(Note: All figures are at the end of the document)

 Leaders of IT organizations are troubled by the lack of reliable benchmarks or comparative data on which to base decisions about support services. Institutional leaders are mystified by total cost of ownership (TCO) studies that appear in the popular press and higher education publications. The numbers quoted in these studies don’t seem realistic in light of actual expenditures on campus. Institutional Trustees, concerned about rising annual costs for information technologies, are asking hard questions about the impact of services on the educational program and the value the institution is getting for its investment and they have formed committees to consider these issues. This article is a progress report on the COSTS initiative, a project aimed at obtaining consistent and reliable data, analyzing it in meaningful ways, and developing benchmarks.

 In November of 1996, Steven Gilbert, Director of Technology Projects, American Association for Higher Education, was experiencing a personal (technology) support services crisis. His laptop computer was down for repairs, his office server was experiencing problems and he found himself unable to function in the Internet based world on which he had become dependent. Steve had an outlet to express his frustration, namely the AAHESGIT Listserv, which he has started when he came to AAHE. The Listserv now has over 6000 subscribers, including CIOs, faculty, campus technology administrators and others interested in the impact of technology on teaching and learning. In that posting [A Modest Proposal, AAHESGIT Listserv, 11/25/96] Steve said,

 It was several days later that the two authors were scheduled for their monthly lunch meeting. Both had read Steve’s post and agreed that his service expectations were reasonable, although we weren’t as confident that the services could be delivered at price points with which he was comfortable. We wondered, "if we were to set up a company to deliver the services Steve specified, what would we charge?" As we began to formulate a vendor contract we realized that even with considerable experiences on our own campuses, we did not have a strong enough understanding of the various costs and their components across the industry – at least not enough understanding that we would risk going into business! Further, we had both been asked, from time to time, by senior administration about the existence of benchmarks that our colleges could use to evaluate the services being delivered. Thus began a one year journey to understand the complexity of the issues and to gather some preliminary data that could be used to convince others to help in an effort to develop reasonable benchmarks for, and estimates of, the cost of delivering excellent IT support services.

At a "birds-of-a-feather" session at the December, 1996 CAUSE annual meeting in San Francisco, attendees were provided with an explanation of the proposed project. Fifty individuals indicated a willingness to participate. A Listserv was quickly set up by the CAUSE staff to support electronic communication among COSTS project participants and work began in late December. As is often the case, ideas that seem doable when you are away from the day-to-day activities of your own campus seem overwhelming when you return home. Reality set in and the group shrunk to 30 participants who agreed to divide up into 6 working groups, each focused on a particular service area. The groups were to communicate with each other regularly. The work in early 1997 was projected to result in rapid progress with results to appear in "the first quarter of 1997". Some progress was made in a couple of areas, but we learned that vendors are not the only ones who fail to deliver on schedule and we experienced first hand the challenges of collaborating electronically. As we approached the crush of the end of the academic year clear results were not evolving and the leaders decided to reorganize the structure of the effort.

The primary thrust of the reorganization was to bring the project into focus and drive toward tangible outcomes. To that end, we established short and long-term goals, defined a conceptual framework, developed test hypotheses, and designed templates for data collection.

Goals

Clearly defined goals are necessary to explain the project to potential participants and keep our efforts on track. The goals of the project were:

Short-term

• Identify and understand examples of IT services at institutions of higher education.
• Develop ranges for the unit costs of providing IT services based upon institutional characteristics.
• Test simple hypotheses about the unit costs of providing IT services.

Long-term

• Identify a core of IT services that should be common to most institutions of higher education.
• Identify exemplars for each IT service, that is, institutional approaches that deliver exceptionally high levels of service at identified cost levels.
• Develop benchmarks that are useful for comparing the costs of providing IT services among various institutional categories.
• Determine components of the total cost of ownership (TCO) for desktop computer equipment in higher education.

Conceptual Framework

Information Technology services in higher education fall into two categories, those that deal with the care and feeding of the infrastructure and those that provide the related support services (Table 1). Those services that are infrastructure-related involve aspects of acquiring, installing, maintaining, and replacing things on an annual basis. Whether the replacement costs are part of the annual operating budget or are to be viewed as "deferred maintenance" (as many colleges have done in repair of their building infrastructure), they are real costs related to providing the necessary IT services. As such, they must be considered as part of any analysis of the cost of providing these important services. Support services are those areas whose budget components are largely staff driven and provide support to users of the infrastructure. Ultimately we propose to study all of these services.

Early analysis of data made it apparent that it would be useful to have common hypotheses against which to test the data in each service area. Richard Parker [Director of Academic Computing at Harvey Mudd College] suggested the notion of grandmother hypotheses; that is, simple hypotheses that even your grandmother could tell you would be true (Table 2).

• Economies of Scale - The unit cost of a service will decrease as the number of units increase.
• Outsourcing - The unit cost of providing services decreases with the degree to which they are outsourced.
• You get what you pay for - As service levels increase the unit cost of providing the service increases.
• Complexity - The unit cost of a service increases with the complexity of the environment in which that service is provided.

Data Collection/ Templates

We focused on one service at a time, developed a template for the data we wished to collect, and distributed it via e-mail to the group with a short deadline to submit data. Data was first collected for network services. We promised participants quick turnaround and preliminary analysis in exchange for their efforts in collecting data. As an incentive, and to demonstrate this could be done, we provided the data for Hamilton and Colgate in the initial e-mail request for each service. The agreement was that institutions must submit data to receive any detailed results. To increase potential participation, we also expanded the audience to include the IT directors at the fifty-four schools in the Consortium of Liberal Arts Colleges (CLAC) [These are small, private, liberal arts institutions.  Two-thirds of all institutions of higher education have less than 2,500 FTE students.]

At last some progress was made as twenty-one institutions submitted data, with others promising to follow suit. Buoyed by early success we continued with two further service areas, desktop repair services, and administrative information systems. Ultimately, twenty-six institutions have submitted data in one or more of the service areas.

Network Services

By network services we refer to those activities of maintaining, but not constructing, the infrastructure (wiring, fiber, hubs, etc.) and the servers on the campus network, including the connection to the Internet. We asked participants to include the cost of the main servers for the library (OPAC and databases) and those that provide general campus information (web server, public lab servers) but not for other departments whose servers provide only information for these departments. We did not want to include the cost of licensing and maintaining application software (e.g. statistical packages, administrative information systems) but did include costs related to maintenance of operating systems. Table 3 lists the data elements that were requested. Twenty-one colleges ultimately responded to our request for data. A short summary of the characteristics for the twenty- one institutions appears in Table 4.

These campuses are heavily networked, including residence halls. Network environments combine shared, switched and fast ethernet segments in buildings with sixty percent of the campuses using FDDI as the core backbone technology and thirty percent using ATM. On most campuses there are a mix of technologies as networks are in the process of upgrade to increase speed and support emerging uses of multimedia technologies.

FTE Staff

Budget Components (dollars budgeted for)

-active ports, used ports, computers, students, employees

Total replacement costs and replacement cycles

-for servers, network electronics

Description of network and service levels

Caveat! As with any survey, estimates often are the best that can be obtained, especially when describing staff who provide a number of services.

Descriptions of the network environments and institutional characteristics such as number of ports, computers, students and employees helped provide a context for understanding the institution and the necessary divisors for calculating unit costs.

We distinguished between ACTIVE network ports (connected to hub electronics - a computer could be plugged into an active port and connect with the network without any further work in the wiring closet), and USED network ports (those with an actual computer or printer connected to them). For institutions that are in the early stages of networking their residence halls the number of active ports may be considerably higher than the number of used ports. The number of used ports is a better predictor of the effort required to provide network services. A summary of the costs per port, (institutional) computer, and student appear in Table 5.

In our analyses we focus on averages, trends, and ratios, rather than absolute numbers. We account for replacement costs even though most institutions have not built these costs into annual operating budgets. We asked each institution for the total replacement value of servers and electronics and an estimate of the replacement cycle they would use if the replacement costs were built into the annual operating budget. As expected, there was variation in projected replacement cycles with ranges from 3 - 5 years for servers and 4 - 8 years for network electronics. To apply a common estimate for the replacement cycle of electronics and servers we computed the average cycle times for the entire group and then applied the average cycles (6 and 4 years respectively) to the actual replacement values for each institution. This helped to factor in replacement costs to all subsequent analyses regardless of whether the college actually had the money allocated in the annual operating budget. Using this approach, replacement costs represent, on average, 40% of the costs of providing network services, with salaries and contractual expenses representing 28% and 21% of the annual operating costs, respectively (see Figure 1).

Economies of Scale

There is a certain amount of overhead that is necessary to provide network services to a college campus regardless of the size of that network. This is most commonly reflected in the number of staff in the network services area. Correspondingly, we would hope that economies of scale would result in lower unit costs as more devices are connected to the network. The data from the 21 schools supports this hypothesis. While variations exist, lower unit costs appear to be achieved for used ports and the costs per institutionally owned computer (see Figures 2, 3) as the number of ports, and computers increase.

Outsourcing

Colleges rely on outside organizations to deliver some portion of their network services, the most frequent being hardware and software maintenance and Internet connections to and from the campus. How are the unit costs associated with providing these services affected by the reliance on outsourced network services. The data for these twenty-one institutions does not support any significant difference among the unit costs for outsourcing versus in-house approaches (Figure 4).

Service Levels and Network Complexity

Most campuses described similar service levels for network services. Coverage for network outages was generally during "business hours" with some degree of personnel on call in the evenings. All except for three institutions had T-1 connections to the Internet with the exceptions being institutions that were sharing higher speed connections with other schools.

Although institutions had a variety of network topologies, used a variety of equipment, and are supporting a diversity of protocols and hardware platforms, we were not able to discern any way to confidently relate these components of complexity with effects on the unit costs of providing network services. While it seems reasonable to assume that more complex networks would exhibit higher unit service costs it is also possible that increased complexity would be reflected in lower service levels.

Some further observations

Our preliminary analysis suggests that the full cost of network services is not yet reflected in the annual operating budget for institutions. Participating institutions are investing heavily in wired campuses, providing high-speed connections to the students in residence halls as well as throughout academic and administrative buildings. Early adopters of networking are now in the process of upgrading their campus network infrastructures to support higher speeds. In general, the costs of upgrading the infrastructure will represent a significant portion (40%) of the on-going cost of providing network services.

As instructional applications of technology become increasingly dependent on campus network and Internet based resources, campus residents will expect their networks to function on a seven day per week, twenty-four hour per day basis. The implications for staff coverage, now generally provided on an informal call-in basis or outsource arrangements, can be substantial. The challenge for campuses will be to define service levels associated with various unit costs. At this point the data collected does not provide substantial insight into the relationship between service level expectation and unit cost.

Desktop Repair Services

Maintaining desktop computer equipment (computers and printers) has become a regular part of providing IT services and the twenty-one institutions that contributed data have been providing this service in two basic ways - using significant outsourcing or repairing equipment using their own staff. The data elements requested were basically the same as for network services, with ports replaced by computers. Institutions were instructed to report only the costs of providing repair of institutionally owned computers and printers and not to include costs or revenues related to repairing personal equipment or internally charging departments for repairs. Since this service focuses on maintaining existing desktop equipment, no replacement cycles were requested. A summary of institutional characteristics appears in Table 6.

For all participating institutions, staffing levels are generally low, averaging one person per institution. On average, salaries, materials and contractual arrangements, make up 42%, 26%, and 20% of the annual budget, respectively (Figure 4), but these averages mask some significant variations among the institutions in terms of budget components.

A summary of the cost per (institutional) computer appears in Table 7.

Economies of Scale

The data collected supports the general conclusion that economies of scale result in lower unit costs/computer as the number of computers being serviced increases (Figure 5). Through a variety of approaches six of the institutions, with varying size populations of computers have been able to achieve unit costs for repair in the range of $ 50/computer per year. The average for the entire group was approximately $100/computer.

Outsourcing

There are significant differences among the twenty-one institutions that submitted data for desktop repair services in the way they provide this service. Nine of the institutions provide this service totally in-house using no contractual services. Three colleges use some minimal contractual services (less than 5% of the budget), leaving nine institutions that do more substantial outsourcing (>5%). On average the two groups (more than 5 % outsourced) and (less than 5% outsourced) differ by about twenty percent with the in-house group averaging $116 per computer and the outsource group averaging $ 89 per computer. It should be noted that the data exhibits considerable variation within groups (Figure 6).

Service levels and complexity

It was difficult to relate the service level associated with various unit costs, as most institutions do not maintain detailed records on the time-to-repair for desktop equipment. Service levels were generally stated as something like

One recent study on technology support comparing technology support in educational institutions and business environments suggests that "When an educational PC fails. it simply gets taken out of service for several days. A business computer is usually repaired within a matter of hours. Therefore downtime for educational computers is two to three times higher." ["Understanding the Total Cost and Value of Integrating Technology in Schools, International Data Corporation, 1997]. This is more likely to be true for public and departmental computer labs than for equipment on faculty or staff desks.

While participating institutions report generally similar expectation levels for equipment repair we suspect that there is considerable variability in meeting these expectations, but no data was submitted to confirm or deny this hypothesis.

Institutions in the study generally supported both Macintosh and Windows desktop environments and alluded to a range in age of equipment on campus. We were not able to confirm or deny the hypothesis that a less diverse hardware environment would result in lower unit costs.

Some further observations

Desktop computer maintenance is an essential service in any technology environment not only for institutionally owned equipment, but also for the increasing number of computers being brought to campus by students. A number of institutions indicated that they have been able to provide repair services for students and in doing so generate sufficient income to subsidize the maintenance of institutional equipment. The potential for lowering net unit costs by providing repair services to students might be examined in more detail, similar to the way colleges are providing telephone services to students and generating revenues in the process from the (re)sale of long distance services.

As the students, faculty and staff of the college become increasingly reliant on technology for teaching, research, learning, and operating the business of the college, expectations for service levels will rise. One participant summarized the expectations at his campus by noting,

Administrative Information Systems

Centralized information systems continue to play an important role in transacting the "business" side of a college. Regardless of the technologies used these systems provide fundamental information that support decision-making by Admissions, Financial Aid, Registrar/Student Affairs, Business Office and Alumni/Fundraising. Support services include systems analysis, programming and operations. Only twelve institutions submitted data in this area and not all institutions are supporting the same collection of applications. Institutions were also inconsistent in accounting for leasing costs, or annual replacement costs for the server. We eliminated these categories from the annual budget. As a result, our conclusions are tentative. Three of the twelve institutions are using in-house developed software, while the other nine are using packages from software vendors. The major components of the annual budget for this service area includes salaries (69%), software maintenance (13%), supplies (7%), and hardware maintenance (6%) (Figure 7).

Economies of Scale

The basic functions performed by an administrative information system are similar across small institutions. For most of the institutions, the total cost of providing this services falls in a narrow band, from $ 225,000 – $ 325,000 (Figure 8). Therefore, regardless of size there is a certain amount of overhead that is necessary to provide basic administrative support services. Thus we would expect to see evidence of economies of scale reflected in unit costs that decline rapidly as the number of units increase. This is evidenced by the data (Figure 9).

Outsourcing

The usual notion of outsourcing, that is, contracting with a company to provide the development and management of administrative information systems is not common in small institutions, and was not the case for any of the institutions that were part of this study. However, a common issue faced by all colleges is whether to develop software in-house or to license integrated packages from a software vendor. Nine of the twelve institutions have chosen this second route. It is commonly believed that institutions choose this approach with the goal of increased functionality, higher levels of support, minimizing the need for technical support staff, etc. Among the twelve institutions the average staff size is smaller for the institutions that license integrated packages, but the unit costs are higher (Table 10)

 

Averages	In-house	License
FTE Staff	5.6	4.5
Cost/Employee	$465	$635
Cost/Student	177	184
Cost/User	127	142

 

With a small number of colleges participating in the COSTS project thus far, it has not been possible to develop benchmarks for unit costs that we can be confident are useful across institutions, even among a variety of small colleges. However, the simple analyses we have done provide valuable insight and point to some interesting avenues for further investigation. In particular, relating unit costs to service level expectations is particularly promising for understanding the differences exhibited by institutions and has the potential to help identify exemplars for further study.

Further progress is dependent upon a substantial increase in the number and variety of institutions willing to make the effort to be introspective about their IT support services. The project goals are focused on developing a common understanding of campus IT support needs. In the era of the "support services crisis" a better understanding of our options is essential.

Figure 1. Network Services – Budget Components

Figure 2. Network Services – Cost Per Used Port

Figure 3. Network Services – Cost Per Institutional Computer

Figure 4. Desktop Repair Services – Budget Components

Figure 5. Desktop Repair Services – Cost Per Institutional Computer

Figure 6. Desktop Repair Services – Cost / Computer – Outsourcing versus In-house

(note: In gray scale, blue = light gray)

Figure 7. Administrative Information Systems – Budget Components

Figure 8. Administrative Information Systems – Total Cost

Figure 9. Administrative Information Systems – Cost Per Institutional Computer