IT as a Budget Black Hole

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.

********** 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 

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

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

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

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.

********** 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 

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

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

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

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.

********** 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 

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

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