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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.

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