ACUTA 2013 04 Funding IT Economic Perspective

ACUTA Annual Conference

April 2013 1

PENN STATE

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• 1 University – 24 Locations

• ~$4.3B Total Operating Budget

• + 85,000 Students

FY12/13 OPERATING BUDGET

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• General Funds: $1.95B

• Hospital/Clinic: $1.27B

• Restricted Funds: $0.66B

• Aux. Enterprise: $0.36B

• Ag Federal: $0.02B

FUNDING FY12/13 – GENERAL FUNDS

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Excluding Hershey & Penn College

IT SPEND AT PENN STATE

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• IT Assessment – 2010 ~$250 million associated with IT Spend or ~6% of

the Operating Budget

ITS 33%

Budget Admin

67%

FUNDING IT – CONCEPTS

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• Funding IT services is NOT about identifying new funds

Tuition Student IT Fee Technology Access Fee Other

• ONE UNIVERSITY! Working towards a common mission

o Education oResearch oOutreach

FUNDING IT – CONCEPTS

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• Funding IT services is about efficiently allocating a limited resource

• Influencing behaviors Informed Decisions

IT Service Consumer

IT Service Provider

BRING IN THE ECONOMICS

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+ Economies of Scale + Research/Resources

– Slow to respond to changes in demand

– Requires strong governance to be effective and efficient

ECONOMICS - MONOPOLIES

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+ Drives Innovation + Responsive to changes in demand – Duplication of effort/resources – Needs to be truly “open” to be efficient

ECONOMICS - COMPETITION

WHERE IS THIS ALL GOING?

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Monopoly vs. Competition Central IT vs. Decentralized IT

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Funding IT is about influencing the behaviors of the service consumer and service providers which best serves the institution.

• Efficient resource allocation and use

• Maximize benefits and impact to meeting business requirements of institution

RELEVANT TO IT FUNDING – HOW?

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FUNDING APPROACH

Behavior Funding Characteristic Efficiency

Driver

No Consumer Choice

• IT services that everyone is

required to use

Service Provider Monopoly Governance

Consumer Choice

• IT services that units choose

to use must be paid for or

cost shared with the units

Service Consumer Competitive Market

Place

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APPROACH TO HOW TO FUND IT

Compliance/ Life Safety/ Risk

No Consumer Choice

Centrally Fund Service Provider

Core/Enterprise Service

Potential Consumer

Choice

Shared Funding – Central & Unit

Competitive/ Differentiated

Service

Consumer Choice

Consumer/ Unit Funded

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PROPOSED @ PENN STATE Type of Service Target Behavior Optimal Funding Examples

•Compliance

•Life Safety

•Risk Mitigation

•Near Complete

Adoption

•No variability due to

differential priorities

•Centrally Funded •Payroll/Financial

•Video Surveillance

•Student Systems

•Core-Service

•Substantial Adoption

•Disincentive to

duplicate service

•Leverage Economies

of Scale

•Centrally Funded

•Technology Fees

•All units participate

regardless of

usage

•Wireless Networks

•Voice

•E-Mail

•Storage

•Server Hosting

•Data Center

•Differentiated

Service

•Meet specific and

unique business needs

•Options spur

innovation

•Funding provided

to unit for

discretionary

decisions

•Department

specific software

•Edge networking &

computing

OTHER CONSIDERATIONS

• Optimize the effective and appropriate use of IT funding sources

Develop a common set of principles for all budget executives to use for IT funding and costing decisions

• Effective IT Governance is critical

A governance board without budgetary authority is just an advisor board.

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SERVICE PROPOSAL Project Name:

Person Submitting

Proposal:

Sponsors:

Stakeholders

Project Category ( ) Enterprise System

( ) Instructional Technology

( ) IT Service

( ) Research

Technology

( ) University

Services

Mission Critical ( ) Provides Competitive

Advantage

( ) Prevents Competitive

Disadvantage

( ) Address compromised operational

efficiency or customer dissatisfaction

( ) Provides significant incremental

revenue or cost savings to the

University

Nature of Project ( ) Renovation

/Enhancement of existing

system/process/asset

( ) Replacement of existing

system/process/asset

( ) Initiation of new system/process/asset

Core Mission ( ) Academic/Student ( ) Research

( ) Other

( ) Service

( ) None

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SERVICE PROPOSAL University Strategic

Goals

( ) Enhance Student

Success

( ) Advance Academic

Excellence

( ) Global University

( ) Access/Affordability &

Diversity

( ) Serve Commonwealth

and Beyond

( ) Control Costs

& Generate

Efficiencies

Compliance ( ) Internal Mandate ( ) External Mandate ( ) No Mandate

Business Need &

Project Goals

Consequences if

Not Funded

Sectors of University

Impacted

Benefits

Risks

Budget

Requirements

Personnel

Requirements

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Year 1 Year 2 Year 3 Year 4 Year 5

1.0 Research, Development, Test and Evaluation

1.01 Development Engineering

1.01.1 In-House Labor

1.01.2 Vendor/Contract Labor

1.02 Development Equipment

1.02.1 Hardware

1.02.2 Software/Application

1.02.2.1 COTS/Vendor

1.02.2.2 In-House Labor (Mod/Change)

1.03 System Engineering/Program Management

1.03.1 Labor

1.03.2 Systems

1.04 System Test and Evaluation

1.04.1 Labor

1.04.2 Systems

1.05 Development Facilities & Infrastructure

1.06 Training

1.07 Other RDT&E

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2.0 Production Procurement & Implementation



2.01.2 Systems

2.02 System Changes/Modifications



2.03 Production Equipment

2.03.1 Hardware

2.03.2 Software/Application


2.03.2.2 In-House Labor

(Mod/Change)

2.04 System Test and Evaluation (Production)

2.04.1 Labor

2.04.2 Systems

2.05 Facilities & Infrastructure

2.06 Training

2.07 Activation/Implementation

2.08 Other Procurement & Implementation

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3.0 Operations, Maintenance & Support (OMS)



3.01.2 Systems

3.02 System Maintenance & Operations



3.03 Production Equipment

3.03.1 Hardware Maintenance

3.03.1.1 Spare

3.03.1.2 Maintenace Spt/Contracts

3.03.2 Software/Application Maintenance


3.03.2.2 In-House Labor (Mod/Change)

3.04 Facilities & Infrastructure

3.05 Training

3.06 Other OMS

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• Monopolistic => Fund the Service Provider

• Competitive => Fund the Service Consumer

FUND IT BASED ON DESIRED OUTCOME

ACUTA 2013 04 Funding IT Economic Perspective

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