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A Saner IT Funding Model(?):

System-Wide Technology

“Cost-Driver Based”

Allocation

Common Solutions Group

January 2006

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Agenda• Context for IT Change• IT Funding

– Today’s budgeting process– Current IT environment– Roles within the service continuum

• Allocation Options and Details– The new budgeting process

• Discussion

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University of Minnesota’sStrategic Positioning Goal:

To become within the next decade one of the top three public research

universities in the world.

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Administrative Aspiration:

• “…that the University be known as much for its service and business innovation as for its high quality research, education, and public service.”

President Robert H. Bruininks

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New Budget Model Committee Principles• Mission and Goal Alignment

• Transparency

• Efficiency/Cost Control

• Revenue Enhancement

• Simplicity

• Predictability

• Adaptability

• Central Investment

• Information Rich

• Implementation

• Risk

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Current IT Funding Environment

• Broad IT Governance - but not tied to funding allocation.

• Current funding mechanism requires excellent relationship with CFO and executive team.

• Actual costs of centrally provided services unclear to revenue generators / stakeholders / Deans.

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Local Technology Principles

• Mission Specific or Strategic Importance to Local Unit• Uniqueness• High Touch, High Interaction• Little Cross-Unit Use• Emerging, Immature Technologies

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Local Technology Service Examples:

• Computer Desktop Support• Web Development & Content Management• Academic Application Development & Support• Research Application Development & Support

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OIT / Institutional Technology Investment Goals

• Maintain a competitive, institutional leadership role that attracts the brightest students, faculty, staff and scarce research funding.

• Create savings, efficiencies and effectiveness.

• Optimize the University’s scarce resources. Achieve the greatest institutional return on investment.

• Improve services to students, faculty, staff, patients, and other stakeholders.

• Exploit untapped ERP functionality and extend the usefulness of ERP systems with new technologies such as portals, workflow and others.

• Demonstrate value by producing meaningful ROI and performance (system and business process) information.

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OIT / Central Technology Investment Principles

• Institutional Vision & Mission Alignment• Institutional Mission Criticality• Strategic Leadership Opportunity• Interoperability• Common Need• Institutional Economy-of-Scale Value• Technology Maturity• Institutional Risk

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Budget Model Alignment

• Strategic Positioning alignment and promotion.• Internal Budget Model Working Principles alignment.• Embrace the Institution’s central technology goals

and principles.• ‘Cover’ the University’s core ‘in’ technologies.

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Core Technologies - What’s In

Student,Faculty,Staff Support

•Helpdesk (1-HELP)•Training•Digital Media Center.•Computer Labs•Security•MS license

Communications

•Data Network

ProductivityApplications

•Operating System•MS Office•File Systems•Web Collaboration (Breeze)•Email•Portal•Calendar (UMCal)•File Storage (SAN)

•Personal space•Enterprise storage

•Web Content Management (FileNet)

BusinessApplications

•PeopleSoft•WebCT•Imaging•Library Automation•E-Research•CUFS•IMS Reporting•EGMS•FormsNirvana•GradPlanner•Portfolio•GoldPass

All currently Centrally Funded

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Allocation Model Options

• Measured Usage (Consumption): Typical ISO model. Define measure to perceived value, real cost and strategic value.– Creates year-to-year volume fluctuations that cause budget

instability. Unpredictable.– Is an imprecise way to measure outcomes.– Requires significant investment in measurement tools and

corresponding administrative systems and processes. Significant implementation implications.

– Can effectively control demand.– Inefficient method to measure the value of a strategic asset.

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Current Technology Services Funding (Examples)

Centrally FundedUnit-Based Chargeback

Consumption-Based Chargeback

Telephone X X

VoiceMail X X

E-Mail X

Data Network X

Calendar X

WebCT X

Security X

Helpline X

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Recommended Allocation Model

• Headcount-Based: Allocation based on an unit’s student, faculty and staff population.– Simple. Easy to understand and administer.– Optimizes the institution’s technology investment.– Sustainable. Is adaptable to internal and external

environmental factors - including emerging technologies.– Predictable. Minimal year-to-year fluctuation.– However…

• Imprecise measurement for actual usage.

• Demand management more challenging.

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Headcount Allocation Model…

• In Alignment with:– Budget Model Principles– Strategic Positioning Goals & Objectives– The Institution’s Technology Investment Goals

• By…– Optimizing the University’s technology investment– Positioning the University’s technology investment strategy– Encompassing and encouraging the use of a core set of student,

faculty and staff technologies.

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Headcount Allocation Methodology

• Annual snapshot-in-time: – Previous year’s headcount.

• OIT’s budget for ‘In’ Core Technologies– Proposed OIT budget for managing these technologies.

• Per Head Rate• Allocate by Collegiate/Administrative Unit• Single annual bill / statement to each Unit• Two-Tiers - one for all campuses and one for Twin Cities (only).

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Headcount Allocation Formula

Core ‘In’ Technology Budget =

System-wide ‘In’ Technology Budget

+

Twin Cities ‘In’ Technology budget

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Headcount Allocation Formula

System-wide ‘In’ Technology Budget

System-wide Headcount____________________________ = A

Twin Cities Only ‘In’ Technology Budget

Twin Cities Headcount____________________________ = B

A = Coordinate Campus Rate ($24/mo.)

A + B = Twin Cities Rate ($48/mo.)

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Employee Allocation Details

• Employees with an X.500 ID as of the 9th pay period of the fiscal year• Employees holding multiple appointments will be assigned to a college or

administrative unit according to primary job code using the following logic:– Highest standard hours– Annual benefit base rate– Highest compensation rate– Lowest employee record

• Both part-time and full-time employees are counted equally.• Both paid and unpaid employees are included.• Temporary/casual employees are excluded.• Student employees (graduate or undergraduate) are excluded and counted as

students.• Employees in ISO’s having a unique area number within Auxiliary Services

only will be excluded from the budget model.

Note: The model is built upon headcount, not FTE. Units will not split charges.

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Student Allocation Details

• All students registered for fall semester as of the 10th day of the fall term.• Graduate School students are mapped to a college using a background table

that maps the student’s major to a college. (All graduate students are required to register, therefore all are counted)

• Students pursuing a dual degree program are assigned to a college and counted only once according the the following logic:

– Degree seeking gets priority over non-degree seeking– Priority is given to professional, then graduate-level, then undergraduate– FA primary number by career. Assigns priority by career (highest tuition)– Number of credits enrolled in each – Electronic random number (rare). Student is assigned to the college that gets the highest random

number.

• Part-time and full-time students are counted equally• Employees taking courses using the Regent’s scholarship or the academic or

civil service tuition benefit are counted as employees not students.

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Student,Faculty,Staff Support

•Premium ‘In’ Services(Where Applicable)•Computer Desk-top Support

•Telephone and Network Installation Services

•Hardware Sales•Software Sales•Web Development

Core Technologies: What’s OutCommunications

•Premium ‘In’ Services(Where Applicable)

ProductivityApplications

•Premium ‘In’ Services(Where Applicable)

BusinessApplications

•Premium ‘In’ Services(Where Applicable)

•Server Management & Support

•Back-Up Services and Data Restoration

•Telephones •Voice Mail

All currently funded through charge-back

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Core Technologies: What’s OutStudent,Faculty,Staff Support

•Premium ‘In’ Services(Where Applicable)•Computer Desk-top Support

•Telephone and Network Installation Services

•Hardware Sales•Software Sales•Web Development

Communications

•Premium ‘In’ Services(Where Applicable)

ProductivityApplications

•Premium ‘In’ Services(Where Applicable)

BusinessApplications

•Premium ‘In’ Services(Where Applicable)

•Server Management & Support

•Back-Up Services and Data Restoration

•Telephones •Voice Mail

All currently funded through charge-back

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Technology Allocation Assumptions…

• All heads treated equally• All ‘In’ Core Technologies applied to all heads• Base level of services with premium options at additional price.• PeopleSoft as headcount source• Coordinate campus distinction• Housing & Residential Life student technologies not included.

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New Cost Allocation Model Understanding / Assumptions

• The model itself is a set of stable revenue and cost attribution rules that assist in achieving (but don’t determine) the strategic goals of the institution

• A sound process for budget approval and rate development for “cost pool” units is key

• The process is dependent on strong leadership to approve cost pool budgets and to make strategic allocations of the state dollars

• The model will be implemented at a collegiate level – not a departmental level

• Good performance measures and good data are essential for analysis

• Existing consultative groups will be essential to promote transparency & understanding of decisions

• Process will evolve over time – year one will largely be a conversion to the basic structure, with refinements toward goals in the future

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Key Changes

• Today’s model is opt-in. Tomorrow’s is a rigorous opt-out.

• Provides the key stakeholders / revenue generators / Deans a clear understanding of what they are actually funding.

• The new model’s open budgeting process will bring those stakeholders together in a form of IT governance not experienced before.

• Will need to appropriately link the new budget model to the current IT Governance structure.

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Discussion…