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The Myth about Saving Money

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© 2005 Brian L. Hawkins and Diana G. Oblinger

EDUCAUSE Review, vol. 40, no. 2 (March/April 2005): 12–13.

"IT Investments Will Save the Institution Money."

 
Brian L. Hawkins is President of EDUCAUSE. Diana G. Oblinger is Vice President of EDUCAUSE, where she is responsible for the association’s teaching and learning activities and for the direction of the National Learning Infrastructure Initiative (NLII). Comments on this article can be sent to the authors at bhawkins@educause.edu and doblinger@educause.edu.
 

Claims that investing in information technology will save money for a college or university have rarely proven true. In fact, realizing the promised dollar savings is so rare in higher education that the credibility of many IT professionals has been jeopardized by making the claim. Not producing promised savings only exacerbates the sense, among many higher education executives, that IT is a "black hole" for institutional funds. Indeed, the truth is that the vast majority of IT investments add cost; they do not generate savings.

Is it the implementation in higher education that is at fault, or are expectations flawed? Business has claimed that it generates cost savings from IT investments. Since most trustees—at both private and public colleges and universities—come from a business environment, it is increasingly important for those in higher education to clarify the IT cost-savings conundrum.

In all areas—business, government, and higher education—IT investments yield few benefits without simultaneous investments in process redesign. If a higher education institution installs a multimillion-dollar financial system but the cashier’s office continues to process travel reimbursements using a calculator, cost savings are highly unlikely. If a process remains the same and the only change is to add IT, savings are beyond reach. Process redesign is essential if an institution hopes to capture savings from IT investments. Implementation matters.

Expectations matter as well. Is the college or university hoping to save dollars—or to avoid future costs? By investing in IT and automating processes, can the institution avoid hiring more staff who would perform a task by hand? There are numerous higher education examples of IT investments that help slow the growth rate of specific expenditures or even decrease them. Yet cost avoidance is seldom part of the equation, since it cannot be measured.

Whether prompted by the president, the CFO, or a board member, colleges and universities are increasingly asking business questions that are appropriate when making IT investments:

  • What is the return on investment?
  • What value will be accrued?
  • What is the cost-benefit ratio?
  • How is the value of this investment determined and by whom?

The responses to these questions tend to be expressed in economic metrics, which are a challenge for higher education. Institutions may be able to identify costs, but articulating clear, measurable, and objective outcomes is more difficult. For example, how does IT contribute to a student’s education? What is the value of the student’s degree?

Even when there are cost savings, finding them can be another challenge. Many IT investments are made centrally; however, the savings may be realized in an individual unit far from the CIO’s office. Neither the CIO nor the CFO is likely to know if an investment in a financial system saves a portion of an FTE in the Department of Fine Arts or in the Civil Engineering Department.

Finally, are we even asking the right question? Most institutional investments are made to support the mission and operation of the college or university; they are not money-saving strategies. Investing in a parking garage or constructing a new classroom building doesn’t save an institution money; but both will enable the institution to fulfill its mission. Institutions—not just IT units—should focus more on strategic, qualitative outcomes and then illustrate how IT enables (or hinders) those outcomes.

When these core outcomes are articulated and related to teaching and learning, research and discovery, or service and engagement, educators can defend the investments—whether or not they cut costs. Higher education can also make a far more persuasive argument to governance bodies. Although the temptation is to focus on input measures, adding more on the input side of the equation does not automatically result in better outcomes. But sidestepping outcomes is not the answer. The perceived avoidance of accountability by American higher education invites criticism. Educators must be better prepared to demonstrate how the investments in higher education—and the IT infrastructure that supports it—can be justified.

A strategy to ensure that IT investments are valued is to tie them to the campus strategic plan and priorities. Although many institutions have developed IT strategic plans, these may be perceived as being separate from the overall institutional strategy. Placing IT in the context of campus priorities and needs signals its fundamental value. According to the 2003 EDUCAUSE Core Data Service, more than three-fourths of survey respondents noted that their campus strategic plan included strategies and directions for IT.1 Other research, such as the EDUCAUSE Center for Applied Research study on IT funding, illustrates the importance of alignment between institutional directions and IT.2

Thus, rather than asking whether an IT investment will save money, higher education executives should be asking questions that will help them determine the strategic desirability of an IT investment. The CIO and the executive team would be well advised to thoroughly discuss and come to a consensus on the following questions.

Does the campus have a strategic plan that places IT in the context of what the institution seeks to achieve? With finite resources, colleges and universities must make the most strategic investments, including the most strategic IT investments. Strategic priorities should emanate from the president’s cabinet or another executive council, not from the IT team in isolation.3

What outcomes are desired? How can they be measured? Have the campus leaders (or key stakeholders) defined their objectives? Although dollars are relatively easy to count, other—often more ambiguous—outcomes should be defined and agreed on ahead of time. These objectives should have both qualitative and quantitative measures, enabling the institution to assess a full range of outcomes.

Is it most important to save money, to increase capacity, or to enhance core functions? Saving money from an IT investment usually necessitates that units outside of IT revise business processes, eliminate personnel, or make other functional changes. Ensuring, in advance, these units’ willingness to make such adjustments and their understanding of the implications is essential. However, saving money may not be the most important goal. The value of an IT investment may be to serve more students or to provide students with better and more timely service. Or the value may hinge on enabling better teaching or better research or increasing institutional capacity. When planning IT projects, everyone involved should understand the goals, agree on the implications, and define an assessment strategy.

What is the result of doing nothing? Higher education leaders should consider the implications of not making an IT investment. Will competitiveness decrease? Will key constituencies be adversely affected? Will capacity be so limited that the institution will be unable to pursue a given initiative? All actions—and inactions—involve costs and consequences.

Saving money for the institution is always a laudable goal. But there may be more important reasons to invest in IT—and more important benefits to be gained.

Notes

1. Brian L. Hawkins, Julia A. Rudy, and Joshua W. Madsen, EDUCAUSE Core Data Service, 2003 Summary Report (Boulder, Colo.: EDUCAUSE, 2004), 10, table 1-15, http://www.educause.edu/ir/library/pdf/pub8001c.pdf.

2. Philip J. Goldstein, "Information Technology Funding in Higher Education," EDUCAUSE Center for Applied Research (ECAR) Study, 2004, vol. 7 (key findings available at http://www.educause.edu/ResearchStudies/1010).

3. This argument is made in David Ward and Brian L. Hawkins, "Presidential Leadership for Information Technology," EDUCAUSE Review, vol. 38, no. 3 (May/June 2003): 39, http://www.educause.edu/ir/library/pdf/ERM0332.pdf.

Brian L. Hawkins

Brian L. Hawkins was president of EDUCAUSE from 1998-2007. Prior to joining EDUCAUSE, Hawkins was senior vice president for Academic Planning and Administrative Affairs at Brown University. In this capacity, he oversaw academic planning, instructional budget management, campus computing, enrollment management, institutional research, summer programs, admission, financial aid, and student registration. Hawkins went to Brown in 1986 as vice president for Computing and Information Services. In 1989, he filled in as senior vice president for Finance and Administration, and then was appointed special assistant to the president for Academic Planning while he spearheaded Brown’s strategic planning processes. In 1997, he served as part of a three-person team standing in for the president of Brown University.

Before going to Brown, Hawkins was associate vice president for Academic Affairs at Drexel University. At Drexel, he was responsible for general academic planning and the first academic program in the nation to require access to a microcomputer, as well as integrating the use of technology throughout the curriculum.

Hawkins is a management professor by training and the author of one book and many articles on organizational behavior. He received his bachelor’s and master’s degrees from Michigan State University and his doctorate from Purdue University. He taught at The University of Texas at San Antonio (UTSA) and served there as department chairman and assistant dean of the College of Business. His organizational work focused on organizational structure, conflict management, communication, and performance appraisal. He earned tenure as faculty member at both UTSA and Drexel.

Hawkins has combined his academic and business experience to serve as a consultant to more than 350 organizations. In 1983, the governor of Pennsylvania asked him to initiate a corporate, industrial, public, and educational partnership in Southeastern Pennsylvania to create start-up companies and develop new jobs. Nearly two decades later, this program is still thriving.

Throughout his career, Hawkins has served on a variety of boards and committees. He is currently a member of the board of directors of the Forum for the Future of Higher Education and the Washington Higher Education Secretariat. Hawkins served as a member of the board of trustees of the University of Richmond and the Consortium on Financing Higher Education (COFHE) General Assembly and as chair and member of the boards of Educom and CAUSE. He also served on the boards of the Coalition for Networked Information (CNI) and the International Consortium for Educational Computing. Additionally, Hawkins has been a member of higher education advisory boards for Apple, IBM, NeXT, Sun, and Microsoft and has served on more than 60 advisory panels for various colleges and universities.

He has written extensively, including four books, numerous articles, book chapters, and monographs on information resources, academic planning, and the use of technology in higher education. Hawkins has received two honorary doctorates of science. In 1991, he received the CAUSE ELITE Award, a lifetime achievement award for Exemplary Leadership and Information Technology Excellence. He has served actively on accreditation teams as a chair and member, as well as the standards committee for North East Association of Schools and Colleges. Hawkins has been an invited speaker at professional meetings including the American Association of Higher Education (AAHE), Educom, CAUSE, the Society for College and University Planning (SCUP), the American Association of Publishers (AAP), the Association for College Research Libraries (ACRL), the National Association of College Stores (NACS), the National Association of College and University Business Officers (NACUBO), and the National Association of State Universities and Land-Grant Colleges (NASULGC).

 

Diana Oblinger

Dr. Diana G. Oblinger President and CEO of EDUCAUSE

Dr. Diana G. Oblinger is President and CEO of EDUCAUSE, a nonprofit association whose mission is to advance higher education through the use of information technology. The current membership comprises over 2,300 colleges, universities and education organizations, including 250 corporations. Previously, Oblinger held positions in academia and business: Vice President for Information Resources and the Chief Information Officer for the University of North Carolina system, Executive Director of Higher Education for Microsoft, and IBM Director of the Institute for Academic Technology. She was on the faculty at the University of Missouri-Columbia and at Michigan State University and served as the associate dean of academic programs at the University of Missouri.

Since becoming president of EDUCAUSE, Oblinger has become known for innovative product and services growth as well as international outreach. For example, Oblinger created the EDUCAUSE Learning Initiative (ELI), known for its leadership in teaching, learning and technology innovation as well as several signature products, such as the 7 Things You Should Know About series. She also initiated EDUCAUSE's first fully online events and its e-book series, including Educating the Net Generation and Learning Spaces.

In collaboration with the Bill and Melinda Gates Foundation she led the creation of the Next Generation Learning Challenges, a $30M program focused on improving college readiness and completion through information technologies. Partners include the League for Innovation in the Community College, the International Association for K-12 Online Learning, the Council of Chief State School Officers, and the Hewlett Foundation.

Oblinger has served on a variety of boards such as the board of directors of ACT, the editorial board of Open Learning, the National Science Foundation's Advisory Committee on Cyberinfrastructure, and the National Visiting Committee for NSF's National Science Digital Library project. She currently serves on the American Council on Education (ACE) board and works with other higher education associations as chair of the Washington Higher Education Secretariat. Dr. Oblinger has testified before the U.S. Senate Committee on Employment, Safety and Training and the U.S. House of Representatives Subcommittee on Technology.

Oblinger is a frequent keynote speaker as well as the co-author of the award-winning book What Business Wants from Higher Education. She is the editor or co-editor of seven books: The Learning Revolution, The Future Compatible Campus, Renewing Administration, E is for Everything, Best Practices in Student Services, Educating the Net Generation, and Learning Spaces. She also is the author or co-author of numerous monographs and articles on higher education and technology.

Dr. Oblinger has received outstanding teaching and research awards, was named Young Alumnus of the Year by Iowa State University and holds two honorary degrees. She is a graduate of Iowa State University (Bachelors, Masters, and Ph.D.) and is a member of Phi Beta Kappa, Phi Kappa Phi, and Sigma Xi.

 

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