Measuring Return on Technology Investments Is Hard Work
...but the rewards should be worth it.
There is an old saying in business, “What gets measured gets done; what
gets rewarded gets done repeatedly.” Unfortunately, there appear to be
few rewards to encourage college and university administrators to examine, in
a deep way, the financial returns on their technology infrastructure investments.
Instead, these investments are frequently talked about in terms of their intangible
value: “We want to have a leading IT program,” or “We need
a more coherent campus infrastructure,” or “We are trying to reduce
complexity.”
Worthy goals, all. But too little attention has been paid to the tangible
consequences of implementing large-scale business process solutions like student
administration systems, human resources systems, or finance systems. Why is
there so little motivation to examine financial or other “hard”
returns?
The answers, of course, are numerous. First of all, getting a handle on the
precise costs of these systems—even in terms of purchase and implementation
outlays alone—can be difficult, partly because projects of this type can
take so long to deploy. Also, while total cost of ownership calculations may
sound reasonably direct in the sales pitch, it can be challenging to put a boundary
around “total cost” out there in the real world. Plain and simple,
if you cannot measure the investment, it is going to be hard to measure the
return.
For this very reason, return on investment (ROI) is sometimes treated—by
providers and consumers alike—as a mere marketing term, and not as something
to be taken seriously. In fact, the higher education marketplace is so keen
to retreat from the idea of setting financial efficiency or gain as a legitimate
management goal in the context of large-scale technology investments that nowadays
the dialogue around returns is awash in still foggier—and comfortingly
less transparent—notions such as “value,” rather than return,
on investment.
However, because enterprise resource planning (ERP) solutions remain a top
concern for CIOs and other higher
education administrators—even as college and university budgets tighten—it
will only become more important for education leaders to learn to effectively
measure the benefits that their technology investments yield.
Show Me the Money
Benefits can be divided into “soft” and “hard” categories.
Among the “soft”
benefits are business process improvements in operational management and the
delivery of services to students and staff, such as:
- A shift to decentralized budget management that gives individuals
and departments much greater control over their budget management;
- An increase in recruiting yield with more effective targeting
of recruiting dollars;
- An increase in admissions productivity with more inquiries and
applications processed by fewer staff;
- An increase in financial aid productivity with more financial
aid applications processed with fewer staff;
- An optimization of course scheduling that allows more classes
and events to be scheduled with a smaller inventory of classrooms;
- A shift to Web-based financial aid systems that allow students
to submit applications, view and accept or decline awards, and view transaction
balances online;
- A shift to Web-based course registration that allows all course
enrollments to be transacted and all course grades to be posted online;
- A shift to self-service human resources systems that allows employees
to self-manage their paychecks, benefits, vacation, and sick leave accruals.
While these process improvement benefits are no less real than any “hard”
financial savings, the evidence pointing to them is largely anecdotal rather
than data-driven. Undoubtedly, there is a financial benefit associated with
each, yet administrators will have to undertake deeper analysis before they
will be able to assign dollar values to these improvements.
There are, however, two primary instances in which a dollar value or financial
benefit can generally be assigned to system-derived improvements:
- Budgetary savings from reductions in paper, print, and mailing
costs;
- Staff avoidance achieved by using process redesign to increase
transaction volumes while keeping staff levels flat.
Budgetary Avoidance
However real, these financial benefits tend to be modest relative to the total
cost of the investment. Occasionally, there can be significant “budgetary
avoidance” benefits, as well. For example, Texas Christian University
found that it benefited from the efficiency gains resulting from the implementation
of a classroom scheduling application from PeopleSoft.
Between 1999 and 2003, TCU’s Registrar’s Office was able to increase
by 33 percent the number of classes and special events scheduled, with only
a 10 percent increase in classroom space, while staffing levels remained constant.
Some of this efficiency gain came from the full utilization of previously unused
classrooms, but much of it came from optimizing the number of students per-class,
scheduling classes back-to-back, and more effectively locating teachers in their
own buildings.
The optimization of classroom scheduling has contributed to higher levels of
faculty and student satisfaction and, according to estimates by the Registrar’s
Office, allowed the university to avoid the need for 16 additional classrooms—the
equivalent of two new classroom buildings—at a projected cost of $40 million.
[See Eduventures’ 2004 study “Measuring Returns: Examining the Financial
and Process Improvement Impact of Student Administration, Human Resources, and
Finance Systems in Higher Education”]
Discovering the “Hard” Truth About Returns
Challenging economic times require rational economic decision making. For college
and university administrators, technology investment decisions are going to
require better performance measures. And for that to happen, those measures
are going to have to be rewarded.
While reduced printing and mailing costs and staff avoidance do have a financial
impact, it would of course take some time for these savings alone to recoup
the investments in these large-scale technology solutions. Clearly, these systems
are having a positive impact on business processes and services to end-users.
But the dollar value of these improvements is still unclear.
Over the past decade, the Internet has proven to be a truly transformative
agent of change. And administrators have clearly understood that Web-based services
make it easier to do business.
While many schools can point to recognizable financial efficiencies, there
is still more work to be done by department heads and business officers in calculating
the “hard” returns associated with decentralized budgeting and improved
recruiting, admissions, and financial aid productivity. When that happens, real
returns will yield real rewards.