Originally published 3/21/12
Until 2008, higher education was relatively insulated from the economic pressures facing most other sectors in the economy. This industry is now grappling with the challenges of an increasingly competitive marketplace: lower returns from endowment investments, skyrocketing student loan debt levels, and growing pressure from students, parents, and even the federal government to justify the cost of tuition in light of weak employment prospects for graduates. Despite these pressures, most campuses are slow to change their underlying model of doing business. The growth of online education is an obvious exception, but it is not a panacea for the structural challenges that lie ahead.
1. Quantify the Impact of Different Budget Options
The finance office wants to see a net percent reduction in your proposal. You should associate each budget level with a quantified service impact. Examples include: less service desk hours; closing the student support center in the library on certain days; increasing resolution targets from 4 days to 7 days per request; charging for evening and weekend event support; eliminating semester start-up and orientation overtime; requiring all non-critical issues be submitted via email; accepting system outages over evening and weekend periods; maintaining 300 more 7-year old computers; etc. Be honest and candid about the trade-offs and communicate them in a way that matters to your organization. Are students a high priority? Is research? If so, communicate the impact accordingly so that senior management can make an informed decision and prepare.
2. Develop a Communication Plan Before the Lowered Service Levels Go into Effect
Usually, fiscal year budgets are set one to three months ahead of time. Chances are your group did not get all of the funding you requested. Most groups do not take that opportunity to pre-emptively communicate the impact to the user community ahead of time. Work with your senior management to develop a comprehensive plan. Key elements should include: a campus-wide memo from senior management explaining the financial drivers behind the reductions in service; targeted communications to students, faculty, and staff regarding changes to day-to-day procedures (e.g., use our FAQs on our self-service website); departmental liaison meetings to discuss the impact and set expectations; and reporting to track the impact on service delivery. That last point is often overlooked but extremely important. Organizations often miscalculate during the budget cycle. Estimates are, after all, estimates. Perhaps your campus will discover it cut too much on one area or not enough in another? Was the backlash from students over reduced lab hours worth the savings? Did your revenue from your pay for print service exceed expectations? Reporting helps the organization learn from its decisions and to get better about making the same type of decisions during the next fiscal cycle.
3. Make the True Cost of New Services Transparent Before They are Approved
Funding is often de-centralized in higher education institutions. As a result, many departments seek to use some of their funds to purchase IT solutions without considering the full implementation and ongoing support costs. Partner with finance and local department budget managers to educate them on a basic cost model. For every net new service added to the IT portfolio, what percent of operational budget must be allocated for ongoing support and solution management? Chances are, these departments are facing the same financial pressures and will re-evaluate the purchase if they know they will encumber a portion of their operational budget as a result. Repeat this mantra: Just because we can afford to buy it does not mean we can afford to own it. The most effective approaches involve using an agreed-to cost model based on the size and complexity of the proposed IT project to determine the total cost of ownership to the college. Tie this model to a cross-functional approval process to ensure that your organization is wisely investing its limited resources. Maybe that project that seemed like a good idea to the alumni relations department will end up costing the college more than the revenue it will likely generate?
4. Include Recurring Service Management and Support Costs into Project Budgets
One of the most neglected areas in project planning relates to activities focused on ensuring that the project delivers a sustainable and valuable service to stakeholders. The vast majority of expense to an organization for an IT solution it purchases and implements is incurred after the project concludes, over the long tail of the operational service lifecycle. However, most of the organization’s attention is focused on negotiating the purchase contract, monitoring the implementation statement of work, and ensuring that the project finishes on-time and on budget. If campuses applied the same level of scrutiny to the ongoing service management and supports costs, they would make more informed decisions early on in the service lifecycle. There is a natural tendency to lower the estimates of proposed projects to ensure they are approved. After all, everyone wants the new and improved solution. This practice can be counterproductive over the long run. It is much more expensive and painful for end users to rationalize a bloated and costly IT service portfolio after projects turn into full production services than it is to kill the idea in proposal state. Develop a cost model to include the following elements: training technical support staff, training end users, vendor management, lifecycle management, business process re-engineering associated with the new solution, self-service documentation, testing the downstream integration with other systems, and ongoing change and configuration management of the system.
5. Trim Your Service Portfolio
Many IT groups add to their service portfolio year over year without taking the time to figure out what services should actually be retired. Typically, most service retirements generate a wave of complaints from some segment of the user community. In light of tighter resource constraints, organizations should make this a formal part of their yearly budget review. Quantify your fixed and variable costs (even if they are employee capacity time) associated with these services. If possible, quantify the value of the service to the community. An alternative would be an easy to implement qualitative system (nice-to-have, critical, competitive advantage, etc.). If you involve key stakeholders outside of IT in an exercise where you prioritize your services in the portfolio and force them to come up with a defined amount of service cuts, you will get more buy in if your organization eventually chooses to act on those proposals. In addition, those tough decisions are likely to be more aligned with the strategic mission of your college. End users may complain, but it is hard to argue with the notion that IT is now focusing on the most important and valuable areas in light of less resources. Back up your plans with data and communicate regularly. If the postal service does end Saturday delivery, we may not like it, but we will probably get used to it over time without much real sacrifice.
In closing, given the increasing financial and competitive pressures most campuses are operating under, it is time to face the reality of trade-offs in IT service delivery and support. As IT managers, we rarely control the financial variables that can often be the most influential factors in determining whether we are perceived as successfully delivering service to the institution. Whether we like it or not, budgeting is a political activity; by proxy, so is service management.
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