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2014. DO NOT CIRCULATE. 1

Shared Services at UT:A Report on G.R. 14 (S) 3: In support of further study before implementation of the Shared

Services Pilot Program

Adam J. TallmanLinguistics Department

David VillarrealHistory Department

Graduate Student AssemblyThe University of Texas at Austin

Within an increasingly globalized and competitive economy, the Shared Services model

developed in order to minimize labor and overhead expenses within large and increasingly

complex businesses; the ultimate purpose of Shared Services has been to maximize

profitability.1Since 2010, Yale Daily Newsreports that at least 12 universities and over 350 global

businesses have adopted the Shared Services model.2 Why have an increasing number of

universities, including our own, chosen to pursue this corporate model? The primary writers of

this white paper, Adam J. Tallman and David Villarreal, prepared this report to help all

stakeholders, who value robust, democratic, and transparent governance at The University of

Texas at Austin, become better informed about the range of Shared Services experiences among

several peer and private research institutions nationwide. We attempt to lay out the range of

concerns our own institution faces regarding Shared Services with the main desire that

informed community members will speak up so that together we may advance a more honest

and forthright discussion about the impact that Shared Services will have on all the students,

staff, and faculty of The University of Texas at Austin.

1Bryan Bergeron,Essentials of Shared Services(Hoboken, NJ: John Wiley & Sons, Inc., 2003), 1-2.2Adrian Rodrigues, Shared Services Remains Controversial, Yale Daily News, Jan. 17, 2014.


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To begin, we start by explaining whatShared Services actually means. We followthis up with a review of the Shared Servicesexperience at other institutions of highereducation. This report culminates with a moredetailed examination of how UTs SharedServices planning developed.

In preparing this report, we used a rangeof publicly available sources. Indeed, one ofthe principal criticisms of Shared Servicesimplementation has been the often secretiveand non-public nature that characterizes theentire process from the initial planning stagesto implementation and further expansion.

Student-run campus newspapers typicallyprovided an important source of fact checkingfor official University pronouncements about

Shared Services, but we have also relied oncorporate literature, meeting agendas, notesgathered from public forums, non-publishedand published research studies, dissertations,recently released information on salaryinformation for UT and, as much material as

we could obtain in order to develop thisreport.

We are open to feedback and criticisms ofour work, and if you happen to encounter

material that would better inform this study,we would be happy to read it.

What i s SharedServ i c es?For a range of historical reasons between 1980

and 1990, the average cost of educating auniversity student in the United States rose threepercent annually.3This uptick in administrativeexpenses that had been transferred to studentseventually triggered public and legislative pressureto slow and eliminate drastic rises in year-to-year

3Robert Ovetz, Entrepreneurialization, Resistance and theCrisis of the Universities (Phd Diss, University of Texas atAustin, 1996). This thesis provides a detailed overview forwhy cost increased at UT.

tuition charges.4To manage rising costs,universities have implemented a range ofstrategies including across the board reductions,hiring freezes and layoffs. Beginning in the1990s, some educational systems and majoruniversities took more aggressive steps toimplement systemic changes to rein in budgets.5

This is where Shared Services comes into play.Shared Services represents the adoption of a

corporate business model into the academic worldof university life. A leading researcher onhealthcare and technology, Bryan Bergeron, MD,has writtenEssentials of Shared Servicesthat definesthe term as follows:6

Shared Services is a collaborative strategy inwhich a subset of existing business functionsare concentrated into a new, semiautonomous

business unit that has a management structuredesigned to promote efficiency, valuegeneration, cost savings, and improvedservices for the internal customers of theparent corporation, like a business competingin the open market.7

Other definitions abound, but the morecommon articulation of Shared Services is theconsolidation of non-strategic, support functionsinto a single organizational structure whichprovides support services to core business units.8

Corporate industries that utilize this strategytypically implement a Shared Service Centerwithin their startup phase, that is, during the firsttwo years.

The Shared Services Center operates like abusiness within a business. This creates a level ofsemi-autonomy within the center that operateswith staff personnel, mid-level managers, and adirector who runs the unit as if they were a CEO.Ideally, these conditions help the center tooperate like a private corporation that must

compete on the open market for business toremain successful.9 The staff workers provide

4Cathy S. Dove, The Shared Service Center: A Model for

University Efficiency? (PhD Diss., University ofPennsylvania, 2004), 10-11.5Dove, The Shared Service Center, 3.6http://bryanbergeron.com/about.html 7Bergeron,Essentials of Shared Services, 3.8Dove, The Shared Service Center, 34-35.9Bergeron,Essentials of Shared Services, 5-6.


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services that multiple units throughout theUniversity might require: informationaltechnology support, student services, humanresource operations, etc.

Supporters of Shared Services see afundamental need and inevitability to its adoption.Rowan Miranda, formerly the lead executive

tasked with implementing Shared Services at theUniversity of Michigan, said, Its the next logicalinflux of thinking in the business world broughtinto higher education.10After the Yale FacultyCouncil reacted against Shared Services inFebruary 2012, Vice President for Finance andBusiness Shauna King explained that sheremained convinced in the appropriateness ofthe model working for Yale.11At the University ofTexas at Austin, Vice President and ChiefFinancial Officer Kevin Hegarty said the campus

cannot afford to staff under the current model, [inwhich] everybody has a customized service, as adriving motivation for implementing SharedServices now.12

Corporatizing the University:UT as ZipCar

At a private, invitation-only annual summittitled Public Sector and Education Shared ServicesSummit: Pathways to Transformation theorganizing center known as Leadership for aNetworked World (LNW) of Harvard UniversitysKennedy School of Government routinely brings inprivate businesses along with public and educationalinstitutions to learn about the Shared Servicesmodel; in fact, a representative of UT System spokeat the conference in 2012.13

The same year, conference organizers invitedZipCar Vice President of Operations and ServiceQuality Dan Curtin to describe the Win-Win-Winsituation that his business model had developed for

10Gavan Gideon, Shared Services Gaining Ground inHigher Education, Yale Daily News, March 23, 2012.11Gavin Gideon, Shared Services Creates Conflict,Yale Daily News, Feb. 24, 201212Madlin Mekelburg, Faculty Council requests moreinformation about Shared Service, Daily Texan, Jan.28, 2014.13http://www.accenture.com/us-en/company/events/Pages/public-sector-education-shared-services-summit-2012.aspx

customers and ZipCar.14For Curtin, ZipCarrepresents the quintessential model of the SharingEconomy driven by a new generation ofconsumers who value experiences over assets.

However, an important question needs to beanswered: at what level, if any, should universitiesadopt corporate and business models to remedy our

own internal concerns? Further, what are theconsequences and limits of thinking about UTadministrative support personnel as interchangeableindustrial components, as ZipCars, if you will?

To many supporters of Shared Services, thefundamental ideas driving the business modelappear highly beneficial and well needed, but asmost University researchers know, theory does notalways work in practice. Thus the idealimplementation of Shared Services hardly evermanifests as successfully and cleanly as originallyenvisioned.

The following section of this white paper showshow the Shared Service model operates at several ofour peer public and private research institutions. Byadopting this model, many schools and universitieshave encountered controversy, faced the complaintsof uninformed constituencies, and often have beenforced to recalibrate plans.How Does SharedServ i c es Real lyWork?

Several universities have undergone SharedService implementation or services quite similar inpurpose and function. Currently, the University ofCalifornia Berkeley, the University of Michigan at

Ann Arbor, and Yale University represent threecampuses similar in research profile or size to TheUniversity of Texas at Austin. The Vice Presidentand Chief Financial Officer for UT Mr. KevinHegarty has, in fact, pointed to the University of

14http://community.lnwprogram.org/insights-articles/zipcar-and-sharing-economy-win-win-win-model;http://sharedservices.lnwprogram.org/sites/default/files/Collaborative%20Consumption_Dan%20Curtin_Zipcar.pdf


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Peer Inst i tut ions: Shared Services at a GlancePlease note: Actual savings have not occurred; they have only been revised downward.

University Project Name Total ProjectCosts

OriginalProjectedSavings

RevisedEstimation ofSavings

FirmRecommending SS

University of

CaliforniaBerkeley

Operational

ExcellenceInitiative

$75

million/yearbeginning inF2016

$14

million/year

Bain &

Company

University ofMichigan at

Ann Arbor

AdministrativeServices

Transformation

$17million/year

$2-3million/earlyyears; $5-6million/lateryears

Accenture

IndianaUniversityBloomington

Shared ServicesInitiative

$11.7million/year

Unclear N/A (IU)

University of

Texas atAustin

Shared Services $30-$40

million/yearafter year 4

Unclear Accenture

University Firm Fees Potential Conflictof Interest

ProjectAnnounce.Date

ProjectManager

Goal Date

University ofCaliforniaBerkeley

$7.5 million N/A 2009 Shared ServicesCenter

January 2015

University ofMichigan at

Ann Arbor

$11.7 million UM Assoc. VP forFinance Rowan

Miranda, formerexecutive atAccenture;

IndianaUniversityBloomington

N/A (In-HouseProject)

N/A April 2011 Accenture

University ofTexas atAustin

$4,082,378.00 Numerousregarding

Accenture

Fall 2013 Accenture/TBA Spring 2014Piloting

Sources: The information above comes from a range of sources publicly available online. Typically, campusnewspaper reporting has provided the most relevant and up-to-date data including information about cost

overruns and over-projected savings.

Michigan as the most appropriate example forcomparison.15

Even still, each campus possesses uniqueconstituencies that make clear-cut comparative

15Alberto Martinez, UTs relationship withAccenture should raise questions, Daily Texan, Jan.20, 2014.

analysis difficult to achieve. Instead, this white paperlooks for patterns that emerge among severalinstitutions to recognize critical areas for additionalinvestigation and greater oversight.


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Point 1: Accenture Looms Largeas For-Profit Business

With a workforce of over 280,000 employees,Accenture provides corporate services in the area ofmanagement consulting, technology, and

outsourcing services in 56 countries and 200 citiesworldwide.16This multi-billion dollar corporationworks with Harvards LNW Center to coordinatethe annual public policy and education summit thatbrings potential shared service customers intoconversation with Accenture executives and otherbusinesses adopting the model.

In many ways, Accenture has been the industryleader in implementing Shared Services at suchuniversities like our own, the University of Michiganat Ann Arbor, and Indiana University Bloomington.Combined these three schools have paid Accenture

millions of dollar demonstrating the significantprofitability potential and vested interest the firmhas in implementing Shared Services as widely aspossible.

At institutions like Michigan and Texas, publicprotest resulted after valid concerns about conflictof interests have arisen. In some instances, the veryinstitutional employees who support and vouch forthe Shared Services model were then current orformer employees of Accenture. In Austin,President Powers selected two Accenture men toserve on the 13-member Committee on BusinessProductivity that was charged with charting ahealthy financial course forward. The committeeschairman Stephen J. Rohleder manages AccenturesHealth & Public Services operating group.17UntilFeb. 6, 2014, three members of the UT committeeoverseeing Shared Services built their careersaround the company. This only changed followingpublic criticism including the Faculty Councilresolution. 18

Faculty members have also highlighted the verypublic failures of Accenture in recent years. Lecturer

Anne Lewis of the Department of Radio-Television-Film said The specifics of Accenture arevery troubling because they are very big, and have

16http://www.accenture.com/us-en/company/Pages/index.aspx 17http://www.utexas.edu/news/2012/04/10/university_efficiency/18Alberto Martinez, UTs relationship withAccenture should raise questions.

a very high failure rate.19History Professor AlbertoMartinez published a column in the Daily Texanquestioning the Universitys association with

Accenture. Martinez pointed to the 2006 publicdenunciation of Accenture by the TexasComptroller for its massive failure in running thestates Children Health Insurance Program at a cost

of $99.9 million dollars. Accentures mistakesallegedly cost families food stamp support and ledto the early termination of health insurancecoverage for nearly 82,000 children.20

Point 2: Over-projected Savings,

Under-projected CostsNearly every university investigated ran into

criticisms from their constituencies when projectedsavings were consistently revised downward. Insome cases, the revised savings pale in comparisonto the originally stated amounts. In theory, the costsof Shared Services are to be paid by future projectedsavings, and several institutions have eagerly movedtoward its implementation with a promise that thosefees would be covered relatively soon.21In reality,

however, the projected savings have beencontinuously revised to reflect additional data andactual results from the implementation of Shared

19Lizzie Jespersen, Shared Services or SharedSuffering, UTs Plan to Cut 500 Jobs,Austin Chronicle,Jan. 24, 2014.20Alberto Martinez, UTs relationship withAccenture should raise questions.21https://www.utexas.edu/sites/default/files/UT-Austin-SS-Draft-Plan.pdf(Slide 8)

We DisagreeWhether conceived of as an operations czar,

a project manager, or something moretraditional someone must be appointed to

drive these recommendations forward, and thatperson must be directly accountable to thepresident and have sufficient power the

proverbial 10,000 votes to resolve conflictand overcome institutional inertia. Steve

Rohleder, Chair of Committee for Business Productivity

We Believethat at all times, the interests of students, staff,and faculty must also be equally represented

within academic culture, and specifically, ourUniversity governance.


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Services. In most cases, this means that the cost ofShared Services implementation will not berecovered until much further down the line andafter additional outlays of financial resources toensure its successful implementation.

Point 3: Unhappy Faculty:Unintended Consequences toCampus Labor & ResearchProductivity

At Berkeley, Michigan, and Yale, significantsegments of the Universitys community havesignaled their distrust and disapproval to theimplementation of Shared Services on campus. Inmany cases, the Faculty Councils including those at

Michigan, Yale, and UT Austin have expresslyrequested greater transparency, additionalinformation, and more involvement within theShared Services decision-making process.22

To date, 1,169 faculty members at Michiganhave signed onto a petition calling for thetermination of their Shared Services plan in favor ofa unit-focused model: We believe that the ASTapproach is inherently flawed because its focus is onreducing administrative costs without taking intoaccount the concurrent reduction in faculty andstaff productivity, collaborative academic culture,

and the unique needs of heterogeneous academicunits. In particular, the UM faculty estimate thatShared Services will erode research to the tune of$65 million each year.23

The UM faculty also protest these additionalconsequences of Shared Services:

1) Reduction in faculty productivity by 10-20%.2) Less faculty access to students and diminished

quality of teaching for undergraduate studentsand supervision for grad students.

3) Loss of research funding to the tune of severaltens of millions of dollars.

22Gavan Gideon and Antonia Woodford, SharedServices Under Fire, Yale Daily News, Feb. 8, 2012; RyRivard, Shared Services Backlash, Inside Higher Ed,Nov. 21, 2013; Madlin Mekelburg, Faculty Councilrequests more information about Shared Services,Daily Texan, Jan. 28, 2014.23http://um-openletter.eecs.umich.edu/

4) Increased frustration and consternation by thefaculty because a significant fraction of theireffort is diverted into secretarial-like tasks.

5) No cost savings; on the contrary, a great deal ofloss in revenue.

6) Dehumanization of some 300 staff members.24

The open letter sent to the UM president andprovost emphasizes a consistent concern amonguniversities, namely a breakdown within the faculty-staff working relationship that subsequently hurtsresearch and faculty productivity levels. This lastconcern should cause alarm at Texas, wherePresident Bill Powers has worked to strengthen ournational profile as a tier-one research institutioneven while some politicians criticize the researchemphasis of our faculty.

The implementation of Shared Services at theUniversity of Michigan was so controversial that the

leader of the project and CFO, Rowan Miranda, hadto step down as the leader of the Shared Servicesinitiative.25A month later, the Michigan Daily reportsthat Miranda left his job at the University ofMichigan.26

In Feb. 2012, the Yale College faculty swelledtheir regular council meeting after the topic ofShared Services was put on the agenda fordiscussion. More than 200 faculty arrived to themeeting to protest problems associated with itsimplementation. Benjamin Foster of theDepartment of Near Eastern Languages and

Civilizations explained that [Shared Services] wassupposed to be streamlining and simplifying ourlives, but instead Everything takes about twotimes as long. We resent the down-skilling ofdepartmental administrative personnel We dontsee how that can be more efficient or cheaper.27

Based on anecdotal evidence gathered bycampus newspapers, additional concerns aboundincluding the following:

1.)The removal of staff from departments leavesthose remaining with an increased workload tha

24http://um-openletter.eecs.umich.edu/ 25University chooses new leader for sharedservices initiative, The Michigan Daily, December11, 2013.26Finance VP and former shared services leaderwill return to Chicago, The Michigan Daily, Jan. 212014.27Gavan Gideon and Antonia Woodford, SharedServices Under Fire.


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creates challenges for developing and institutingadditional departmental initiatives;

2.)A reduction in departmental autonomy and self-sufficiency;

3.) Particularly unsuited for languagedepartments;28

4.) High turnover of Shared Services personnel thatresults in inconsistent faculty support;5.) Particularly challenging for departments thatalready operate off limited staff support.29

6.) Increased privatization of campus personnelincluding childcare centers.30

Back to UT:From SmarterSystems to SharedServ i c es ERP

The recent idea to implement a Shared Servicesmodel at UT Austin seems to have been introducedby Stephen Rohleder in an op-ed piece for theStatesmanin 2011.31Soon thereafter, Rohleder wasappointed chair of the Committee on BusinessProductivity (henceforth CBP), which PresidentPowers tasked with providing recommendations forhow to increase revenue at UT. This culminated in areport released in January 2013 titled "SmarterSystems for a Greater UT."32

That Report further divides into threesubcommittees: Asset Utilization, TechnologyCommercialization, and Administrative Services

Transformation. It is the latter subcommittee,headed by Accenture COO Stephen James thatrecommends a Shared Services model that

28Gideon and Woodford, Shared Services Under

Fire.29Adrian Rodrigues, Shared Services RemainsControversial.30Megan Messerly, Private provider to manageuniversity care program, The Daily Californian, Nov. 1,201231Stephen Rohleder, Rethink Government toMaximize EfficiencyAustin American Statesman,July 9,2011.32Committee on Business Productivity, SmarterSystems for a Greater UT, Jan. 2013.

consolidates "Finance and Procurement, HumanResources, and Information Technology" for UT.

The report also suggests technological upgrades inorder to automate work. The reports mostimportant conclusion is that if therecommendations are adopted there will be savingsranging between $150-200 million. As it stands the

conclusion is not useful since it does not say whenthe savings would occur.33The CBP report explains that its recommendation

is based on research. As the report explained,

The sub-committee gathered and analyzed asignificant amount of data collaboratively with27 different units within the University. This[sic] data strongly suggests [sic] that therecommendations are achievable based on the

workforce distribution, the similarity of workfunctions, and the level of effort currently

expended by individuals in each unit.34

Accenture was paid over $1 million in order to helpthe CBP gather these data. Allegedly the data werenot scrutinized by any UT administrators, but weregiven to Accenture.35In order to assess thecommittees recommendation one must first knowhow the committee determined which tasks wereredundant and how the degree of similarity of

work functions was actually determined.This information remains only recently available

to University stakeholders. The campus community

and its shared governance structures (e.g. FacultyCouncil, Staff Council, Graduate Student Assembly)

33If the report suggested someway of increasingrevenue by $100 a year, UT would save $150million dollars eventually.34Ibid, 19.35Shortly, after the Faculty Council resolution onShared Services, Jan. 26, 2014, data on thecompensation and role of Accenture was partiallyreleased: The deliverables to be completed under theSOW were to be delivered to the CBP, not the

university. The university was to receive the finalreport of the CBP. Accenture was engaged because theuniversity did not have the shared services expertisenecessary nor the adequate permanent staffing tosupport the CBP. The initial cost of the work wasestimated to be $995,352. After subject amendmentsto the contract for additional work the final cost paidto Accenture was $1,083,060.http://www.utexas.edu/transforming-ut/committees/administrative-services/shared-services-committee/faculty-resolution-01-27-2014/7


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would be well suited to assess this analysis since ourperformances often rely on these work functions.However, the Accenture-controlled research thatour University paid over a million dollars to obtainis remained undisclosed despite multiple OpenRecord and FOIA requests, until approximately a

week ago in response to a faculty council resolution

on the issue. It is now being processed for thepurposes of assessment by graduate students andprofessors.

The fact that the data was not scrutinized by UTadministration and took over a year to releasecreates skepticism about whether Accenture and theCBP subcommittee adequately took into accountthe specificity of departmental needs in determining

which work functions were categorized asredundant. Following the Faculty Council requestfor transparency, the administration has now movedto act: information from Accenture referred to as a

deliverable in the SOW and provided to the CBP.36

Note t o Reader : On Monday, Feb. 17, 2014, Mr.Hegarty released the final report of the CBP as wellas supporting data. While we would haveappreciated this material sooner, we are happy thatMr. Hegarty has released this material in accordance

with the Faculty Council resolution on SharedServices. Additionally, we view this release ofinformation as the result of effective Universitygovernance (i.e. Faculty Council resolution) doingits job and furthers our justification for a Graduate

Student Assembly resolution calling for theinclusion of graduate students into the continuedplanning process.

Announcing the UT SharedServicesPlan

UT released the "Shared Services Plan (Draft forCampus Discussion)" in Oct. of 2013. This draftcontains cost estimates of implementation andprojected savings to be realized by downsizing the

Austin campus workforce.One difference between the UT Austin plan and

the plan at other Universities is the scale of thedownsizing. Michigans Shared Services planentailed the elimination of 50 positions, while UTsrequires the elimination of 500 or more positions.

Another dramatic difference between UT Austinand other higher education institutions that are

36Ibid

implementing Shared Services is the implementationcost. In the same Oct. report, the UT cost estimates

were reported to range between $160-180 milliondollars. These costs were not then itemized but

were, in fact, later broken down within the minutesfor the UT System Board of Regents Decembermeeting.37

ERP Conversion Total: $44,000,000Operating, Subscription, Licensing, Maintenance:$30,000,000Labor and Technology: $13,900,000

Total: $43,900,000ERP Total: $87,900,000Shared Services: $54,100,000Project Contingency: $11,000,000Estimated Total Cost: $153,000,000

One of the largest costs is the EnterpriseResource Planning (ERP) implementation. Since

this is a complex topic in its own right, ERP isexplained below.

What is Enterprise ResourcePlanning (ERP)?

We need to understand ERPs because theUniversity of Texas at Austin has chosen to link thepurchase and implementation of an ERP (Workdayat UT) with the successful roll out of a SharedService model.

ERPs are an outgrowth of business materialrequirement planning/manufacturing resource planning(MRP)that came into use within the manufacturingindustry during in the 1960s. ERPs were created tosolve and automate complex computational tasksinvolved in production (e.g. the quantities and typesof materials necessary to meet a productionprogram).38Eventually business informationsystems expanded; these more general systems werecalled Enterprise Resource Planning systems:

ERP systems are cross industry systems

supporting all major business processes[thatinclude] MRP II functionality and generalbusiness functionality such as accounting,

37Regents meeting minutes: 43:00http://videoportal.utsystem.edu/Mediasite/Play/47d020a3dc394c77ac73cbfc72cacc8b1d38Ch.1 in Kubel, K. E. 2013.Enterprise Resource Planningand Supply Chain Management. Springer-Verlag: Berlin.


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controlling, financial planning, and humanresources.39

At the turn on the century, ERPs began replacingcustom-built legacy systems at institutions of highereducation.40Academic studies on ERP adoption atUniversities have focused largely on implementation

problems and associated cost-escalation.A University can rely on either an external ERPvendor (Oracle, Workday) or build a custom in-house system.41In-house systems seem to havebeen scarcely studied. One study made reference toa University in Australia, with over 40,000 students,developing its own in-house ERP in order to avoidconsulting costs, but a study comparing the costs ofan in-house solution to that of external vendors isnot available.42A major reason in-house ERPs arenot adopted appears to be the amount of timerequired to build them (up to 7 years).43

There are a number of costs associated withERP implementation, for example, maintenance andlicensing fees, consulting fees, and many others.44Customizations, which refer to modifications madefrom off-the-shelf ERPs in order to meet somespecific institutional need, are the primary reasonsprojects go over time and budget.

The need and cost of customizations are arecurring theme in the literature on ERP adoption

within higher education institutions that possessdifferent internal structures than what ERPs were

39Ibid, 2.40see Aaron Charles MartererEnterprise ResourcePlanning in Higher Education: A Comparative Case Study.(PhD diss., University of North Florida, 2008).41Hossler, D. & Pape, S. 2006. Editors notes Hossler,D. ed. 2006.New Directions for higher education. Specialissue: Building a student information system: Strategies andsuccess and implications for campus policy. 136.42Grant, D. Richard Hall, Nick Wailes, and

Christopher Wright. 2007. The false promise oftechnological determinism: the case of enterpriseresource planning systems,New Technology, Work, and

Employment 21: 1.43p. 19. Gore, William & Don Hossler. 2006. Why allthe Fuss about Information Systems?. In Hosler, ed.And presumably cost, since ERP software companiesspend billions on Research and Development.44A detailed review can be found in Babey, Evelyn.2006. Costs of Enterprise Resource Planning- andThen some. In Hossler, ed.

originally designed to manage.45One example ofsuch a customization comes from theimplementation of an ERP at Cornell University.Peoplesofts student record system was unable toreport median grades for each course on a studentstranscripts; thus, the ordered customization requiredto accomplish this task cost Cornell $25,000.46

Much of the academic literature on ERPadoption at universities emphasizes that many morecustomizations are necessary than are predictedduring the pre-implementation phase. Onedissertation on the topic attributed this to thedecentralized or federated organizational structurestypically found in universities.47

There is no inherent link between an ERP and agiven business model in the abstract (such as SharedServices). A given institutions rules must beprogrammed into an ERP system, however, whichimplies a detailed understanding of the

organizational structure of that institution. If abusiness or University undergoes organizationalrestructuring after ERP implementation, moreupgrades to the ERP will have to be paid tocomplete.

For the University of Texas, this is the statedjustifications for implementing Shared Services and

Workday simultaneously (the ERP chosen by UT).48

If Workday is implemented first, then upgrades willhave to made later when Shared Services isimplemented. This argument follows if one considers theimplementation of Shared Services to be inevitable.

Its important to appreciate how ambitious thecurrent plan is. Both Shared Services andEnterprise Resource Planning are costly, risky andinvolve a huge over-hall of normal businesspractices at an institution. At Universities thedisruption to normal practice has been moreextreme. Meticulous and accurate budgeting

45Aaron Charles MartererEnterprise Resource Planning inHigher Education: A Comparative Case Study. (PhD diss.,

University of North Florida, 2008).46Babey, 2006. Costs of Enterprise ResourcePlanning.47Aaron Charles MartererEnterprise Resource Planning inHigher Education: A Comparative Case Study. (PhD diss.,University of North Florida, 2008).48Mr. Hegarty provides a detailed defense of Workdayas preferable to Oracle software at the UT SystemsBoard of Regents December meeting. See 43:00 athttp://videoportal.utsystem.edu/Mediasite/Play/47d020a3dc394c77ac73cbfc72cacc8b1d


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Shared Services Plan: Cash-low Graphs (October 2013 report);$100 million versus $180 million Implementation Cost


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would therefore be expected of anyadministration interested in implementing such aplan.

UTs Overstated ProfitProjections

Accompanying the Shared Services Plan weretwo town hall meetings, in which Mr. Hegartydiscussed the plan in order to obtain campusfeedback on whether the plan should beimplemented, and subsequently, UT released the"Shared Services Plan (Draft for CampusDiscussion) in October of 2013.

This draft contains estimates for the costs ofShared Services implementation as well asprojections of savings to be made through thedownsizing of the Austin campus workforce.Regarding the labor reduction, the report states that

the Total number of reduced positions !500(!4% of the total administrative workforce of !12,000 or !11% of the total administrative

workforce of the HR, Finance, Procurement and ITworkforce of !4,500) over 4 years.49

The Shared Services Plan includes significantinvestment in the enterprise resource planning(ERP) software Workday (more on this later). Thesavings from downsizing through Shared Servicesare calculated to range between $280-320 millionover 10 years ($30-40 million annually) with a $160-180 million overall benefit. However, theinvestment costs are not itemized (e.g. cost ofchange managers, programmers, ERP software,etc.). Fortunately, the projected costs do include theastounding fees associated with UTsERPAdditional requests for an itemized breakdownof all costs have been repeatedly denied.

Most importantly, the profits from the Shared ServicesPlan are erroneous or overstated.

First, the Shared Services Plan assumes that 433jobs (the equivalent of $26 million) will be cut byDecember of 2014. According to the plan "Attrition

is expected to account for a significant percentageof the reductions, which implies that some otherpercentage will be laid off.

The plan claims that there will be a paybackfrom the ERP implementation at Year 6. However,this calculation is based on the assumption of a$100 million investment. The difference betweenthe Shared Services Plan's profit projections and theprofit projections using the actual investment costs

49Shared Service Plan, 5

are included in the accompanying graphs on page11. If we use the high end of the cost estimation at$180 million and we take a more realistic view that100 jobs per year will be cut for a total of five years,then, there will be no financial payback until 10years after the beginning of the plan.50

$30-40 Million a year from 500Jobs?

The Shared Services plan claims to save $30-40million a year through cutting 500 jobs. Upon closerscrutiny this statement is difficult to interpret.51Ifone divides each of the numbers in the range by thejobs (30-40 million/500 jobs) we arrive at cutting500 jobs paying $60-80 thousand per year. Recentdata released through FOIA request52to the TexasState Employees Union on annual salaries and

layoffs at the University of Texas demonstrate thatthe mean salary of administrative staff is $55,762

with a standard deviation of $78,405. When outliersabove $120,000 are removed the mean is $48,033

with a standard deviation of $24,077.If we take the more reasonable mean of $48,033,

the yearly savings are approximately $24 millionwith a standard deviation of $12 million. To achievea $30-40 million in savings would require cuttingapproximately 625-833 positions, not 500, assumingthe adjusted mean of $48,033.

It is entirely possible that the Plan entails cutting500 jobs that are between $12,000 and $32,000above the mean yearly salary ($60,000-$80,000respectively). What has to be explained is why theelimination of jobs will mostly effect positionsranging between 0.5 and 1.5 standard deviationsabove the mean. Suffice it to say that there is anextreme lack of clarity in how job cutting willachieve the desired savings.

50Alberto Martinez, Should we centralize staff atUT? Presentation before the UT Graduate StudentAssembly, December 13, 2013.51One of the most obvious reasons is that $30-40million is not a probability distribution, its arange. No one has yet been told where the $10million uncertainty comes from.52Open Records 08-01-2013 TSEU, UT StaffInfo. Please email the co-author Adam J Tallmanfor more information regarding these data;[email protected].


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Mr. Hegarty and Dr. Gilligan have bothemphasized that the plan will save $30-40 million ayear in perpetuity, without addressing howanalytically sloppy and unclear such a statementactually is (together with the fact that we are notsupposed to break even for 10 or more years notcounting the interest paid through debt financing

the ERP).53

Another issue not addressed by such astatement is the potential decline in services itentails. If professors and graduate students areforced to do more administrative work, a decline inresearch and grant acquisitions could outweigh thegains made through cutting labor. This has beenprecisely the charge at the University of Michigan,and there only 50 staff were cut, rather than theplanned 500 positions at UT, in the implementationof Shared Services.

UTs Brief Campus DialoguePhase

Throughout much of the campus dialoguephase, Mr. Hegarty presented the implementation ofShared Services as inevitable. He equated SharedServices with some sort of positive change ingeneral without any real qualification. This isparticularly evident in an op-ed piece he wrote forthe Daily Texan:

I will remind those who are working against usthat doing nothing is a recipe for the decline ofthe Universityand will lead to others outside theUniversity imposing actions upon us.

Which outsiders will impose Shared Services isnot made clear. The comment, however, suggeststhat Shared Services is a foregone conclusion. Thisseems even more likely when one considers the factthat, before campus meetings even started, Mr.Hegarty appeared in a promotional video for aShared Services summit sponsored by Accenture

(June 2013) discussing the UT Austin plan with alevel of finality that suggests the decision toimplement Shared Services had already been made.54

53Thomas Gilligan Shared Services presents UTopportunity to cut costs, The Daily Texan Feb. 122014.54http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Reflections-2013-Summit-Leaders-Discuss-Shared-Services-Model-Productivity-Video-Transcript.pdf

Furthermore, Mr. Hegarty told the Daily Texanafter the faculty council resolution on SharedServices; To me, in my mind, Shared Services isnot a matter of if, its a matter of when.55

In response to criticisms about the SharedServices plan, UT administration has suggestedpiloting the model in various colleges before

moving on to full scale centralization. There aresome practical problems with this idea, however.

Piloting Economies of Scale?

A Shared Services model gains efficiency througheconomies of scale. When tasks are centralizedefficiency gains are achieved because tasks are morespecialized to individual employees. The degree to

which centralization improves efficiency depends onthe size of the business. Efficiencies througheconomies of scale are not possible in smallerenterprises. According to Bryan Bergeron Theres aminimum company size and revenue stream, below

which the shared services model doesnt makesense.56

But a pilot is just a smaller version of a largerproject. It thus becomes unclear how one can pilotan economy of scale. Furthermore Shared Services,(in contrast to outsourcing and in-housecentralization) requires a high start-up cost. Thismeans that a pilot of the model cannot simply be aneutral test of an unproven model. Rather it is

costly in and of itself.

Do we already have SharedServices?

Through dialogue with the campus it wassomehow discovered that UT already has SharedServices in some sense. This is surprisingly notmentioned in the Committee on BusinessProductivitys report.

Some form of Shared Services seems to exist in

the colleges. However, in contrast to the modelproposed at UT and implemented elsewhere the

various colleges that have centralized services donot have off-campus call-centers performingadministrative tasks, nor is there a separate layer of

55Faculty council requests more information aboutshared services, Daily Texan February 1st2014.56Bryan Bergeron,Essentials of Shared Services(Hoboken, NJ: John Wiley & Sons, Inc., 2003), 21.


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management overseeing a shared services center. Inmany cases employees are simply move from onedepartment to the next. This type of downsizingand centralization, whatever one may think of it, isnot obviously the same Shared Services astraditionally conceived.

The Shared Services organization that colleges

have adopted are qualitatively not just quantitativelydifferent than a University wide centralizationeffort. It is, therefore, unclear in what sense theselocal model can prove or disprove the moreambitious centralization proposal.

Remaining Concerns aboutAccenture, et al.

When it comes to Accenture, perceivedconflicts of interest abound. Heres the rundown:

As reported, an Accenture COO chaired thesubcommittee that drew up UTs Shared Servicesrecommendation. Accenture was paid to gather theresearch on which this recommendation was based;further, there are three Accenture consultants onthe Shared Services project team (Tim Mould, RyanOakes, Jamie Wills) including one ex-Accentureexecutive, Brad Englert, who serves as theUniversitys Chief Information Officer.57Recentlyreleased data on compensation to Accenture revealsthe company has received $4.1 million in fees foronly the initial planning stages of work.

Additionally, the ERP Workday was chosen inthe summer of last year even as Accentureconspicuously claims to be one of Workdays mostimportant deployment providers. There were notownhall meetings for the Workday ERP but the$30 million purchase was recently approved by theRegents last December.58During this wholeprocess, Accenture twice received consultingcontracts without following a competitive biddingprocess.

Virtually every study on ERP implementation atuniversities emphasizes the problem of cost-overrunand the need for accurate budgeting, but UTs cash-flow analysis seems to have greatlyunderrepresented costs, even those based on itsown initial estimates. This is particularly surprising

57http://www.utexas.edu/transforming-ut/committees/administrative-services/shared-services-committee58http://www.accenture.com/us-en/Pages/service-acn-workday-alliance-video.aspx

given the amount of money that was spent onprofessional consulting fees.

Both Shared Services and the implementation ofthe ERP ultimately create an institutionaldependency on external consultants. Research onERPs emphasizes that such a relationship can be aserious risk. Kubel, citing a case study, describes the

problem as follows:

the company becomes dependent upon theexternal consultants, who do not necessarilyhave the same goals as the company. Wu andCao quote an information manager who statedthat consultants are primarily interested infinishing an implementation project as quicklyas possible. The company, however, isinterested in obtaining the best possiblesolution. Because the consultants only presentthe option they decided upon, the company is

often not aware of other possible alternatives.

We find this worrisome given the overlyintimate relationship that some UT administratorshave with Accenture. This relationship suggeststhat UTs lack of skepticism about the role ofexternal consultants might not align with ouruniversitys needs.59This problem becomesaccentuated when one considers the apparent lackof accurate profit projections, the fact that

Accenture won UT contracts without competitivebidding, and that repeated comments by the

Universitys chief financial officer who suggests thatShared Services is the only option.

Based on our literature review we suggest that,given the relationship with Accenture, the latter

view may be the result of over confidence on thepart of external consultants, which should be acause for serious scrutiny. Greater transparency andconsultation with the Shared Governance structuresof UT Austin should partially ameliorate thisproblem.

Given that ERP implementation and SharedServices are both complex issues both with their

own individual problems, we also believe debatesabout them should be separated rather thanpackaged as one deal.

59UT should have more carefully vetted Accenture inShared Services deal,


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Summary andConclusion

The following report has assessed the success ofShared Services at peer institutions as well as

provided a brief overview of Shared Services andenterprise resource planning within institutions ofhigher education in order to contextualize and helpinform debate concerning the implementation ofShared Services at UT Austin. Synthesizing thediscussions above, our main concerns remain.

1.)The benefits of Shared Services, to theextent that anything is known, seem to havebeen exaggerated at peer institutions andour own.

2.) ERP costs at institutions of highereducation are typically much higher thaninitially estimated.

3.)The initial profit projections from the Oct.Shared Services Plan are erroneous andmisleading.

4.) Reliance on outside consultants is costly andpresents the risk of excluding otheralternative options.

We strongly believe that these concerns arereasonable based on the information available to us.

The Committee on Business Productivity did not

contain a single academic or professional employeeof the University. The data from which theirrecommendation was based have only been recentlyreleased despite requests dating back more than ayear ago. More than half of the Shared Servicesproject team was comprised of Accentureconsultants, and the team poorly represented thediversity of our campus as a whole. Theinvolvement of Accenture, whatever one may thinkof the firm, was made without consideration of ourschools shared governance structures. Additionalquestions that we believe should inform discussion

on this topic are as follows.

1.) Given UT central administrationsintimate relationship with Accenture, to

what extent was the purchase of Workdayan autonomous decision in the bestinterest of the campus? Did Accentureconsultants, and ex-Accenture COOsconvince UT central admin to buy thesoftware?

2.) Why are the profit projections so grosslyover stated in the October SharedServices draft?

3.) How will efficiency gains actually bemeasured during the piloting of SharedServices? Given that efficiency impliesimproving some service in relation to

savings, and the University performs a lotof functions, can Shared Services improveefficiency for some tasks and not others?

4.) To what extent will this effect departmentalautonomy? Will some departments beadversely affected and others not?

Details of the implementation of the plan haveonly become recently available following a UTFaculty Council resolution, and still, many questionsneed to be answered concerning the role ofprofessional consultants and the degree to which

major University decisions should be made outside adeliberative and democratic process.We believe that an increase in transparency

about the project and the inclusion of a largerdiversity of perspectives into the Shared Servicesproject team is one step towards addressing ourconcerns. For instance, we remain troubled that thepublic meetings on Shared Services failed toconsider any serious alternative to the plan. In fact,comments by the CFO suggest that there are noother solutions to UTs problems.

Mr. Hegarty told the Daily Texan To me, in

my mind, Shared Services is not a matter of if, its amatter of when.60In contrast, Mr. Hegartyexplained at the first town hall meeting on October30, 2013, in response to a question concerningfaculty feedback:

I would say that most people whether you'refaculty, students or staff and me, have ahealthy dose of skepticism. Until I actually see

what is the plan and one can answer thequestion how does it affect me and myportfolio or in this case, the University, I think

we ought to have a healthy dose of skepticismBecause all we have right now is data thatsuggest this could be really beneficial for thecampus...in terms of accomplishing thosethree things... But we won't know until weactually, on a controlled basis, on a pilot basis,get into it, and begin to prove or disprove the

60Faculty council requests more information aboutshared services, Daily Texan February 1st2014.


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model. And I do think we have to accept thatsometimes your hypothesis is not correct. So

we need to have the courage to say; gee forwhatever specific reasons is not going to dowhat we think its going to do. Let's stop, wewere wrong, let's go another direction. And Ido think that that exists, I have seen it relative

to my boss Bill Powers, that he has thecourage to make a tough decision whether itsthumbs up or thumbs down.61

We agree with the latter quote from Mr.Hegarty rather than the former. We share Mr.Hegartys skepticism and applaud the rational andopen-minded approach that the CFO seems toadopt in the latter quote as opposed to the former.It should go without saying that as the SharedServices model moves into its pilot stage, a clearidea of what it would mean to falsify the

hypothesis must be articulated, with an opendiscussion of alternatives.This perspective is in stark contrast to the one

articulated by the chair of the Committee onBusiness Productivity Stephen Rohleder whoemphasizes leadership rather than open discussionin the Smarter Systems report.

Whether conceived of as an operations czar, aproject manager, or something moretraditional someone must be appointed todrive these recommendations forward, and that

person must be directly accountable to thepresident and have sufficient power theproverbial 10,000 votes to resolve conflict andovercome institutional inertia.62

In discussion on the Shared Services model theterm efficiency has been used fairly carelessly. Anincrease in efficiency implies an increase in thequality of some service in relation to cost. It cannotsimply be equated to savings. UT administrativestaff provide a number of non-identical services that

vary between the departments. It is entirely possible

that one of these services is adversely affected byShared Services while another is not or onedepartment is affected more than another. The

6159:11 Shared Services Town Hall Q&A, October30th2013.http://mediasite.aces.utexas.edu/UTMediasite/Play/b906091f708f416db977e79d79e4957d1d62Committee on Business Productivity, SmarterSystems for a Greater UT, Jan. 2013.

Shared Services issue is not just a narrow questionabout saving money but touches on questions aboutthe function of a public institution of HigherEducation. This is why greater care must be taken indiscussing the feasibility of such a plan. StephenRohleders anti-democratic stance on the issueshould have no place in an institution of Higher

Education.

Villarreal and Tallman SS Draft 11

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