Strategic Planning and Budgeting for Information Technology Copyright CAUSE 1994. This paper was presented at the 1993 CAUSE Annual Conference held in San Diego, California, December 7-10, and is part of the conference proceedings published by CAUSE. Permission to copy or disseminate all or part of this material is granted provided that the copies are not made or distributed for commercial advantage, that the CAUSE copyright notice and the title and authors of the publication and its date appear, and that notice is given that copying is by permission of CAUSE, the association for managing and using information technology in higher education. To copy or disseminate otherwise, or to republish in any form, requires written permission from CAUSE. For further information: CAUSE, 4840 Pearl East Circle, Suite 302E, Boulder, CO 80301; 303449-4430; e-mail info@cause.colorado.edu STRATEGIC PLANNING AND BUDGETING FOR INFORMATION TECHNOLOGY prepared by: Charles R. Thomas and Dennis P. Jones INTRODUCTION Strategic planning can enable an institution to take advantage of new and different opportunities in the future while minimizing the negative impact of unexpected challenges along the way. In this time of rapid technological change, strategic planning can also provide great opportunities in the use of information technology to support the mission and goals of colleges and universities. The planning effort must, however, be conducted within the framework of the institutional planning process and must consider the institutional culture, history and resources. While many institutions engage in strategic planning activities at the campus level, few have extended those activities to the information technology units, and even fewer have linked them to budgeting and operations. The strategic planning process described in this paper is not revolutionary, in fact it has been used by dozens of institutions. The unique addition is the integration of budgeting at the strategic level. The purpose of this paper is to present a detailed framework for the implementation of a strategic planning and budgeting process for information technology that ensures policy level attention to the resources required to achieve strategic objectives. This approach involves close work with the appropriate institutional policy committee supported by staff work from the information technology unit. It is important to note that while outside assistance can bring a broad perspective and knowledgeable opinions to the process, and an outsider can serve as a catalyst to keep the process moving, the strategic planning process must be "owned" by the institution. DIMENSIONS OF STRATEGIC PLANNING The strategic planning part of the process described is based in part on "Strategic Planning for Computing and Communications[1] by Penrod and West, and generally follows the model developed by Dr. Robert Shirley[2]. The following important dimensions of planning for information technology cited by Penrod and West are based on a list compiled by John Moynihan.[3] and modified to fit the higher education environment. Planning for information technology should: 1. be a formal continuous process, have the support of senior administrators, use up-to-date planning methods, and result in documented output publicized to the institutional community; 2. be eclectic, choosing the best features from a diverse set of resources; 3. include a review of the mission and the organization of academic computing, administrative information systems, and telecommunications; 4. be broad but bounded in scope by economically and technically feasible solutions; 5. involve senior administrators, representatives of major client departments, and information technology staff members; 6. involve the identification of potentially important technologogical developments and recognize when those developments make the transition from "state of the art" to "state of the market"; 7. address the technical and managerial assets of the information technology units through an analysis of strengths and weaknesses; 8. formalize an organizational architecture that addresses all departmental levels of the institution; 9. formulate an organizationwide information architecture on which all institutional application systems are based; and, 10. result in an organizationwide technical architecture that includes hardware and software platforms for voice, data, and image networks; 11. develop a collegial process for selecting an organization-wide tool set for both academic computing and administrative application systems development. 12. be driven by institutional problems and opportunities and by client office needs rather than by technological developments; THE PLAN TO PLAN Before undertaking to develop a strategic planning process for information technology, it is important to have the commitment and support of the institutional leaders. The best way to achieve this is to have a very understandable Plan To Plan, to communicate that plan to the appropriate individuals on the campus, and then encourage participation in the process. In the collegial environment, the involvement of the right people in the right processes at the right time can do much to ensure success. An effective planning process should be consciously and formally organized. Both the administrators and the support staff should have formally assigned planning responsibilities[4]. To this end, a well thought out plan to plan can enable an institution to reach consensus on a planning process with a minimum number of false starts. In the follow paragraphs present a suggested set of activities for the plan to plan. 1. Conduct an on-campus workshop on strategic planning for top administrators and advisory committee members. The purpose is to establish a base set of knowledge about the state of information technology and strategic planning efforts at other colleges and universities. This workshop should follow the general model for strategic planning and emphasize the linking of strategic planning for information technology with the institutional planning process. The workshop should cover the basic concepts of data versus information; the array of managerial actions; decisionmaking styles and the differing roles of information; and the application of a strategic planning model to a unit within an institution. Other areas such as the external environment, both technical and nontechnical should be covered, as well as the major strategic planning issues. 2. Gather strategic plans for information technology from other appropriate institutions to serve as examples. 3. Develop and summarize an overview of the strategic planning and budgeting process and the steps appropriate for the institution. 4. Develop a policy and advisory committee structure for information technology, including: a. Committees and specific charters. Gather and consider example committee charters from other institutions. b. Determine committee chairs and representatives based on examples from other institutions of comparable complexity and size. c. Develop committee appointment and operating procedures within the structure of existing institutional committee guidelines. Clearly document these procedures. 5. Develop an academic computing seminar agenda appropriate for the institutional culture, then identify topics for discussion, moderators, and participants. 6. Develop an administrative computing seminar agenda, then identify topics, moderators, and participants. It should be obvious, but be sure to obtain approval for the Plan to Plan from the appropriate institutional administrators before proceeding with the orchestration of the full planning process. THE STRATEGIC PLANNING PROCESS The following paragraphs suggest the steps necessary to develop an ongoing strategic planning process for information technology for the institution. Institutional documentation and procedures for the process should be prepared in cooperation with institutional staff who will be responsible for accomplishing them. 1. Establish the planning parameters. This process determines who does what and how the planning process for information technology will relate to the institutional strategic planning process. 2. Assess the external and internal environments. Since these assessments may be conducted at varying levels of detail, it is important to determine the level of effort for appropriate the institutional culture. Analysis of the external environment should identify and assess major forces in the economic, social, technological, political and legal, demographic, and competitive areas that will present specific opportunities, threats, and constraints to the institution. Assessment of the internal environment includes identifyingthe strengths and weaknesses of the organizational resources such as human, physical, technological, and financial. 3. Determine institutional and constituency values. Include solicitation and documentation of perceptions of and expectations for both academic and administrative computing in the planning for this step. Conduct campus interviews with all of the major technology clients and document their opinions. 4. Identify areas for strategic decisions. The specific areas typically addressed in this step are: organizational mission, clientele, goals and outcomes, service mix, service areas, and, comparative advantage. Discuss the strategic decision areas in the planning committees, then review staff descriptions of alternatives in each of the six areas. Address alternative organizational structures, as well as the institutional hardware and software environments and the academic and administrative applications portfolios. 5. Develop functional and operational strategies. This step deals with how each of the strategic information technology issues will be addressed, by whom, and through what processes. Base discussion and suggestions for descriptions of the functional and operational strategies on successful models from other institutions. Develop and document specific action plans for each of the major information technology organizational units. 6. Develop strategic objectives for the planning year. The final step of the strategic planning process is to come to agreement on a set of strategic objectives for the planning year. These objectives include development and/or acquisitions of new information technology products and services as well as maintaining and improving existing systems. It is important to allow for iteration in the planning process, since many times other institutional units develop objectives that create information technology objectives that may well be unbeknownst to the information technology unit. THE STRATEGIC BUDGETING PROCESS Executive and top level policy committee involvement with the typical strategic planning process ends at the point of agreement upon objectives, leaving operational units to accomplish what they can within limited or reduced resources. Responsibility for achieving the objectives then shifts entirely to the operational managers While it may seem relatively simple and somewhat mechanistic, this strategic budgeting process explicitly focuses executive attention on the activities and resources necessary to successfully meet the objectives. This is accomplished by using a series of steps that relate resources required for operational activities to agreed- upon objectives. The process allows value judgments on resource allocation and trade-off decisions to be made at a strategic level before operational projects are undertaken rather than being forced to make costly midstream adjustments when resources will not stretch to cover over-optimistic objectives, or when inprocess operational failures occur. The first step in the process is to briefly describe and identify all of the agreedupon strategic objectives for the planning year. These objectives are then listed across the top of a standard spreadsheet. After agreement upon the objectives, all information technology activities required to achieve those objectives, as well as all ongoing activities, are briefly described and identified, then listed down the side of the Objective-Activity Matrix. After constructing the basic matrix, a "1" is then placed in the spreadsheet cell under each objective supported by each activity as shown in Figure 1. The first pass at this exercise can be completed by information technology staff, then reviewed by the appropriate strategic planning committees. Figure 1: Objective Activity Matrix 1a Objective-1 Objective-2 Objective-3 Objective-n Total Activity-1 1 1 Activity-2 1 1 Activity-3 1 Activity-4 Activity-n 1 1 1 Total After all objectives and activities have been entered in the spreadsheet, the Objective-Activity Matrix is then summed vertically and the bottom line checked for totals of zero as shown in Figure 2 below. Any objective indicating zero supporting activities obviously cannot be achieved, so must either be eliminated, or have supporting activities added to the list. Figure 2: Objective-Activity Matrix #1b Objective-1 Objective-2 Objective-3 Objective-n Total Activity-1 1 1 Activity-2 1 1 Activity-3 1 Activity-4 Activity-n 1 1 1 Total 3 0 3 2 After all zeros on the bottom total line have been eliminated, the Objective-Activity Matrix is then summed horizontally as shown in Figure 3 below. If any activity indicates zero objectives supported, either there is an unlisted objective, or there is some question why that activity exists. In most cases, an ongoing objective has been overlooked. Figure 3: Objective-Activity Matrix #1c Objective-1 Objective-2 Objective-3 Objective-n Total Activity-1 1 1 2 Activity-2 1 1 2 Activity-3 1 1 1 Activity-4 0 Activity-n 1 1 1 3 Total 3 1 3 2 Once all zero totals have been resolved, the resources required for each activity are identified, both dollars and full-time- equivalent (fte) staff. Allocation percentages for activity resources are then estimated and entered for each objective supported as illustrated in Figure 4. These two exercises are usually accomplished by information technology staff, then reviewed by senior administrators and the information technology policy committee. Figure 4: Objective-Activity Matrix #2a Objective-1 Objective-2 Objective-3 Objective-n Total Activity-1 %% %% $fte Activity-2 %% %% $fte Activity-3 %% %% $fte Activity-4 %% %% $fte Activity-n %% %% %% $fte Total After resources are allocated and summed vertically, the estimated costs for each objective are displayed as shown in Figure 5 below. Value judgments can then be made by the information technology policy committee as to the costs and benefit of each objective. If the estimated costs shown in the lower right hand corner of the Objective-Activity Matrix exceed those available, value judgments can also be made as to which objectives should be modified, postponed, or dropped. Figure 5: Objective-Activity Matrix #2b Objective-1 Objective-2 Objective-3 Objective-n Total Activity-1 $ fte $ fte $ fte Activity-2 $ fte $ fte $ fte Activity-3 $ fte $ fte $ fte Activity-4 $ fte $ fte $ fte A\ctivity-n $ fte $ fte $ fte $ fte Total $ fte $ fte $ fte $ fte $ fte CONCLUSION Recent technological developments in both computing hardware and software present dramatic opportunities for colleges and universities, but planning and preparation are required to capitalize on those opportunities. The current industry emphasis on campuswide networking, clientserver computing, and the graphic user interface require major changes in traditional institutional computing and communications environments, but these changes will not happen without executive involvement and leadership. The process of strategic planning and budgeting described in this paper can focus institutional attention on the appropriate institutional issues, and with institutionwide involvement, formulate a common vision for information technology. Footnotes: 1. James I. Penrod and Thomas W. West, "Strategic Planning for Computing and Communications," Organizing and Managing Information Resources on Campus, (EDUCOM, 1989), pp. 117-139. 2. Robert C. Shirley, "Strategic Planning: An Overview," Successful Strategic Planning: Case Studies, New Directions for Higher Education, No. 64 (San Francisco: JosseyBass, 1988): pp. 5- 14. 3. John Moynihan, "Propositions for Building an Effective Process," Journal of Information Systems Management 5, no. 2 (Spring 1988): pp. 61-64. 4. Donald Lelong and Robert Shirley, "Planning: Identifying the Focal Points for Action," Planning for Higher Education," vol. 12, no. 4 (Summer 1984): p. 4.