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At a time when budgets are being decreased or at best held stagnant, we are looking at different ways to support the university community. Demands for our services continue to rise in this consumer driven environment as more technology is added to the mix the expectation of IT departments is that they will naturally provide the services without impact to those requesting them. We cannot continue (as small departments at small to medium institutions) to expand without an understanding on our clients' end that they too may have to participate in the funding new initiatives. I know that many large research institutions operate from a central IT organization that charges users fees for services provided. We have started to pursue some charge backs but am interested in what others are doing and how the fee structures were devised (and maintained from year to year). We are currently charging for: 1. Printing services 2. Telephone Services (landline and cell) 3. Ports moves adds and changes (except where the fault lies with the infrastructure in older buildings) We are looking at things like: 1. Standard fee (tax) for consumable bandwidth/access to internet 2. Storage 3. Email service 4. programming I am interested in understand what other schools determined the services to charge back, what you charge clients for services provided and how you determined those charges (particularly from schools less than 5,000 FTE). Specifically my questions are; 1. What specifically have you determined the campus community needs to pay for in terms of services you provide? 2. How do you assist departments in determining budgets for these IT services? 3. Are fees (if charged) mandatory (for instance if you charge for bandwidth do you just charge each department a percentage or is it based on some other calculation? 4. Can you share a chart of fees, fees for service, or "tax" that you employ to aid in supporting the central enterprise IT functions? This would mean a cultural shift for our campus and perhaps aid in thinking more strategically about requesting technology or services. Tom Thomas H. Carnwath Vice President Technology and Information Services Hamilton Hall 320 South Broad Street Philadelphia, PA 19102 Tel: 215-717-6440 [cid:8B745959-8462-470B-B560-6D39653BC7F7] 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. ********** Participation and subscription information for this EDUCAUSE Constituent Group discussion list can be found at http://www.educause.edu/groups/.
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Comments

Thomas--


I hope you get some good data from folks. A somewhat related Research Bulletin was published by ECAR in January is now freely available: Funding-Model Archetypes for Central IT Functions. It doesn't address your specific questions, but does provide some data about who is using chargeback across different types of institutions and what they use it for (but not what they are charging for necessarily).

For example, the figure below shows the percentage of institutions in each Carnegie group who use chargeback (perhaps with other sources, see the three categories on the second column in the legend) to fund communications infrastructure. Note that this is percentage of institutions, not percentage of budget or expenses.  Again, this is not your question exactly, but may provide some context.

 

In case the hyperlink doesn’t work, here’s the URL for the Research Bulletin:

http://www.educause.edu/Resources/FundingModelArchetypesforCentr/244745

 

Thanks,
Pam

 

Thomas,
At ISU we do charge for additional storage..departments get 500mb free..each additional 100mb cost $25 per year. We are pretty generous in giving out the 500mb allocations.
We went through an extensive modeling process to charge folks monthly for network connections...but when all was said and done...it did not make sense for us because none of the colleges had any new funding to pay the charges..in fact, they had all suffered budget cuts too..
Good news is, we were just given additional funding vs implementing a new complicated billing process. The modeling process helped make the case though, for the additional funding.
Randy

Tom, Although UAB is a much larger institution than yours, we face some of the same challenges as you do. We are always looking for a "better" way to fund our regular operations while finding funds to explore innovative technologies and new ideas (which also cost money). It's definitely an ongoing challenge! Our IT funding model is fairly complex but entails the following: 1) Direct institutional funding for administrative systems support (HR, Finance, Student, and Research Information Systems). 2) Fee based funding to cover help desk, email (10Gb mailbox), software site licensing, security, sharepoint collaboration/intranet, and storage (1Gb), etc. for faculty and staff. This fee is calculated on a per-FTE basis and is charged to the administrative units and schools based on their headcount. 3) Allocation based funding to cover help desk, email, software site licenses, security, and LMS system for students. This fee is incorporated into our tuition rates and is transferred to the IT organization on a semester basis. Directly tied to credit hour production. 4) Rate based funding for services including voice (landline and cellular),network, desktop support, server support, data storage, copier usage and custom application development. Rates are calculated on a breakeven basis +10% contingency and charged uniformly to all customers. It does require a little overhead to a billing office but it works quite well for us and enables us to keep the expenses tied to the usage. We re-calculate rates every year to make sure that we aren't over/under collecting. Changes (if any) are very incremental and provide minimal impact to the users on a year-over-year basis. 5) Direct partnerships with functional areas (human resources, provost, student affairs, research, etc.) Sometimes an internal "customer" may want a project that is not directly funded. In these cases, we become partners with them by treating it like a project helping them to identify the cost components (personnel, hardware, software, maintenance, consulting, etc.) If they want to move forward after understanding the additional cost, we have them transfer funds to us to cover the costs and we get started. This option has been used more and more lately and is becoming very popular with the functional areas we support, largely because the process is very transparent and they can understand the correlation between the "extra" thing they want and the "extra" charge they pay. Hope this helps. Heather Heather Maddox White, MBA Director, Fiscal & Administrative Affairs Information Technology University of Alabama at Birmingham 205.934.6225 Phone | 205.975.2855 Fax | heatherwhite@uab.edu
Hi Thomas, Here are some of the ways we are saving money: 1. Convert all servers to use VM. This enables the use of a large box for multiple servers. 2. Convert computer labs and desktop machines to use VDI. This will extend the life of your computers. When the computers need to be retired, you can purchase cheaper thin clients or zero clients. 3. Negotiate mutli-year contracts with your vendors. Vendors will typically give you a discount if you sign a multi-year contract with them. 4. Bundle you internet and voice contracts. When you create a larger contract by bundling, the vendors will work to give you additional discounts. 5. Pre-purchase a set amount of Long Distance. We have purchased X amount of minutes of long distance with a vendor at a very low price. This gives me a set cost instead of a variable cost. The university has also pulled all long distance charge backs from the departments and consolidated under the telecom account. The only exception is international calls. We have saved clerical man power on both the accounting and telecom side as most of the paper work has been eliminated. 6. Use student workers for some of your tasks. We have increased using our student workers for various tasks. These tasks include - audio sound engineers, level 1 help desk, low level system configuration, web development and design, assisting faculty on power points and simple blackboard questions, student tech support, etc. 7. Create a printer and paper contract. You have to be very careful as some of these contracts are very tricky, but you can get great deals on toners and paper. 8. Charge departments for tech support after 15 minutes of 'free' time. While we are NOT doing this at PLNU, I have seen this done. 9. Charge the departments for A/V support on events. You have to be very careful what and how much you charge. You don't want the departments to skimp on the event by not asking media services to help, then the even has is not representative of the image of the institution. Good luck, Sam Young CIO Point Loma Nazarene University
Kyle is very articulate in stating my thoughts.  I've found that charge backs are really a way of reallocating fixed resources, with the overhead of processing the reallocation.  For our university, we've not found that to be cost-competitive with external vendors, and we very much lose the partnership aspect of what we do.

Theresa

The only valid use I see for chargeback is an easy way to control waste. We charge a one time $150 per data drop install. Researchers ask for 10 drops for their lab but when given the price they often decide they only need 2. Steven Conway ________________________________________ From: The EDUCAUSE CIO Constituent Group Listserv [CIO@LISTSERV.EDUCAUSE.EDU] On Behalf Of Theresa Rowe [rowe@OAKLAND.EDU] Sent: Friday, May 25, 2012 6:34 PM To: CIO@LISTSERV.EDUCAUSE.EDU Subject: Re: [CIO] IT Charge backs Kyle is very articulate in stating my thoughts. I've found that charge backs are really a way of reallocating fixed resources, with the overhead of processing the reallocation. For our university, we've not found that to be cost-competitive with external vendors, and we very much lose the partnership aspect of what we do. Theresa
I split out pass-through costs from charge-backs for internally funded operations.

We outsource all low-voltage wiring.  If a unit wants a new network drop, that is outsourced work.  We handle the coordination and we JV (accounting entry) the actual cost of the invoice back to the unit. 
Nearly all of our business analysis work for our ERP is outsourced.  We do the RFP to select the vendor and we handle the Purchase Order.  All the individual visit costs are JV'd back to the unit requesting the work.
All of these cases are project-by-project.

We think of these a pass-through costs, as we don't add any surcharge.  We think of charge-backs as looking at something that is internally funded through our general fund budget process, but then charging back to the unit, perhaps with a surcharge.  This is something we do not do.

Theresa

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Message from dewittlatimer@gmail.com

All -- just a couple of random thoughts that from my neck of the woods (and while I have some time on my hands on this long flight).

Knowing what a service costs to deliver and how you chose to recover those costs are two completely different things. Everything in this thread thus far (that I've seen) has been about cost recovery. But I think we're perhaps missing the essential point. 

Establishing the true cost (and I mean a fully weighted cost...no tricks or gimmicks) of a service should be the first step in the process. How you chose to collect is the secondary conversation. Even if you chose to centrally fund services, having a robust cost model in place that grows resources at a pace commensurate with growth in usage is invaluable. Without such a mechanism, you're just another hat-in-hand person at the budget table trying to justify why you over them. And unfortunately, not all money is the same color at bigger schools. You need to have mechanisms in place that allow users to pay for something through other sources. Otherwise, decisions about resource allocation are being made more at the macro level once a year and not at the micro level by individual users. 

This is usually where you have a conversation about risk. Central groups are good about recognizing risk and baking those costs in (sometimes we're a tad bit too overzealous at it). And yes, users are not so good about recognizing risks in all the forms they may take on. Having rigorous standards (with teeth) is essential in such a free-market model and the lack or standards is often a fatality in highly centralized service models. After all, we know what we're doing centrally...we don't need to document anything, now do we?

Likewise, you need to be understand when to downsize, outsource, and yes, even eliminate services and be willing to reallocate resources where needed. Usage and cost metrics are essential. Centrally funded models have a tendency to create false economies and give a false sense of value. Highly centralized models have a tendency to grow grow grow without much falling off the table except in times of dire economic constraints.

Play this mental exercise with me, if you would. If students were having to write a check out of their pockets each and every month for landline phone service in the dorms, how much faster do you think their (the landlines) demise would have been? The students would have voted with their wallets much much sooner than the epiphany we all started having here recently. This is where I usually here some polyanic statement about users (particularly students) not being able to value the true cost of a service or know what they need or don't need and when they need or don't need it. 

Capitalism 101 -- Anything that is free (or has the perception of being free) is inefficiently allocated and utilized. The users need to know exactly what a service is costing the institution as if it were their own money irrespective of funding mechanism. Moreover, you must give users an easy mechanism to enter and exit the market. Just like the dorm landline comment above, I suspect that landline service in fac/staff offices is seeing an extended life because we (central IT/telephone service in this case) don't always make it easy to get rid of a service. Again, play that mental exercise of a department chair or faculty member having to make monthly choices between this or that in these tight economic times. 

Centrally funded models also have a tendency to emphasize the transactional at the expense of the mission critical. Service departments like Central IT need to efficiently and effectively allocate limited resources to those areas that are true core differentiators.  All other services are candidates for outsourcing (and yes, sometimes even elimination). And if we're doing a good job at fully costing our service, then we can adequately compare when the open market is indeed cheaper. 

Now agreed, there are some common good services that are best centrally provided. But these have a tendency to be more utilitarian in nature. For instance, IP transport is a common good. It's the high-tech municipal water or natural gas system. But note that you still get metered and charge for the amount you consume. And in deregulated markets, you can even chose who sells you the commodity. And also agreed, developing robust cost models is hard and expensive work. Not every service is a candidate for such an approach. 

Now I'm sure that I'll tick off many of my brethren out there, but sometimes I get the sense that we're taking the easy way out when we push central funding/head-tax models, not because it's right or efficient, but just because we don't want to compete in the cut-throat world of free market economies where our services (and ultimately we, as service providers) are constantly being evaluated by our users. Perhaps we just inherit this trait from the mother ship...dunno.

Now I'm going to sit back and wait for the first Obama vs. Romney vs. Ron Paul symbolism to be hurled my way :-)

best,

-d






Message from dewittlatimer@gmail.com

All - probably should have closed a little less provocative than I did. Apologies to those who don't know me well enough to take me with a grain of salt (and shot of tequila sometimes). 

The point is that while central funding models have a certain degree of appeal in their simplicity, just recognize some of the pitfalls that can come along for the ride. 

All my best...

-d <gathering no moss>

On May 28, 2012, at 8:24 PM, Dewitt Latimer <dewittlatimer@gmail.com> wrote:

All -- just a couple of random thoughts that from my neck of the woods (and while I have some time on my hands on this long flight).

Knowing what a service costs to deliver and how you chose to recover those costs are two completely different things. Everything in this thread thus far (that I've seen) has been about cost recovery. But I think we're perhaps missing the essential point. 

Establishing the true cost (and I mean a fully weighted cost...no tricks or gimmicks) of a service should be the first step in the process. How you chose to collect is the secondary conversation. Even if you chose to centrally fund services, having a robust cost model in place that grows resources at a pace commensurate with growth in usage is invaluable. Without such a mechanism, you're just another hat-in-hand person at the budget table trying to justify why you over them. And unfortunately, not all money is the same color at bigger schools. You need to have mechanisms in place that allow users to pay for something through other sources. Otherwise, decisions about resource allocation are being made more at the macro level once a year and not at the micro level by individual users. 

This is usually where you have a conversation about risk. Central groups are good about recognizing risk and baking those costs in (sometimes we're a tad bit too overzealous at it). And yes, users are not so good about recognizing risks in all the forms they may take on. Having rigorous standards (with teeth) is essential in such a free-market model and the lack or standards is often a fatality in highly centralized service models. After all, we know what we're doing centrally...we don't need to document anything, now do we?

Likewise, you need to be understand when to downsize, outsource, and yes, even eliminate services and be willing to reallocate resources where needed. Usage and cost metrics are essential. Centrally funded models have a tendency to create false economies and give a false sense of value. Highly centralized models have a tendency to grow grow grow without much falling off the table except in times of dire economic constraints.

Play this mental exercise with me, if you would. If students were having to write a check out of their pockets each and every month for landline phone service in the dorms, how much faster do you think their (the landlines) demise would have been? The students would have voted with their wallets much much sooner than the epiphany we all started having here recently. This is where I usually here some polyanic statement about users (particularly students) not being able to value the true cost of a service or know what they need or don't need and when they need or don't need it. 

Capitalism 101 -- Anything that is free (or has the perception of being free) is inefficiently allocated and utilized. The users need to know exactly what a service is costing the institution as if it were their own money irrespective of funding mechanism. Moreover, you must give users an easy mechanism to enter and exit the market. Just like the dorm landline comment above, I suspect that landline service in fac/staff offices is seeing an extended life because we (central IT/telephone service in this case) don't always make it easy to get rid of a service. Again, play that mental exercise of a department chair or faculty member having to make monthly choices between this or that in these tight economic times. 

Centrally funded models also have a tendency to emphasize the transactional at the expense of the mission critical. Service departments like Central IT need to efficiently and effectively allocate limited resources to those areas that are true core differentiators.  All other services are candidates for outsourcing (and yes, sometimes even elimination). And if we're doing a good job at fully costing our service, then we can adequately compare when the open market is indeed cheaper. 

Now agreed, there are some common good services that are best centrally provided. But these have a tendency to be more utilitarian in nature. For instance, IP transport is a common good. It's the high-tech municipal water or natural gas system. But note that you still get metered and charge for the amount you consume. And in deregulated markets, you can even chose who sells you the commodity. And also agreed, developing robust cost models is hard and expensive work. Not every service is a candidate for such an approach. 

Now I'm sure that I'll tick off many of my brethren out there, but sometimes I get the sense that we're taking the easy way out when we push central funding/head-tax models, not because it's right or efficient, but just because we don't want to compete in the cut-throat world of free market economies where our services (and ultimately we, as service providers) are constantly being evaluated by our users. Perhaps we just inherit this trait from the mother ship...dunno.

Now I'm going to sit back and wait for the first Obama vs. Romney vs. Ron Paul symbolism to be hurled my way :-)

best,

-d






Ø  Establishing the true cost (and I mean a fully weighted cost...no tricks or gimmicks) of a service should be the first step in the process.

 

Dewitt makes many interesting points, some of which I agree with and some of which I disagree with – and for most of his points I even tend to agree with them and disagree with them at the same time, impossible though it might seem. J  But I think the notion of establishing the true cost of a service is the point that is at once both the most salient and the most troublesome.

 

I’ve been doing this IT management stuff for a really long time. The older I get the more I become convinced that the notion of establishing the true cost of almost anything is a pretty meaningless concept. I think you can use generally accepted accounting principles to make the true cost of almost anything be almost anything you wish. I think cost accounting is an art, and a very black art at that, not a science. Accountants and MBA’s and people like that generally will argue the contrary position most vehemently. But when I have had the opportunity to have a quiet and private and reasoned discussion with accountants about it, most of them will admit privately that cost accounting is nowhere near as scientific and precise as they proclaim publicly.

 

I have many, many examples available to support my position, but for now I will offer up just two. One of them is IT related and one of them is not.

 

1.       The actor James Garner starred in a TV show back in the 1970’s called The Rockford Files.  Mr. Garners’s contract called for him to be paid a certain percentage of the profits from the show in addition to his salary. The trouble from Mr. Garner’s point of is that the show never made a profit, not one penny. And this was despite that fact that the show was a huge success and that it raked in millions and millions of dollars for the studio. According to a lawsuit filed by Mr. Garner, the studio used creative cost accounting to load the show’s costs with huge overhead costs such as (metaphorically speaking) the studio’s corporate jet and (not metaphorically speaking) the salaries of the studio’s high level executives. What was especially galling to Mr. Garner was that the show continued to rake in millions of dollars of revenue from syndication after its initial run was over, and during that time the actual costs associated with the show were essentially zero. Yet the studio’s books showed that the show was losing money and that because there were no profits, Mr. Garner was not owed a percentage of the profits.

2.       Back in the 1960’s, Gene Amdahl was the chief designer of IBM mainframe computers, and mainframes at that time were an extremely lucrative business for IBM. IBM certainly didn’t try to use creative accounting to prove that their mainframe business was losing money. But Mr. Amdahl did allege that too many of the company’s overhead costs were loaded onto the mainframe business and that too few of the company’s overhead costs were loaded onto the company’s other business. In the case of IBM, the overhead costs did literally include the costs of corporate jets. Mr. Amdahl ultimately responded by starting his own company that competed with IBM by building and selling competing mainframes that didn’t have the huge IBM overhead costs included.

 

What were the true costs associated with making The Rockford Files?  Was Mr. Garner correct or was the studio correct? What were the true costs associated with building IBM mainframes? Was Mr. Amdahl correct or was IBM correct?  I don’t know.  Which is my point. Nobody really knows.

 

Jerry Bryan

----------------------------------------------------------------------------------------
Jerry Bryan • Vice President of Information Services • Pellissippi State • 10915 Hardin Valley Road • P.O. Box 22990 • Knoxville, TN 37933-0990

Voice: 865 539-7127 •  Fax: 865 539-7653 •  E-mail: jbryan@pstcc.edu

 

 

 

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