The Enterprise: Open Source Finance Is Here


Why some big players are getting ready to trust their finances to a community-owned software system.

THE MALAYSIAN WORD kuali (“wok”) may soon be a catchword in campus business offices, thanks to a community software development project simmering on the stove and soon to be served up to higher education.

This spring, a $2.5 million grant from the Andrew W. Mellon Foundation gave a boost to the Kuali Project’s (www.kuali.org) development of a new open source financial system for colleges and universities. The founding partners, Indiana University, the University of Hawaii, the National Association of College and University Business Officers (www.nacubo.org), and the r-smart group (www.rsmart.com) have been joined by four additional partners: Cornell University (NY), San Joaquin Delta College (CA), Michigan State University, and the University of Arizona.

Is the time ripe for open source software to move into the core areas that have traditionally been dominated by the large, proprietary software vendors? Recent shakeups in the commercial software world—such as Oracle’s (www.oracle.com) takeover of PeopleSoft (www.peoplesoft.com)—may have helped pave the way for a more community-based approach to critical applications. The progress of the Sakai Project (www.sakaiproject.org), a community effort to develop a course management system, has attracted wide attention.

We asked Brad Wheeler, associate VP of Information Technology at Indiana University, to make the case for Kuali. Wheeler is also the chairman of the Kuali Project Board.

We seem to have passed a tipping point in the interest in open source, community-developed applications for higher education. Is that what you’re seeing? At Educause 2004 in Denver, there was so much interest in open source and Sakai that even we were surprised. Sakai changed the atmosphere surrounding open-source application development in higher education. But I don’t think the real story is about open source or about particular products. What’s really momentous is the pace at which the higher education community is coming together to meet its own needs. We are taking a more active role in producing software that is tailored to us and produced under our terms, as we did with Internet2 (www.internet2.edu) and National LambdaRail (www.nlr.net). Sakai and Kuali are just the two leading projects demonstrating the model for software.

What motivates interest in a project like Kuali? There are two principle drivers: customizing to higher education needs, and retaining control of our own destiny through community ownership of the intellectual property rights. Maybe accounting is accounting, but managing multi-year grants or state procurement law, or the need to look at financial reports over different periods of time or different collections of units, really changes the picture. The needs of higher education are not the same as corporate America. And no two institutions are the same: Authority, governance, and budget processes differ hugely, and each institution needs the ability to adapt to changing needs over time. A new president, for example, might move an institution toward either responsibility-centered management, or centralized budgeting and control.

With an open source option, there's a competitive market for peripheral services—and sane rates.

But isn’t Kuali based on financial software that IU developed for its own use? Can other institutions adapt and customize it? Aren’t too many things hardwired into the program? Kuali is based on the overall design of the IU software, not on the software itself. If we started with a blank piece of paper, the project could not be completed at this price tag. We’re moving the proven design from an old technology base to a new one. Of course, everybody has wish lists. So an impressive Functional Council is working on the requirements, from both public and private institutions, with a separate set of representative specialists who scrutinize each module. Our architects and senior developers from all the institutions have been meeting intensively to work out the Kuali nervous system, abstracting the business rules and deciding what should go in which layer. A strength of the project is having input from the seven founding institutions.

What resources must an institution dedicate to adopting Kuali? D'es Kuali call for more internal resources than a traditional commercial application? As is, Kuali costs less than a commercial product. It takes a certain amount of expertise to install any software, and you can hire, rent or outsource that expertise, or even use an ASP [application service provider] model and buy the cycles “turnkey” from someone else. One advantage of open source is that it provides a marketplace for buying those services. You have more choices, not just the companies which have been certified in a product by that product’s vendor. A number of commercial firms are now interested in providing Kuali services such as hosting, managing Unix boxes, or even providing a Tier One facility. Or, you may want to do all that yourself, but rent the specialists you need on an as-needed basis. Now that there’s an open source option and nobody has the intellectual property advantage, there is a competitive market for these services, and the rates will be saner.

Will smaller institutions be able to use Kuali? Kuali will work for schools in the smaller Carnegie classes. The core of Kuali is the General Ledger module. Transactions are run against that module and it supports reporting, routing approvals, and the Kuali workflow. A small liberal arts college with 2,000 students can keep the books even if it d'esn’t need a sophisticated procurement process or grant tracking right away.

What other licenses do you need to run Kuali? Do they diminish the independence from commercially licensed software? Big schools are implementing Kuali on Oracle, but the software itself is being written with open database interfaces. It will be able to use MySQL (www.mysql.com) or DB2 (www-306.ibm.com/software/data/db2), for example. As far as the Java tools (www.sun.com/java) are concerned, the evolution of the Java programming language is still in the hands of Sun. But there are no licensing fees tied to Kuali.

Must an institution be a member of the Kuali group and contribute to the development project in order to be able to use the software? No. It is economically efficient to want to interact with the community, to participate fully in the collective, but nothing is required. Just like Sakai, Kuali is based on an OSI-approved license agreement. We basically say take the software, live long and prosper.

What are the auditors going to say when I tell them we are switching to open source financial software? That’s a great argument for us. Indiana University has extremely rigorous financial controls and internal audit. Passing the internal audit scrutiny of Cornell, Michigan State, and San Joaquin Delta College in California, which is a tough state, should help bolster confidence that the software is being looked at carefully from the auditing standpoint.

If Kuali and other projects like it are demonstrating that the community development model can work for higher education, will we eventually see an open source SIS system, or maybe even a complete higher education ERP system? Is a student ERP next? If somebody chooses to take the model and do that, great. Indiana University is not interested in developing an open source student or HR system at this time. Open source is not a religion for us—it’s economics.

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