Administrative information technology forms the core of an institution that is functioning efficiently and is thriving. However, the cost of these systems is also growing. How can institutions stem these expenses? In a thought-provoking roundtable discussion, four CBOs discuss whether this can be accomplished and how institutions can maximize the value of the administrative and related IT.
“If I had a crystal ball and could look 10 years down the road, I would say that many small- and medium-sized universities will move their computer centers to the cloud, allowing vendors to perform basic operations, including disaster recovery, security, backup, patches, fixes, and updates,” predicts Roger V. Bruszewski, vice president for finance and administration, Millersville University, Millersville, Pennsylvania. “The universities will focus attention and resources on providing services to the front-end user.”
He explains that his institution’s financial and HR systems are already housed in a private cloud with 13 other institutions and that student and advancement systems will soon join them. “I see us slowly scaling down our back-office operations,” he says. “The economics of higher education are driving us to a lower common denominator. I don’t see how we can survive if we continue to duplicate multimillion-dollar capital projects when they can be scaled to another location.”
What is the real value of administrative IT systems?
Bruszewski: I assume you are referring to the standard enterprise resource planning [ERP] system, which entails financials, HR, student services, and alumni development. In the perfect world, our administrative systems would be sufficient and robust enough to make the university work in a highly efficient and effective mode, being able to collect money, bill students, award financial aid, and track those dollars. The trick is getting them to run efficiently so we can keep our costs to the absolute minimum.
Gentzler: If you don’t have a robust and integrated system in the admissions and financial aid area, for example, it could impact your ability to attract and retain students. If you don’t have an effective human resource/payroll system, it doesn’t allow you to adequately manage what is probably your largest institutional expense, and to pay your employees in a timely and efficient manner.
Woody: That’s true. We are using technology to recruit students, maintain academic quality, and keep a level discount rate.
Perkins: The value to the institution is directly related to the services they provide to our students—our customers. We’re one of 19 community colleges in New Jersey. If we don’t provide good service, our students will go elsewhere.
What factors influence your decision to buy administrative systems?
Gentzler: Cost versus value. Will the product and functionality meet the needs and expectations of the university? What is the annual cost of maintaining it? What institutional support is required? What expertise is required? Is it centralized or decentralized? What is the anticipated return on investment?
Perkins: We consider short-term, immediate, and long-term value, as well as how many people will be affected by an increase in service. For example, will 30 percent of our students be able to immediately take advantage of this new system, or will this implementation grow slowly without an immediate jump in student satisfaction?
We also look at purchase price, annual maintenance, and savings of employee time, as well as the ancillary costs involved. Many administrative software systems have differing requirements for platforms or levels of operating system. Do we have a supportable infrastructure? How often does the vendor do upgrades? What kind of sustainability can we expect? The window used to be 7 to 10 years. Now we’re lucky to get five good years without having another major investment. The rate of change has forced us to make these decisions more regularly.
We in community colleges often look to other institutions, particularly the heavy hitters in technology, to get a hint about the direction in which they are going.
Bruszewski: Service. Efficiency. How easy is it for the user on the other end to get into the system and make it work? Ease of use is very important.
We just moved our telephone system, which is voice over IP, from our own switch on campus to the cloud, realizing a savings—or cost avoidance—of about $1.4 million. Our old switch had come to end of life, and we had to do something. Buying a new switch was $2.3 million. Moving it to the cloud was $800,000. We avoided some cost and did so without disruption to our end users.
Have you seen an increase in efficiency because of your investment?
Bruszewski: That’s the question of the day. Some people ask, “What’s the return on investment?” I’ve been doing this for 37 years, and I know no administrative system that pays for itself. The cost is the cost of doing business. In other words, you have to be able to compete. You have to be able to make it easy for students to access information. A lot of it is cost avoidance. A lot of it is service. Administrative services can be very, very expensive. But run right, they can create efficiencies for the workforce.
For example, 10 years ago 83 to 85 percent of all procurements were $500 or less. Today, we use procurement cards. A person makes a purchase with a university credit card, and we process the paperwork. I used to need an accounts payable office that was five people strong. I now have two people. The process picks up much of the labor.
Another efficiency we look for is handling data. Not so long ago, the big hassle was putting data into the system. Now we do admissions applications online. The student fills out the application. We don’t have to pay anyone to type it in anymore.
Are the costs of administrative IT systems getting out of hand?
Woody: Not in my judgment—at least at my institution. The important issue is not the actual cost, but rather,“What do you get out of the investment?” At the University of Denver, we have very good administrative systems for transactional processing. Great administrative systems will not attract students to our institution, but their reliability allows us to focus on our primary mission, which is education.
Perkins: From my perspective, it’s only natural that technology costs go up because the breadth of services is expanding and improving.
So what justification should be required for IT-related proposals?
Bruszewski: It varies from institution to institution. At our institution, I’m currently doing CIO and CFO functions. For the telephone proposal, I showed to our president’s cabinet the difference between running it in-house and running it outside, the costs versus benefits, and the period of time to implement. The cabinet approved it. In larger institutions, there may be many more layers.
Perkins: We’re so good at being territorial and building empires at colleges and universities. Logically, what should happen is an institutional review by people who understand software and the college’s operations. It’s also helpful to understand what other institutions are doing so decisions aren’t made in a vacuum. Changes should be evaluated by a group that crosses traditional lines.
Woody: Here’s the issue I see. People who have historically defined where money should be invested have often been associated with transactional processing. For example, they might work in the registrar’s office, the bursar’s office, or the controller’s office, and they have counterparts in the technology services area. That orientation is fine, but it doesn’t address the strategic issues that are at the heart of what differentiates the institution. We need to evolve from a transactional processing orientation to ask questions like, “How do these proposed systems and investments help solve the strategic issues faced by the institution?”
The degree to which information technology can be used in a more strategic way should be the criteria on which decisions are made. That hasn’t happened as well as it must in the future.
What happens when institutions fail to invest in and maintain administrative systems?
Gentzler: You risk losing your competiveness in the marketplace. If you don’t have the technology and administrative systems support, you can’t deliver over time and the sustainability of the organization will erode.
Perkins: At Middlesex, we haven’t had the funding, so we’re a couple of versions behind. We’re starting a project in the next several months to reassess our use. We understand we’re not that uncommon. The college has not had sufficient resources to perform the somewhat time-consuming and costly review.
Bruszewski: When institutions fail to invest, they cannot compete effectively. For example, here at Millersville we were not doing a lot of online admissions and recruiting. Two years ago, we started to see a drop in the quality of students applying to us. We found out that other institutions had very sophisticated prospecting and recruiting software that made it easy for students to apply, track the admission process, and get registered. We invested in that. Now our numbers are back up—
actually a little better than four years ago.
Because we weren’t staying current, we were losing admissions.
Is the concept of shared services feasible in institutions?
Perkins: Absolutely. I think they can work, depending on the individuals and institutions involved. I was at an institution where we processed transactions for another institution. It makes a lot of sense. Besides saving money, the redundancy in a shared service situation provides comfort when you are in an institution of my size. For bigger institutions, it’s a different situation. I can think of only one disadvantage: less control.
Bruszewski: The Pennsylvania System of Higher Education has 14 institutions—from the largest of 14,000 to the smallest of just under 2,000—that share a finance and HR system. The box is located on Millersville University campus. All 14 schools pay their prorated share based on their size, enrollments, and budgets.
Three people in the system office handle the treasury and financial functions. The treasury function for my university alone would require one or more people. Multiply that by 13. We’re doing it with three for all 14. There are real economies you can get hold of.
In bigger schools with enrollments of 30,000 to 50,000, you may find different systems in each college. The college of science may be different from the college of pharmacy from the college of liberal arts. Sharing payroll and registration costs can be very beneficial. You also have institutions with two or three satellite campuses that share systems. Then there are consortiums of private schools that get together.
Shared service can work when everyone is on the same timeline, hardware, software, and chart of accounts. It’s very easy for the system to roll up data because everyone is playing by the same rules. The consistency across the board creates an economy of scale.
I think you will see more sharing. It could be small schools coming together. It could be bigger schools helping smaller schools. My fear is that when you share, you are only as good as your weakest link. You have to worry about weaker schools pulling the technology down because they can’t keep up. I’ve seen it happen in the past.
Does everyone agree that we’ll see more institutions transition to the cloud?
Perkins: Yes. Moving to the cloud can be cost-effective, particularly for those of us who can piggyback on the leaders. The danger, as I see it, is the security-versus-convenience factor. Look what happened with Target. We’re all really sensitive about our data and how we process information.
Woody: I also think there will be more migration to the cloud, which has implications for internal controls. We have to consider not only our own controls but those of our provider as well. For example, who’s going to undertake the assessment, and what tools will they use? Will the cloud providers use the Statement on Standards for Attestation Engagements [SSAE] No. 16, Reporting on Control at a Service Organization? SSAE No. 16 is the authoritative guidance for reporting on service organizations—i.e., cloud providers in this context.
It will be an interesting future.
How can institutions maximize the value of administrative systems and related IT?
Gentzler: First, by comparing their own costs and outputs to other benchmark institutions to determine whether there is a potential for cost savings. Also, by taking advantage of full functionality of the systems that they own.
Bruszewski: Yes, take advantage of the features you buy. Don’t oversize. Don’t undersize. Use the features that enhance your campus.
Also, don’t customize the software. Software modification is very expensive. Stay as close to off-the-shelf as possible. Instead of putting patches and fixes into a customization, you could be using these resources to advance the mission of your university.
Gentzler: Right. Customization drives up the cost of maintaining a system. The more you customize, the more costly to make changes and support the systems. We are moving toward developing standardized administrative software systems that will provide cost-effective functionality and the necessary level of responsibility.
Isn’t it possible to reengineer existing processes to reduce customizations?
Woody: We’re presently engaged in that. We’re looking at rationalizing our existing processes in the areas of reclassification of individuals, budget, accounting, procurement, and travel. Our goal in business-process reengineering is to take a hard look at transaction cycles and identify ways to be faster, cheaper, or better, leaving no sacred cows in the process.
We have asked an outside firm to assist us. Every solution we ultimately implement will be consistent with the culture of our institution.
Woody: No resistance yet, but concerns have been expressed. We’re examining how nonacademic services can be more efficient and effective. We would rather have more resources in the classroom related to the principal mission of the institution than supporting overhead. Sure, people are wondering, “How will this affect me?” But they understand that the process will make the institution a better place.
We’ve had responsibility center reporting in place for more than 20 years. People understand that the institution’s success is more important than individual success, and that we’re all in this together.
What about analytics? Who is maximizing the strategic value of the data collected by their administrative systems?
Perkins: Although we’re not there yet, we’re building the consistent use of analytics across the college.
Gentzler: We have some key dashboards, but we need to continue to develop this area. Organizations that don’t currently have analytics—or are not in the process of building the data infrastructure to help support and drive decisions—will become disadvantaged in the marketplace.
Bruszewski: We probably don’t do enough. We’re really starting to use analytics in the admissions and retention process, finding out where our students come from and their income levels. We’re paying a lot more attention to how many times kids go to a Web site before they apply. We’re relying more on Facebook and Twitter analytics than we were.
We also are starting to use analytics for facilities usage. For instance, if I took every classroom I have on campus and I were to fill every classroom to capacity for every hour from 8 a.m. to 8 p.m. five days a week, what is the maximum capacity I could have in enrollment? What happens if I added Saturday? Or Sunday? We also use analytics to track our carbon footprint and sustainability.
Of course, you have to have the systems to spit out the data.
How can business officers achieve a significant reduction in administrative IT costs?
Bruszewski: That’s a loaded question because you assume it can be done. I don’t think large IT savings are possible. Sure, you can make modest adjustments, but if you want effective mainstream administrative systems, you can’t expect multimillion-dollar savings.
However, you can streamline processes. We saved $600,000 the first year we went to e-billing because we’re not doing stamps and letters and envelopes and preprinted bills.
Woody: If you start with the premise of making a significant reduction, you are saying, “That’s my goal” without examining the institution’s current base or need for information. There’s no way I would be bound to an X percent reduction in administrative information technology resources without a lot more data. My institution may already be extremely efficient and getting great results.
Is your institution taking steps to reduce administrative IT spending?
Woody: No. I wouldn’t say our goal is to reduce IT spending. The point is to spend our resources the most efficiently to produce the greatest effect. We’ve increased the expenditure line for technology services because we want that function to be robust and adequately resourced.
Bruszewski: We’re looking at trying to reduce our capital investments to keep our main administrative systems working by moving them to a service provider in the cloud. For instance, I’m looking at a $5 million bill to redo my computer center building. Do I really want to do that? Would I rather have somebody else take that over? Our goal is cost avoidance. How can we provide more and better services with the same amount of money?
I’ll tell you a story. I put in a system once in a school. The system was up and running, and my boss asked me, “How come we’re not saving money?” My reply: “Who told you we were going to save money?”
The more data the systems provide you, the more information you receive, the more you want from that system. It’s like a drug. The dollars never go down because you keep asking the system to do more and more.
Perkins: We’re just trying to manage the increases.
Any other advice for business officers who are looking at their IT investments?
Gentzler: Yes, take three steps. First, ensure that you have support from the president and senior management on administrative IT decisions. Second, be willing to go with standardization instead of customization. Third, be willing to identify processes or tasks that can be eliminated through the increased use of technology, so savings can be identified and become reality.
Perkins: We have to learn how to implement administrative information technology changes more quickly and to be more adaptable to changes already out there. We have to push for changes as they happen. We’re used to sitting back for several years and implementing what sticks. We can’t provide good service to our students when we do that.
We sometimes get hung up in the bureaucracy rather than stepping back and asking, “What are we trying to accomplish, and what’s the easiest and best way to do it?”
One thing I do know: What we need right now is not what we will need even a year from now.
Woody: My advice: Bring together the critical perspectives of three C-level positions—chief business officer, chief information officer, and chief academic officer. If you don’t have a process that brings those three unique perspectives to bear, then you’re not likely to make the best decision.
Institutions are aware that we are facing a headwind. Every day we read about economic issues confronting higher education in the Chronicle and the Wall Street Journal. Every day we are reminded that we need to be operating more efficiently and focusing on our value proposition. How are institutions responding to that set of challenges?
We’re trying to improve efficiency, whether through administrative systems or processes, and that is a good objective, but that’s not where the game will be won. It will be won by institutions also becoming more effective in accomplishing their primary missions. Effective administrative systems provide critical support for the accomplishment of that primary initiative.
MARGO VANOVER PORTER, Locust Grove, Virginia, covers higher education business issues for Business Officer.