By Matt Loecke, Executive Vice President, Apogee

Technology growth and updates in higher education have often been funded by planned or unplanned project-based capital investments. But technology is changing—with technology requirements doubling every two years—and so have our funding requirements. We are seeing Moore’s law in action—that computing would dramatically increase in power, at an exponential pace.

And we see an exponential growth in devices, especially on campuses. Analyst firm Gartner, Inc. forecasts that 8.4 billion connected things will be in use worldwide in 2017, up 31 percent from 2016, and will reach 20.4 billion by 2020. With technology developments occurring at such a rapid pace, institutions need to be able to scale quickly with changing requirements.

If capital expenditures are generally meant for static investments and operating expenses are intended for variable, ongoing costs, it only makes sense that rapidly changing technology would be better shifted to predictable operational expenses.

The Way It Was

Historically, IT teams have built the campus technology environment from the ground-up, implementing hardware builds that required large initial costs followed by routine large replacement costs. Costs so large, in fact, that long, in-frequent refresh cycles became the norm – PC refresh, server refresh, backup refresh and the like. These cyclical spending sprees were paid for as capital expenses, which, as we all know, may or may not be planned in advance. And because of the large investments, IT leaders were “encouraged” to service the equipment and make it last as long as possible. But technology is not like a large investment such as a building, which is depreciated over the years but holds (or increases) in value.

Very few operational dollars—which are annually and more elastically budgeted for—were needed to maintain these localized solutions. Outside of staff compensation, operational dollars were traditionally only used for personnel, training/development, and supplies.

The Way It is

Supporting new IT initiatives for today’s higher education institutions means implementing funding models as nimble as the technology they support. Technology has become increasingly agile, responsive, integrative, flexible and streamlined. Yet implementation oftentimes proves difficult, not because of the technology itself, but because funding models, timing, resources and adaptation, are anything but agile and responsive.

How to Improve Funding for IT today

So, the question is, how can funding models be improved, and what conditions need to be in place, so that they support, rather than thwart, innovation? Below are three potential solutions:

1. Shift Capital Expenses to Predictable Operating Expenses

Shifting capital expenses to predictable operating expenses is foundational for progress. Instead of purchasing technology based on long-term projections decided years ago, the institution shifts spending to the Cloud or other provider. The institution pays only for the IT services it needs, when it needs it and can scale as it is needed. This shift is the buyer shifting the responsibility for actual results to the provider. It’s a combination of pay-as-you-go, the reduction or elimination of the up-front capital risk, and a service-level agreement (SLA) service which ensures the institution gets the speeds, throughput, and uptime, as promised.

While some institutions are still reluctant to move much of their IT spending to partner providers, technology innovations occur faster than companies can digest and are the exact reason why it’s critical to shift from a reliance on capital expenditures to operational spending. Universities can create predictability around technology changes by:

• Investing in services that naturally adapt to the ever-rapid changing technology
• Focusing less on specific technology service deliverables and focusing on delivering teaching, learning and research
• Partnering with companies that have a perspective based on university industry trends rather than just on-campus
• Keeping abreast of future technology adoption trends
• Being nimble to adapt to changing conditions fast (Moore’s law)

2. Refocus Personnel to Achieve Strategic Goals

Once technology is shifted to an operating model, University IT staff can be refocused to more strategic and mission-critical tasks.

• Move to the cloud. By removing typical IT constraints—such as long lead times for infrastructure improvements, limited resources for maintenance, and incompatibilities between systems and tools—cloud computing frees institutions to focus on things that have an impact on the institution’s core mission and bottom line. Many universities are transitioning to a model where “back office” applications such as ERPs, CRMs, student information systems, and even learning management systems are in the cloud. This results in the ability to better process and utilize data, facilitate information sharing, and most importantly drive effectiveness and efficiency across the institution.
• Research IT support. Instead of spending time on complex utilities like email and networking—which can be outsourced and managed by third parties—IT can focus on research and support for applications that are core to a university’s strategic mission. As examples, IT could be managing IBM Watson for the engineering department or ECHO 360 video capture for teaching/learning. Freeing up IT staff to pursue more strategic endeavors creates more value for the campus.
• Adopt assessment and data analytics. In a higher education context, data can change the way learners, educators, and administrators communicate. The generation and analysis of data creates a new paradigm – one where stakeholders make keen choices that enhance learner experiences, streamline teaching practices, keep learners safe, and ensure institutions can account for student attrition, satisfaction, and success.
• Innovate around learning management, teaching delivery. Among the more mission-focused goals for many universities are things such as transforming academic delivery, student success and operational efficiency. IT staff can focus on questions such as “How can we improve academics?” “How can we optimize our resources around student retention and outcomes?” “What new student success and advising technologies are available?” What tools can we develop/provide to help faculty, staff and administrators work more efficiently?

I know of one large university that had over 20 different email servers. Now, by moving to one cloud-based email system, instead of 40 IT staff supporting email, there are just two; The result: a massive total cost of ownership saving. What’s more, users can more easily access their account from a range of devices and locations. And yes, the other 38 staff are still at the school; the university invested in those people by training them for more mission critical tasks, ensuring their future employability.

3. Embrace Cross-Functional Financial Collaboration

Finance leaders in higher education are well-positioned to help drive significant and positive change by:

• Reaching across departments and business units and collaborating more regularly. With the CIO. With the CBO. With Student Affairs and Housing. It’s important to understand the model across the table. It’s important to collaborate with a healthy dose of give and take throughout all processes. And it’s critical to build and retain trust with all stakeholders. There’s a great piece on collaboration by Ithaca College VP Finance and Administration Gerald Hector in the March 2016 issue of Business Officer.
• Looking to new technologies to aggregate information. As a finance leader, you’re expected to integrate financial data and sophisticated analyses into planning and decision-making processes—to ensure new investments are coupled with prudent financial planning. You want to be operationally agile, able to shift gears quickly to provide this strategic leadership. But, like many university CFOs, you’re faced with a disparate cost structure. Oftentimes, the structure is so convoluted that many institutions can’t arrive at a true spend. What is spent on CapEx vs OpEx? Have mid-level managers factored in people/overhead costs correctly? Something that looks inexpensive on the surface might end up costing more, for example, that of managing an ERP system. Simplify and standardize financial processes to gain better insight into spend and total cost of operations.
• Partnering with technology companies who provide reliability, scalability and support. What once required dedicated real estate, skilled employees and loads of time (costs) can be fulfilled by higher education-focused technology companies to help drive innovation. Universities have more options because they can afford the latest and greatest technology without having to find a large bucket of funds upfront to pay for it. And while there are clear corporate-driven best practices that can be applied to higher education when instituting new technology, the nuances of the educational ecosystem add complexity. So, look for a partner that understands these complexities.

In a new era where a university’s IT offerings directly impact the recruitment, attraction and/or retention of students, technology matters more than ever. But technology can only serve its purpose if it is agile and responsive to the mission it serves.

By creating a nimble and predictable funding model for innovation—with a wireless network scalable enough to handle the fast pace of technology innovation—schools can take the critical first step. Institutions will benefit from choosing partners who possess expertise in both higher education and technology to ensure a seamless experience and achievement of the best results. Those willing to morph their funding models to be as nimble as their technologies will ensure their university’s longevity and success. They will build a university of the future that exceeds student expectations while also protecting the bottom line.