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.
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.
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.
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:
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:
Once technology is shifted to an operating model, University IT staff can be refocused to more strategic and mission-critical tasks.
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.
Finance leaders in higher education are well-positioned to help drive significant and positive change by:
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.