Funding the Information Technology Enterprise


Copyright 1991 CAUSE From _CAUSE/EFFECT_ Volume 14, Number 1, 
Spring 1991. Permission to copy or disseminate all or part of 
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      FUNDING THE INFORMATION TECHNOLOGY ENTERPRISE
                     by Dorothy M. Marshall

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Dorothy M. Marshall is Assistant Vice President for 
Administrative Information Services at Columbia University, 
where she is responsible for administrative systems 
strategies, development, and support.

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ABSTRACT: With increasing demands for widespread access to 
internal and external databases and online, interactive 
systems, one thing is clear--costs of providing information 
technology services are escalating at an alarming rate. 
Multiple approaches to information processing 
and delivery make the traditional one-faceted chargeback 
mechanism a funding approach that has outlived its 
usefulness.


Throughout the country, higher education information 
technology organizations are revisiting the issues of funding 
computing services. Driven by escalating costs, particularly 
in the administrative systems area where large database 
systems are being developed and distributed, new approaches 
to funding are being explored. Examined here are issues
and factors to be considered in funding the information 
services resource.

A review of current literature on funding computing services 
and networks reveals no perfect approach that can readily be 
adopted. No consistent pattern of funding exists among 
businesses or institutions ofhigher education. Funding and 
chargeback strategies vary, depending on what the 
organizations are trying to accomplish and on the behavior 
they are trying to encourage.

The issues of computing today are certainly different from 
those of ten years ago. Today, funding issues reflect:

  *  The maturing of the information technology (IT) 
organization from a technical monopoly to a partnership role 
with campus management in the development of IT strategy 
throughout the institution

  *  The personal computer revolution and emergence of 
powerful workstations

  *  The demand for distributed systems versus centralized 
systems

  *  Down-sized mainframes and central processing

  *  The need for marketing IT services because of growing 
competition in the private sector

  *  The sharing of resources and tighter budgets

Computing has the potential to become as ubiquitous a utility 
as the telephone and electricity, but the challenge facing IT
administrators is convincing the vast user community that 
they "own" and therefore must support the computing utility. 
As users begin to depend on automation to help them in daily 
processing of work, they must also plan for the ongoing cost 
of development, equipment replacement and repair, and so on. 
Only when use and costs of computing are incorporated
into user planning and budgets, as are utilities such as 
telephone and electricity, will computing be fully integrated 
into the campus culture.

     Why charge?

Bernard, Emery, Nolan, and Scott suggest in _Charging for 
Computer Services: Principles and Guidelines_ that " ... an 
ideal pricing scheme will always motivate users to act in a 
manner completely consistent with management's objectives in 
all areas where users have discretion over resource 
usage."[1]

Management's objectives in charging might include any or all 
of the following:

  *  To foster controlled growth
  *  To encourage prudent use of scarce resources
  *  To provide a return on investment in information 
technology to the institution

Whatever the objectives, the plan used to share the cost of 
funding administrative computing should be made clear to the 
customers so they know what they are getting for their money, 
and should be perceived as fair and equitable to the user 
community.

     What are the real costs?

Perhaps the most challenging task facing IT management is 
assessing the real cost of computing. Growth in demand for 
distributed information significantly changes the 
configuration of the computing enterprise and has generated 
discussions for funding mechanisms that reflect today's 
environment and future potential.

As the systems and network become more powerful and complex, 
costs have escalated, not only for mainframe cycles and 
network cable, but for management and overhead as well. The 
following are some examples of the so-called hidden costs:

  *  Migration costs to new hardware/software platforms

  *  Significant training costs for both IT professionals and 
the user community

  *  Adequate staffing levels to support many different 
technical platforms

  *  Development of policies for standards, security, and 
operations, and monitoring adherence to such policies

  *  Performance analysis of all platforms

  *  Development of user-friendly interfaces that are 
consistent and intuitive

Maintaining adequate research and development budgets will be
critical in this decade. As we distribute systems, and 
incorporate multiple vendor front ends to our systems, we 
increase the potential for exaggerating costs with each 
technological change. The impact of a change at one 
particular level must be examined throughout the
distributed system before cost analysis and cost benefit 
studies are completed.

One of the missions of an information technology organization 
is to provide the technical infrastructure on which systems 
may be developed and maintained. This infrastructure figures 
into cost in a major way and must be considered part of the 
whole system that users support. The infrastructure includes:

(1) selection and implementation of hardware, software, and 
network platforms that provide a stable and secure technical 
environment, three shifts a day, seven days a week;

(2) maintenance of reliable operations/production schedules 
for deliverables of central and local management systems 
(payroll, benefits, personnel, accounts payable, purchasing, 
etc.) and student systems (admissions, financial aid, 
registration, and bursar);

(3) strategic and tactical planning for the development of
applications that provide the transaction and information 
base on which the administrative and reporting activities 
rely; and

(4) establishment of partnerships with the staffs of the 
various research schools, research units, and administrative 
departments to develop, implement, and maintain systems that 
will help them perform their work more efficiently and in the 
most cost-effective manner. The breadth of the complexities 
of all issues needs to be considered as funding models are 
examined. Equally as complex as the issues of what costs 
should be shared are the mechanisms for paying.

     What is the potential for cost recovery?

Potential revenue sources are more varied, and each 
institution must evaluate cost-recovery potential against its 
mission and goals.Among the typical components of the system 
for which costs may be sharedare the following:

  *  Equipment
  *  Communication Networks
  *  Printing
  *  Application Development
  *  Consulting
  *  Support (Help Desk)
  *  Management/Overhead

These identifiable costs should be combined with the hidden 
costs and a structure should be established that 
realistically reflects the total cost. From such an 
assessment should come a funding program (be it
central funding, cost sharing, or total cost distribution) 
that meets the needs of the institution.

Funding the computing enterprise remains a challenge for all 
of us. If we do not step back and look at how the issues 
within computing have changed, we run the risk of 
implementing plans that do not reflect the current 
environment. A clear business plan, careful cost containment 
and cost tracking, a long-range funding plan, and good 
communication with the user community are the elements of a 
successful program. New constructs, new thinking, and 
creativity will help us set these strategies for the 1990s.

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1 D. Bernard, J. Emery, R. Nolan, and R. Scott, _Charging for 
Computer Services: Principles and Guidelines_ (New York:
PBI Books, 1977), p. 56.

Funding the Information Technology Enterprise