The budget and fees would be computed annually. Anyone wishing to take the covers off a pricy service will be buried in paperwork documenting the cost. Note that this costs the services but does not say how such costs are recovered. Whether IT costs are taken off the top or distributed out is a financial decision not an IT decision.   

I don't think administrators really believe this Black hole stuff. Not any more really. It's a red herring and when IT shows the cost of its services it will be so labeled  again. The real fear on the part of administrators is facing the truth that if the whole university were to do this math, that is look at true costs then ugly secrets would be revealed and hard decisions would be demanded. Overhead would be scrutinized, money losers would be outed, cross subsidies would need to be defended. And the whole cottage industry mom and pop model even as augmented(but not changed) by technology would be thrown into question. It's a whole lot easier to vilify the I T budget than to work on revenue generation and/ or tuition reduction. Most ( but not all) of IT infrastructure will move to the cloud over time, and administrators will need to find a new Black hole.

Larry Frederick, CIO, UMSL

Sent from my iPhone

John,

You bring up a great topic, that's especially relevant to this time of year. We have started a process that will view our costs by services (as you've indicated below). In other words; how much does it cost to run Banner (you can choose to break this down further into the various services i.e. Finance, A/P, HR, SIS, etc.). These costs would included hardware, software, maintenance, personnel, etc.—total cost of ownership. An example of another service is the cost to support the technology in the classrooms or in teaching/learning.

In all instances, we will be taking these costs and dividing it by the number of constituents that use the systems (or benefit from them). So, if someone asks, "How much does it cost to support technology for teaching/learning?" We can answer with an exact number and how much it costs per student. 

Folks don't care about the components, but they do care if the service is reliable, available, and easy to use.

Mark

______________________________________________
Mark Staples
Vice President & Chief Information Officer
Wentworth Institute of Technology
Division of Technology Services

Williston Hall | 550 Huntington Avenue | Boston, Ma 02115
Office Phone: 617-989-4592 | Mobile: 617-543-4184
email: staplesm@wit.edu | Twitter: markstaples_cio
LinkedIn: http://www.linkedin.com/in/markallenstaples
blog: http://blogs.wit.edu/cio
http://www.wit.edu

______________________________________________

"The conventional view serves to protect us from the painful job of thinking." -John Kenneth Galbraith

From: John Kaftan <jkaftan@UTICA.EDU>
Reply-To: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>
Date: Thursday, January 3, 2013 11:08 PM
To: "CIO@LISTSERV.EDUCAUSE.EDU" <CIO@LISTSERV.EDUCAUSE.EDU>
Subject: [CIO] IT as a Budget Black Hole

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I have a few related thoughts. One, it is important to make IT services “real” by relating in tangible things where particular costs go. E.g. “If we don’t purchase these WAPs, wireless will be saturated with next round of freshmen moving in the dorms. Would you like to roll out Health Records self-service? We’ll need to replace that old firewall to remain secure.  Did you say you want to accept credit cards for event tickets? We will need to purchase a PCI-compliant package.” This doesn’t always work but is a good start and of course it also depends on the relationship IT has with key decision-makers.

 

Chargebacks seem like an attractive approach to evaluating and funding IT but there are mines all around this approach. Chargebacks breed more chargebacks and overhead and before you know it areas that didn’t use to bill you suddenly turn around and charge you for facilities, personnel, etc. The expectations can also rise substantially. My take is IT chargebacks should be few rather than lots and they should be focused on controlling high use of resources. This perspective might change with the size of an institution. On the other hand, being able to show costs per user or per service can be very effective.

 

Last thought, I recently found a calculator on Amazon’s Web site for their storage and other cloud services (http://aws.amazon.com/calculator/). It is quick-and-dirty but is a nice way to compare some internal costs with cloud alternatives when feasible. Recently I had to find the best way to add 10TB of storage and for now an internal solution is less expensive and less troublesome but next year that might change.

 

Ilya Yakovlev

Chief Information Officer

University of Wisconsin-Parkside

 

From: John Kaftan <jkaftan@UTICA.EDU>
Reply-To: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>
Date: Thursday, January 3, 2013 11:08 PM
To: "CIO@LISTSERV.EDUCAUSE.EDU" <CIO@LISTSERV.EDUCAUSE.EDU>
Subject: [CIO] IT as a Budget Black Hole

 

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.

 

I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.

 

Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 

 

I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.

 

I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?


--

John Kaftan

IT Infrastructure Manager

Utica College

 

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

This is a very interesting thread. ECAR collected data about measuring IT costs in November for a study we'll publish later this year. We were, among other things, interested in learning about your readiness and interest in various IT cost metrics. A (very) preliminary look at the data suggests a couple of things: 1. The most desired IT cost metrics are for staff salaries, comparing IT costs with other sourcing options, estimating the TCO of a service/application, comparing estimated costs of alternative enterprise application solutions, and justifying IT spending for a specific population or mission. 2. People's ability to actually do this effectively is still maturing. Fewer than half of respondents reported they are able to obtain these metrics effectively. 3. Only 18% said they're able to effectively estimate the TCO of a service/application (and 48% are measuring the cost of services currently, with another 15% planning to). 32% are measuring quality of services, with another 24% planning to. -Susan Susan Grajek Vice President Data, Research, and Analytics EDUCAUSE Uncommon Thinking for the Common Good 1150 18th Street, NW, Suite 900 Washington, DC 20036 direct: 202.331.5350 | main: 202.872.4200 | educause.edu From: , Mark > Reply-To: EDUCAUSE Listserv > Date: Friday, January 4, 2013 2:24 PM To: EDUCAUSE Listserv > Subject: Re: [CIO] IT as a Budget Black Hole John, You bring up a great topic, that's especially relevant to this time of year. We have started a process that will view our costs by services (as you've indicated below). In other words; how much does it cost to run Banner (you can choose to break this down further into the various services i.e. Finance, A/P, HR, SIS, etc.). These costs would included hardware, software, maintenance, personnel, etc.—total cost of ownership. An example of another service is the cost to support the technology in the classrooms or in teaching/learning. In all instances, we will be taking these costs and dividing it by the number of constituents that use the systems (or benefit from them). So, if someone asks, "How much does it cost to support technology for teaching/learning?" We can answer with an exact number and how much it costs per student. Folks don't care about the components, but they do care if the service is reliable, available, and easy to use. Mark ______________________________________________ Mark Staples Vice President & Chief Information Officer Wentworth Institute of Technology Division of Technology Services Williston Hall | 550 Huntington Avenue | Boston, Ma 02115 Office Phone: 617-989-4592 | Mobile: 617-543-4184 email: staplesm@wit.edu | Twitter: markstaples_cio LinkedIn: http://www.linkedin.com/in/markallenstaples blog: http://blogs.wit.edu/cio http://www.wit.edu Publication: Making Room for Yes: It Starts at the Top ______________________________________________ "The conventional view serves to protect us from the painful job of thinking." -John Kenneth Galbraith From: John Kaftan > Reply-To: The EDUCAUSE CIO Constituent Group Listserv > Date: Thursday, January 3, 2013 11:08 PM To: "CIO@LISTSERV.EDUCAUSE.EDU" > Subject: [CIO] IT as a Budget Black Hole Every time I hear IT referred to as a budget black hole I cringe. I think I have heard this from senior management at every institution for which I've worked. IT being seen as a budget black hole means that senior management does not see the value in what we are doing. If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced. I used to work for an application service provider (ASP). We were "cloud" before cloud was cool. One thing we did was to simplify our cost model by making our offerings a per user charge. Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit. Our line was, "Let us take care of all of that. You're in the construction business not the IT business." Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you. Why couldn't we do this kind of budgeting in-house? The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center. He just wants his technology to work and be available. So we could bust out our services into a subscription like fee. You want Banner? Ok that will be $300/concurrent user/year. You want a desktop for your personal assistant? Ok that will be $200/yr. Printing is $.01/page for black and white and $.14/page for color. I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross. The other important piece is that it would give us an metric to measure ourselves. We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk. With application, desktop, and storage virtualization we are able to do it for $150/yr. I think that might be eye opening to our staff as well and motivational. We also need to see the value of what we are doing. I wonder if anyone has gone down this road already and what challenges arose. Do any organizations actually have the flexibility to budget in this way? Would it just be too much work to pull it off? Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers? -- John Kaftan IT Infrastructure Manager Utica College ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.
Message from gjackson@mit.edu

I agree with Susan: this is a fascinating and important thread. It brought to mind some thinking I did for a SAC presentation some years ago, which later became an ER article "Ya Can Talk All Ya Want, but IT's Different Than It Was," and which I just went back and reread. The key point was that there's no simple resolution to the dilemma: organizing to run technology effectively and organizing to make the case for it have certain intrinsic incompatibilities.

Rather than rehearse the points from the piece any further, here's the URL for the .pdf version, in case anyone finds it useful:

http://net.educause.edu/ir/library/pdf/erm0151.pdf

Every time I hear IT referred to as a budget black hole I cringe. I think I have heard this from senior management at every institution for which I've worked. IT being seen as a budget black hole means that senior management does not see the value in what we are doing. If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.

--

Greg Jackson
jgackson@gmail.com | +1-202-596-9425 | gjackson.us

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John You've already received lots of good suggestions from some of the best minds in the IT field. Let me add a few more cents. My natural inclination is being analytical but I'd suggest that the problem you describe is less about data and more about relationships. That is, the data may provide logic but still be irrelevant to addressing the central issues. Looked at from a different perspective the "black hole" comment suggests that there does not exist strong relationships between IT leadership and senior management (at least the particular people who expressed that opinion). That leads to lack of trust, etc. and trust isn't built on just data. Relationships are built over time based on things like demonstrated concern, delivering on promises, being willing to be vulnerable and take responsibility when things don't go well, etc. There are lots of books and articles about how to build effective relationships. I would agree with Theresa and say setting up a charge-back system is definitely a bad idea. As I learned back in the 80s the main purpose of a charge back system is to "control" resources. Every such system has overhead and unintended consequences. We had the same experience as Theresa with phone services and we ultimately decided that there wasn't a need to control this and we stopped all the internal charging. Especially at small institutions control is better handled by developing good relationships. More than fifteen years ago Karen Leach and I attempted to come up with benchmarks for IT services (http://costsproject.org/Articles&Presentations.htm) and a lot of that work has migrated to the Educause Core Data Service. For example, what would we charge per year/per user for providing a call-in help desk service or a computer repair service? As a number of people have suggested this is complex given the variations in approaches taken at different institutions. Having unit costs is a great idea in theory but harder to implement in practice. And it doesn't address the relationship issue. My recommendation would be to sit down one-on-one with the people who believe that "IT is a black hole" to better understand their point of view. It isn't easy to ask people to give you genuine feedback but when they do you often find out interesting things and you start the relationship building. Good luck, Dave On 1/3/2013 11:08 PM, John Kaftan wrote: > Every time I hear IT referred to as a budget black hole I cringe. I > think I have heard this from senior management at every institution > for which I've worked. IT being seen as a budget black hole means > that senior management does not see the value in what we are doing. > If that is the case, it is only a matter of time when someone comes > along and knocks us off our block and "poof" IT is outsourced. > I used to work for an application service provider (ASP). We were > "cloud" before cloud was cool. One thing we did was to simplify our > cost model by making our offerings a per user charge. Our potential > customers had in-house IT guys telling them they need $100K for a new > drive array, $50 for a tape library, and $80K for a new CRAC unit. > Our line was, "Let us take care of all of that. You're in the > construction business not the IT business." Every service we had was > charged in a way that was simple to understand and we never went back > and told them we needed a Recapitulator, Turbo Thruster or Packeteer > or what have you. > Why couldn't we do this kind of budgeting in-house? The President > doesn't need to know about virtualizing servers, or what SAN we want > to get or BTUs in the data center. He just wants his technology to > work and be available. So we could bust out our services into a > subscription like fee. You want Banner? Ok that will be > $300/concurrent user/year. You want a desktop for your personal > assistant? Ok that will be $200/yr. Printing is $.01/page for black > and white and $.14/page for color. > I think if we could put it in those terms we may be seen as an enabler > or partner rather than an albatross. The other important piece is > that it would give us an metric to measure ourselves. We could say at > some point, "5 years ago it cost us $300/yr to put a computer on > someone's desk. With application, desktop, and storage virtualization > we are able to do it for $150/yr. I think that might be eye opening > to our staff as well and motivational. We also need to see the value > of what we are doing. > I wonder if anyone has gone down this road already and what challenges > arose. Do any organizations actually have the flexibility to budget > in this way? Would it just be too much work to pull it off? Are we > afraid of lifting the curtain of obscurity only to show that we are > not a good value, i.e, can we compete with outside providers? > > -- > John Kaftan > IT Infrastructure Manager > Utica College > > ********** Participation and subscription information for this > EDUCAUSE Constituent Group discussion list can be found at > http://www.educause.edu/groups/. > ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.
John, As is usually the case, I find myself in strong agreement with Dave's comments on this topic - especially those about the importance of relationships. We humans are fundamentally intuitive decision-makers even though nowadays we are increasingly aware of the power of analytics in higher education and in the IT domain. Because of the pervasive use of IT infrastructure and services in just about every college and university, there are many constituencies to be served and many relationships to be cultivated. This, together with such things as the rate of change of technology and associated needs for life-cycle replacement funding, the substantial impact of IT costs on overall institutional budgets, and the increasing array of service providers on and off campus, provides IT leaders with a great deal of important work. Several others in this thread have written about services and service catalogs. Just as there has been a shift in higher education conversations from teaching and related inputs to learning and outcomes assessment, I think we in IT are now engaged in a shift toward more and better data and information about our services. I also think IT leaders nowadays will benefit from the development of service-centric AND multiple budget views. These views might include, for example: - Overall IT budget, expenditure and staffing data including benchmarked trends - Total expenditures for personnel and all other - Total expenditures for in-sourced and outsourced services - Total expenditures to run, grow and transform IT services - Total expenditures by functional area within the IT organization - Total expenditures in the institution's general ledger view - Total expenditures by key services provided So, developing a deep understanding of IT budgets including a service-oriented view, listening carefully to IT's many constituencies, and actively engaging with others (especially key decision makers) about those budgets over the long haul might be helpful. All the best in 2013, Randy ________________________________________
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

It does seem logical, but my experience indicates that there are factors that have to be considered with any charge-back model.  As a result, over the years, I've tried to eliminate all charge-backs.  Would your university commit to the budget without allowing exceptions? 

One factor to consider is competition, in terms of perceived price-per-service.  I use the word perceived thoughtfully, as folks outside central IT, without any deep understanding of technology, can analyze costs very differently from an experienced IT view.  If your university doesn't enforce a centralized view of cost analysis, the price of your service and the price of what might appear to be the same service provided by an outside company can be compared by the client community.  For example, a few years back we had charge-back long distance telephone service at the same time long-distance calls could be made on purchased calling cards.  So the community bought the long distance calling cards to use to avoid paying the long distance charges on campus.  But the campus long-distance charges had a surcharge that funded the telecom infrastructure, and when the campus moved to the cards to avoid paying us, our funding to maintain the infrastructure declined.  It wasn't just our department; campus mail services suffered the same way.  If you are going to charge-back or put subscription pricing in place for all services, you need to price those services competitively, and that may not be enough to cover the cost of providing the service.  If the campus community can go around your area and independently contract for a lower price service, your area may not even get to be involved in the conversation.  If the client is empowered to do price comparison shopping, and to buy the best service at the lowest cost as they perceive it, you've cut your department out of the conversation. 

I am trying to maintain relationships so that my department is a value-added partner in those conversations and decisions, not just another vendor (an internal vendor) from which to purchase solutions.  I've found that the clients often do not consider the things we consider when we look at solutions, such as:
  • How will identity access management be handled (login ID creation and termination, password reset, etc.)
  • Ongoing contract management (periodic cost assessment, contract termination, service reassignment)
  • Monitoring (who is monitoring quality of service to contract)

We've tried allocation funding, subscription pricing, or charge-backs for phones, departmental printing, encrypted storage shares, special service coverage, fees for co-locating in the datacenter, only to find the campus community avoiding us as a result. We've eliminated phone billing and all surcharged services and even allocations.  If you want us to help or offer a service, we will do it if we have it in the installed base.  If we don't have the product, we create a specific transparent budget request.

I do try to submit budget requests that are specifically linked to visible projects.  That isn't difficult for me to do on my campus, as we are so terribly underfunded that just about any new project that comes along requires me to go into a mode of building a specific and transparent business case for funding.  Some universities have IT budgets that are a large bucket and perhaps that seems like more of a black hole.  My budget is a teacup, and every project results in a' la carte budget requests, so we are less of a black hole.


Interesting to think about -

Theresa



John,

So much depends on the culture of the campus and the campus budget model... is it distributed, centralized, cost recovery...

I think you have to structure your budget to clarify the cost of services for clients and for the institution... instead of a $4.5M budget, it is more useful to have a budget that reflects the cost of services
  • Web Services
  • Campus Network
  • User Services (which could reflect the cost per user)
  • Conferencing
  • ...
and of course this is needed to justify and be accountable for "charges" if in fact a cost recovery model is required (which you have already pointed out).

In addition, you should always consider what is good for the institution as well as the individual.  As you know, some services cannot survive without scale and some services are required for the institution to be viable and competitive...

and of course, outsourcing is always an option as appropriate - but with cloud services, I view outsourcing more as a public/private partnership... yes our LMS is in the cloud, but we provide first line support and instructional services...

Floyd Davenport CIO/Director Information Technology Services Washburn University floyd.davenport@washburn.edu http://blog.washburn.edu/technology 785-670-2066
On 1/3/2013 10:08 PM, John Kaftan wrote:
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

--
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

John,

Whether or not the money spent on IT is seen as going into a black hole, the finance folks generally don't want to see IT as a black box. In other words they want to see the bits and pieces on which money is being spent. So I'm not going to get away with a formal budget request that looks like what you describe. On the other hand I think that what you are describing would be an excellent way of crafting the narrative that goes along with the budget request to explain in relatively simple terms the value of what's being done, particularly if you can compare it directly with the cost of outsourcing and show value for in-sourcing. 

 - Mark
--
Mark Berman, Chief Information Officer
Siena College
515 Loudon Road
Loudonville, NY  12211
(518)782-6957,  Fax: (518)783-2590
Siena College is a learning community advancing the ideals of a liberal arts education, rooted in its identity as a Franciscan and Catholic institution.

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--- On Thu, 3 Jan 2013, John Kaftan wrote:
Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.
 
I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.
 
Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 
 
I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.
 
I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?

-- 
John Kaftan
IT Infrastructure Manager
Utica College

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I do think that John has point. No matter how detailed the explanation of need (using English instead of techno-babble) there is still this sense on the part of senior colleagues that technology just is consuming too much of the university's available resources. If we stop and think about what is accomplished today without the use of some IT service (whether in the classroom or the business office) it is very little. And whatever services we are providing it is for the good of the community not the IT staff. It costs the community to not have some of the resources we manage – just take the number of calls to the help desk when something is wrong with an application, email is down, the ERP is down for maintenance (even if in the middle of the night there are complaints it is not available!) I think Mark's point about using John's outline for a detailed budget narrative makes good sense as well, it is how we submit our budget based on relative costs associated with each service (with the budget submission detailing the technical) the narrative tends to place our requests in perspective that my colleagues on senior staff will better understand. Tom Thomas H. Carnwath Vice President Technology and Information Services Hamilton Hall 320 South Broad Street Philadelphia, PA 19102 Tel: 215-717-6440 [cid:E6843D09-5AD4-4232-BC0A-BD01024CE190] Need Assistance? Call Oops (215-717-6677) to get answers. OTIS will never ask for your personal information or password in an email. Never share this information with anyone. This message and any attachment may contain confidential or privileged information and is intended for the intended individual named as addressee. If you are not the intended recipient of this message, please notify the sender immediately by return email and delete this message and all attachments from your system. Any unauthorized disclosure, use, distribution, or reproduction of this message or any attachments is prohibited and may be deemed unlawful. Please consider the environment before printing this email. From: John Kaftan > Reply-To: The EDUCAUSE CIO Constituent Group Listserv > Date: Thursday, January 3, 2013 11:08 PM To: "CIO@LISTSERV.EDUCAUSE.EDU" > Subject: [CIO] IT as a Budget Black Hole Every time I hear IT referred to as a budget black hole I cringe. I think I have heard this from senior management at every institution for which I've worked. IT being seen as a budget black hole means that senior management does not see the value in what we are doing. If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced. I used to work for an application service provider (ASP). We were "cloud" before cloud was cool. One thing we did was to simplify our cost model by making our offerings a per user charge. Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit. Our line was, "Let us take care of all of that. You're in the construction business not the IT business." Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you. Why couldn't we do this kind of budgeting in-house? The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center. He just wants his technology to work and be available. So we could bust out our services into a subscription like fee. You want Banner? Ok that will be $300/concurrent user/year. You want a desktop for your personal assistant? Ok that will be $200/yr. Printing is $.01/page for black and white and $.14/page for color. I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross. The other important piece is that it would give us an metric to measure ourselves. We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk. With application, desktop, and storage virtualization we are able to do it for $150/yr. I think that might be eye opening to our staff as well and motivational. We also need to see the value of what we are doing. I wonder if anyone has gone down this road already and what challenges arose. Do any organizations actually have the flexibility to budget in this way? Would it just be too much work to pull it off? Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers? -- John Kaftan IT Infrastructure Manager Utica College ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

John,

                I think that is where IT needs to be able to market itself to campus. I think rather than the notion of IT being a black hole, it is more of the question “What have you done for me lately?” As long as e-mail, network drives, and users computers are working, IT is not part of the users normal thought process. They don’t see the dark computer rooms with switches or gears, and frankly they don’t care. If they flip a switch and the power comes on then everything is working. If it doesn’t, then IT must have been doing something to cause the issue.

                IT needs to look at having a marketing arm where we can tell our story to campus. This can include making sure that every IT member has the resources or ability to interact with the customer that will have a positive impact on the IT organization. This does not always mean that IT answer is always yes, but should instead be a partner with the institution and the other faculty, staff, and students to find the best solution for the campus community. It also means that IT should take the lead and over communicate when new projects or systems are being changed and taking responsibility when things don’t go as planned. A change board and alerting campus of planned changes is one way that communication can help clear up the black hole syndrome.

                If we are not willing to market our services and advantages to campus then there are companies in every magazine that your executives read that are. IT is no longer just a differentiator, it is a necessity. While IT organizations have good programmers that like to hide in their darkened cubes and pump out code, we also need a champion that can go out to the rest of the institution and market IT so that people will not have to think of IT as a black hole.

 

Thanks,

 

Randall Alberts, PMP

Institutional Technology

Ringling College of Art and Design

2700 North Tamiami Trail

Sarasota, FL 34234

Office: 941-893-2054

Fax: 941-359-7615

Web: www.ringling.edu

 

Ringling College – Changing the Way the World Thinks about Art and Design

 

--- On Thu, 3 Jan 2013, John Kaftan wrote:

Every time I hear IT referred to as a budget black hole I cringe.  I think I have heard this from senior management at every institution for which I've worked.  IT being seen as a budget black hole means that senior management does not see the value in what we are doing.  If that is the case, it is only a matter of time when someone comes along and knocks us off our block and "poof" IT is outsourced.

 

I used to work for an application service provider (ASP).  We were "cloud" before cloud was cool.  One thing we did was to simplify our cost model by making our offerings a per user charge.  Our potential customers had in-house IT guys telling them they need $100K for a new drive array, $50 for a tape library, and $80K for a new CRAC unit.  Our line was, "Let us take care of all of that.  You're in the construction business not the IT business."  Every service we had was charged in a way that was simple to understand and we never went back and told them we needed a Recapitulator, Turbo Thruster or Packeteer or what have you.

 

Why couldn't we do this kind of budgeting in-house?  The President doesn't need to know about virtualizing servers, or what SAN we want to get or BTUs in the data center.  He just wants his technology to work and be available.  So we could bust out our services into a subscription like fee.  You want Banner?  Ok that will be $300/concurrent user/year.  You want a desktop for your personal assistant?  Ok that will be $200/yr.  Printing is $.01/page for black and white and $.14/page for color. 

 

I think if we could put it in those terms we may be seen as an enabler or partner rather than an albatross.  The other important piece is that it would give us an metric to measure ourselves.  We could say at some point, "5 years ago it cost us $300/yr to put a computer on someone's desk.  With application, desktop, and storage virtualization we are able to do it for $150/yr.  I think that might be eye opening to our staff as well and motivational.  We also need to see the value of what we are doing.

 

I wonder if anyone has gone down this road already and what challenges arose.  Do any organizations actually have the flexibility to budget in this way?  Would it just be too much work to pull it off?  Are we afraid of lifting the curtain of obscurity only to show that we are not a good value, i.e, can we compete with outside providers?


-- 

John Kaftan

IT Infrastructure Manager

Utica College

 

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.

I’ll also affirm the value of reporting the cost of IT Services – not only the budget categories that comprise them.  IU has long used Activity-based Costing (ABC) along with a Quality of Services survey to compile an annual Cost and Quality of Services (16 years of data linked below).

 

We find it an invaluable exercise in the process of doing it as well as the value of the final report.  We use simple, perceptual estimates and financial data to keep it lightweight.

 

For example, let’s say that the manager of System Administrators allocates 20% of the personnel cost for System Administrators to the Student Systems, 30% to Research Systems, and 50% to other services.  The Service Owner for Student Systems may say, hey, I’m not get 20% of the Sys Admin’s time and I need it.  This prompts a healthy conversation between the service owner and the service provider to get that cost allocation and personal allocation right.

 

Once we know all the personnel, operational, and capital costs going into a service, say Exchange or the Help Desk/Support, we can then assess it by a number of divisors such as # of users, # of mailboxes or # of service contacts, etc.

 

The ABC approach allocates all the budgetary expenditures in the financial model to the set of services, and they reconcile together.  Over the years, we’ve automated much of the data roll up of this process.  We have chosen to run it on a cash, rather than accrual basis so it does have some spikes for large capital expenses (e.g., larger server refresh), but over time, it really shows the cumulative cost of a particular service for managerial decision making.

 

BUT MORE IMPORTANTLY…

 

The value of having the data is immensely helpful for the very heart of John’s questions.  It makes IT expenditures more understandable for others, and helps us better understand sourcing strategies for internal, outsourcing, or collaborative partnerships with other institutions.  It puts many debates on a factual basis rather than everyone making up their own views for what X or Y does or should cost.  Reporting Cost and Satisfaction measures together is also helpful.

 

I should also note that this ABC work began in the mid 1990s with Laurie Antolovic’ and the late Chris Peebles.  Their leadership of it has been invaluable.

 

The public reports are at http://go.iu.edu/6wH

 

--Brad

----------------------------------------------------------------------

IU Vice President for IT & CIO, Dean, and Professor

Indiana University, http://ovpit.iu.edu 

 

 

 

 

Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Hey all,

 

  Good points all around, when I get frustrated, I try and remember that it’s only been 30 or 40 years from I.T.’s inception as an entity that now commands one of the highest, if not the highest, operational budget.  Beyond the brass saying that we are a black hole, I have an equal (many times greater) issue from faculty and staff, who commonly say things like ‘your SAN cost the same amount of x amount of professors’ without enough floor time to defend that cost as I have to educate people on what a SAN is. 

 

  If the requests are big enough, I generally need to present in three tiers: technical specifics, middle of the road, and black box.  I’m lucky that I can delegate the technical specific ‘sales’ to one of my directors most of the time.  That technical specific tier is always problematic regardless of who your audience is as many times you and your team have been researching the details of a solution so even a very technically savvy person will question the reasoning on it.  I’m dealing with that right now on our VDI project[s] – when I go full disclosure on the technical ends which I am sometimes forced to do I get pushback on using widget A as opposed to widget B when in reality it was only after a year of research that we ourselves concluded that Widget A was required.  By the time I feel like I start being effective in my educating the ‘client’s’ eyes are glazed over.  So we typically lose the battle when we go into such specifics but it’s generally with a demographic that we can ultimately say ‘it’s our problem not yours, so please don’t worry about it, our supervisors will hold our feet to the fire’.  <-  Still, we’ve given those people the opportunity to hear the details so when they complain to the brass those people can’t use the common tropes of us not being transparent, cooking some conspiracy or being stand-offish on the matter.

 

  So the lynchpin in this area is unfortunately many times luck-of-the-draw:  for us it’s all about our support in management.  I’m lucky to have a CFO and a president that don’t [always] question us when we say we have an item that is sorely needed.   Enough that when they get other VPs / faculty /staff complaints they help us say ‘we support IT’s decision’ even without really knowing the technical specifics.  It’s also a close enough relationship that they help identify pushback before it happens – we are presenting to the trustees this week about general IT operations and to help promote an IT driven community project, and that is part of the ‘marketing’ John talks about but also sends a message to the college that a controversial (and expensive) decision is being backed from the top down.  I’ll follow up that black-box presentation after the trustees break up with my directors present if someone wants to ask a technical question or have a follow up meeting to drill down even though I know it typically generates confusion I still feel the need to offer the technical explanation for those that seek it. 

 

  Best,

    Greg

 

AVP of I.T. / CIO

Cape Cod Community College

West Barnstable, MA 02668

 

I've come to the importance of communicating IT's value in a way that may be relevant to some - a defence to deal with shrinking budgets.  As budget allocations get squeezed we can get into an unending "more for less" situation that is simply untenable.   I positioned the situation to my team as not ceding to do "more with less" but instead aim to do "less with less" or "more with more".  The common requirement for either of those scenarios is a visible demonstration of value for investment that we can use to change the conversation from simply cutting costs to one that appreciates that those cuts eventually have an impact on service.

What we are beginning to do is bring together our service catalog with metrics and costing to communicate what services are used and what they cost.  An important aspect of this work is the way we articulate our services and that is in a way that is appreciated and understood by the users of the services (as others have pointed out or intimated - a faculty member may appreciate the value of an LMS - they're not so interested in the servers, storage etc. keep it running).

Last thing - a book that I've found helpful on the topic is "The Real Business of IT" by Richard Hunter and George Westerman.   Interestingly in searching for references for the book I came across an entry from Timothy Chester's blog wherein he relates a visit by one of the authors to a retreat at Pepperdine ... http://www.accidentalcio.com/2011/02/day-with-richard-hunter.html

Happy new year all,
Bob G


-------------
Bob Gagne   |  Chief Information Officer  |  University Information Technology  
108 Steacie Science and Engineering Library  |  York University    |   4700 Keele St. ,  Toronto ON  M3J 1P3 Canada
T: 416.736.5818   |  F: 416.736.5830  | bgagne@yorku.ca |  www.yorku.ca

NOTE: York UIT will NEVER send unsolicited requests for passwords or other personal information via email.   Messages requesting such information are fraudulent and should be deleted.



From: John Kaftan <jkaftan@UTICA.EDU>
To: CIO@LISTSERV.EDUCAUSE.EDU,
Date: 2013/01/04 11:40 AM
Subject: Re: [CIO] IT as a Budget Black Hole
Sent by: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>




Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Bob:
 
I ordered the book.  Thanks.

Message from slowe@1610group.com

Bob,

I couldn't agree with you more about the need to reframe the "less with more" discussion as something else.  As you state, that becomes a never-ending situation.  For the first round, most of us can probably some *something* that we can cut from our budgets that may not be noticeably impactful on the services provided and that cry act has the outcome of demonstrating to the leadership that the "more with less" scenario is constantly possible.

What I believe leadership often fails to realize is that IT is perfectly positioned to enable a more with less outcome across the institution, but only with the right strategic technology investment in tools and in people.  Good leadership will recognize the possibilities that exist in turning to IT as a business enabler/multiplier and reasonably funding the unit to that aim.  There are unending numbers of stories out there about companies that have invested in IT in order to reduce their overall cost of doing business.  In many places, higher ed has yet to catch up in this way and continues to view IT with great skepticism.

This has been a great discussion!  Although I'm not a CIO at present, I provide consulting services to CIOs and find these discussions invaluable.

Scott Lowe
Founder and Managing Consultant
The 1610 Group
(530) 330-5693

On Jan 4, 2013, at 11:12 AM, Bob Gagne <bgagne@YORKU.CA> wrote:

I've come to the importance of communicating IT's value in a way that may be relevant to some - a defence to deal with shrinking budgets.  As budget allocations get squeezed we can get into an unending "more for less" situation that is simply untenable.   I positioned the situation to my team as not ceding to do "more with less" but instead aim to do "less with less" or "more with more".  The common requirement for either of those scenarios is a visible demonstration of value for investment that we can use to change the conversation from simply cutting costs to one that appreciates that those cuts eventually have an impact on service.

What we are beginning to do is bring together our service catalog with metrics and costing to communicate what services are used and what they cost.  An important aspect of this work is the way we articulate our services and that is in a way that is appreciated and understood by the users of the services (as others have pointed out or intimated - a faculty member may appreciate the value of an LMS - they're not so interested in the servers, storage etc. keep it running).

Last thing - a book that I've found helpful on the topic is "The Real Business of IT" by Richard Hunter and George Westerman.   Interestingly in searching for references for the book I came across an entry from Timothy Chester's blog wherein he relates a visit by one of the authors to a retreat at Pepperdine ... http://www.accidentalcio.com/2011/02/day-with-richard-hunter.html

Happy new year all,
Bob G


-------------
Bob Gagne   |  Chief Information Officer  |  University Information Technology  
108 Steacie Science and Engineering Library  |  York University    |   4700 Keele St. ,  Toronto ON  M3J 1P3 Canada
T: 416.736.5818   |  F: 416.736.5830  | bgagne@yorku.ca |  www.yorku.ca

NOTE: York UIT will NEVER send unsolicited requests for passwords or other personal information via email.   Messages requesting such information are fraudulent and should be deleted.



From: John Kaftan <jkaftan@UTICA.EDU>
To: CIO@LISTSERV.EDUCAUSE.EDU,
Date: 2013/01/04 11:40 AM
Subject: Re: [CIO] IT as a Budget Black Hole
Sent by: The EDUCAUSE CIO Constituent Group Listserv <CIO@LISTSERV.EDUCAUSE.EDU>




Wow!  Thanks Bradley and everyone else who has responded.  This is great stuff.
 
John

Excellent blog post, will order the book!

 

Sheryl

               

 

From: The EDUCAUSE CIO Constituent Group Listserv [mailto:CIO@LISTSERV.EDUCAUSE.EDU] On Behalf Of John Kaftan
Sent: Friday, January 04, 2013 1:22 PM
To: CIO@LISTSERV.EDUCAUSE.EDU
Subject: Re: [CIO] IT as a Budget Black Hole

 

Bob:

 

I ordered the book.  Thanks.

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