Facing Higher Ed's IT Funding Future
Since the economic meltdown began, continued financial challenges have impacted how most higher education CIOs deal with IT funding. Maintaining IT services has become a struggle as revenues dry up, while costs are ever on the rise. Expanding these IT services with such limited resources and uncertain long-term budget growth is on everyone's mind among higher ed CIOs and has changed how many institutions approach reducing their IT costs.
"Here's the funny thing about IT, especially colleges and universities: There are really two or three flavors within higher ed. The first one is just the administration of the school--keeping track of registration, financial aide, transcripts. Then there's the whole other IT thing, which is basically the operation of the physical campus--building security and running the physical infrastructure. Then the third is academic computers, which is e-learning, delivery of courses, and instruction that takes place," said Frank Ganis of the Gilfus Education Group. "So in terms of IT funding, what's getting trimmed away is more the administration and the operations of the campus. Those budgets are being cut by mandate."
But not all IT funding is created equal, depending on whether you're a CIO at a public state university or an Ivy League private institution.
Moody's Investors Service is projecting a financial outlook for 2012 that is stable for a small number of the highest rated colleges and universities, according to the Jan. 23, 2012 report "U.S. Higher Education Outlook Mixed in 2012." But most public schools can expect to face continued financial anxiety, including state funding cuts, public pressure not to increase tuition, and "heightened public scrutiny requiring universities to operate more efficiently and to keep costs down," according to the report.
The 12th annual Educause Current Issues Survey 2011, which selected
the top-10 issues critical for "strategic success," placed funding IT at top of the list with the remaining top-nine all related to IT issues. According to the report, when it comes to funding IT, "the focus in the past has largely been on securing a stable and predictable level of funding. Although that remains a critical need, the IT leader now also needs to factor in the perspective of the campus community members and to show them the value of existing services and investments as well as the true cost of future decisions."
Coping with the New State of Affairs
"I will say that one change I have seen in the last couple of years is that we are becoming much more accountable for the cost of the IT services and being able to show the university what services cost and what the utilization is of them," said Terri-Lynn Thayer, assistant vice president and deputy CIO at Brown University. "So, we're getting more traction with some of that stuff than we ever did."
Thayer also served four years on the Educause Advisory Group on Administrative Information Systems and Services and was a co-presenter of "IT Funding: Coping with the 'New Normal,'" one of the sessions at the Educause 2010 Annual Conference back in October 2010.
Coping with "the new normal" means that both public and private higher education institutions need to consider ways to make their flat funding go further.
"I've taken kind of a combined approach to try to alleviate that impact or at least keep it as even as possible," said Michele Norin, CIO of the University of Arizona (UA), a public university.
One of those ways has been specific to their network area. Several years ago UA switched from a phone-type charging model where, just like the phone company, different departments paid a monthly fee and that subsidized their network.
"From that model we switched to a person-based model where now all units on campus pay based on the number of people in their units," said Norin. "Now if people counts are down, the funding goes down, and if people count goes, up the funding goes up."
Another pot of money is from the university, which is state dollars, a portion of that goes toward paying for things like the institutional applications, while money from Arizona Proposition 301, instituted some five years ago, goes toward research-type projects, with a portion funding their high-performance computer needs.
Thayer said at Brown University there's more interest in consolidation now. This is part of a move to being more accountable about where the costs are and is helping Thayer uncover wastefulness and put the spotlight on situations where the institution has duplication across campus. According to Thayer, "People are paying attention now when we say, 'Hey, we have one of those here centrally and two other departments went out and bought one of those. Do we really need three?'"
Getting out of the Hardware Business
In general, the cloud business model today is based on multi-tenant usage of offsite digital storage and applications rather than having the IT department deal with stacks of hardware that can become outdated overnight.
"So not only do we expect it will be ultimately cheaper, we expect it to be a better experience for us and our users," said Thayer.
Of course the key word here is "cheaper," and that is music to the budget ears of many college and university CIOs. In fact, by getting out of the hardware business, IT departments are finding their staffing needs change as well by requiring less tech maintenance people.
"We were on of the first research institutions to move everyone to Google, not just students, and did it several years ago," said Thayer. "We are very aggressively adopting a Cloud strategy in that we have signed on with Workday and we are also looking at some of the things they plan to do with it. That's our approach, and that's how we plan to ring more out of the money that we have."
"We haven't made the leap yet," said Norin, who noted that UA is still in the planning stage. "Where we're starting to see more movement with regards to Cloud really is in the individual units. We've had some research projects go out and get some SPU time on Amazon Web Services."
What the UA is considering is how they can establish a service like the Cloud on the behalf of the university that would leverage the same kind of service, but with some particular characteristics that would lower what some perceive as a risk around that kind of service. "So it would be like our own mini portion of that kind of Cloud service that the campus would use, said Norin.
"When you look at the subscription price and what type of people you'll need on your end, it sure seems a lot cheaper," said Thayer. "I'm sure there will be some surprises for all of us along the way with various things that don't turn out exactly the way we hope them to be with some of these Cloud models."
The Student IT Fee Option
A Jan. 17, 2012 Educause research bulletin, "Funding-Model Archetypes for Central Information Technology Functions," released the results of a recent survey related to funding models for IT. The bulletin profiled "institutional archetypes" for IT funding sources with a particular emphasis on highlighting student IT fees.
"For services that are specific to students, several years ago I instituted an IT fee that students pay that becomes the funding source for products and services that are important to students, like wireless, online courses, and some software packages that a lot of students use," said Norin at the UA.
Norin said that it's what's called a "mandatory fee," of which there are several other types to cover a variety of activities on campus.
"Many schools, I wouldn't say every school, are structured that way," noted Norin.
On the other hand, schools in Brown University's peer group have reasonably stable resources.
"We're not going that way at all. Part of it is because we don't think that with the type of school we are--if you think of it as the product we are selling--it's the kind of thing where we really don't want to nickel and dime the students for fees," said Brown's Thayer. "But I can see why my friends at state schools are somewhat desperate and are turning to those kinds of measures."
Leveraging Research IT
"The way the economic downturn has affected the different types of schools is really quite different, said Thayer. "Our endowment is really the biggest issue, making sure that we're still able to grow it and draw off of it in the way that we depend on. But as a research institution, the other economic driver we have is all the research dollars."
Those institutions that regularly score large research grants or get funding for ongoing, long-term projects are in a unique position
"Sometimes there's a line item for IT. So if they know in their grant that they have to store data somewhere, then sometimes they will designate dollars for the servers and the software and maybe personnel to support it and manage it," said Norin.
The University of Arizona is one of those institutions in a unique position. Among the many research projects, the university has been involved in almost every NASA planetary exploration project since 1958. One high-profile space project was the $325 million Phoenix Mission, launched in late 2007. That project involved the largest single research grant in UA history. Because the two Mars "rovers" of Phoenix were controlled from the UA campus' "Mission Control" rather than from a NASA facility, the special needs for IT infrastructure were intense. And UA is still benefiting from that IT infrastructure leveraged with ongoing NASA projects today.
"There's a huge dependency on having a big 'pipe,' so we had to make sure that our network infrastructure could support the data coming down off the vehicles onto our computers and then from our campus to NASA and the public with pictures on their Web site," said Norin. "They carved out dollars from that grant to make sure they had the right computers and servers and things like that."
Pushing Ahead
To deal with flat or waning budgets, some public higher education institutions are attempting to recruit students that pay the full tuition, such as international and out-of-state students, as well as increasing tuition in general. Meanwhile, some
private institutions are seeking more corporate partnerships and donor gifts and are also increasing tuition. And both are chasing more corporate and research grants.
But the future of investment in higher education IT will have to factor-in students' resistance to tuition increases, as well as grant organizations, donors, and state governments clinging tightly to their limited resources, according to Moody's. At the same time, higher ed institutions remain under rising pressure to clearly distinguish their own schools as a "unique products."
"I would say the least stable aspect of the equation has really been the state funds because as an institution, that's where we've taken the cuts," said Norin. "So that's what's forced me to look out and say, 'Okay, how can I re-package this so I have an opportunity to pursue different funding sources?' From a development side, I have not had success to convince an outside investor to come in and invest in the IT, and I don't know many schools that have, though there are a few exceptions."
Norin said that as the state funds go down, UA has to make-up for that in increased tuition.
The National Association of College and University Business Officers has weighed in on the issue and posted some basic cost-saving ideas for IT on its Web site. Among the suggestions are:
- Share training on administrative software with similar institutions;
- Use a third party for hosting your server, which could save a staff position;
- Switch to virtual servers.
Above all, CIOs should stay positive and resist obsessing about the unpredictability of IT funding in the immediate future. According to the 12th annual Educause Current Issues Survey 2011: "CIOs need to continue to embrace the excitement and magic that comes with information technology, but finding the right justification for funding will be a challenge in the visible horizon."
"While it's not the best of times, it's also not the worst of times," said Thayer. "We had a moment where things got better, and then it looked like things were going to get worse again. Honestly, I think they've kind of leveled out."