The Cost of Technology: Total Cost of Ownership and Value of Investment - Rich Kaestner

SchoolDude University 2009

Total Cost of Ownershipand

Value of Investment

CoSN K-12 Leadership Initiatives

Rich KaestnerCoSN TCO/VOI Project Director


Consortium for School Networking Mission and Values

CoSNWashington DC based non-profit organization

Serving K-12 technology leaders who through their strategic use of technology, improve teaching and learning.

The primary challenge we face in using technology effectively is human, not technical. For that reason, CoSN focuses on Leadership and Policy.

Supported by institutional, individual, and corporate members

Free and member resources; annual conference in March


Areas of Investigation


CoSN’s TCO and VOI Projects

Understanding Where You Are (TCO),

and

Helping to Plan Where You Are Going (VOI)


Total Cost of Ownership (TCO)

• A methodology for determining all of the costs for implementing and maintaining networked computers

“ ‘Would you tell me, please, which way I ought to go from here?'‘That depends a good deal on where you want to get to,' said the Cat.”

Lewis Carroll’s “Alice in Wonderland”

• It’s difficult to determine your technology direction if you don’t understand current costs


Why CoSN’s TCO Project

• School leaders didn’t understand how to plan for the long-term costs of managing technology

• Increasing complexity of networks makes understanding ongoing TCO more important

• Schools need to manage networks to avoid backlash against educational technology


TCO Focus• Help Identify all of the costs of acquiring

and maintaining a networked computer environment– Direct technology and labor costs– Indirect (end-user) labor costs

• Know where you are so that you can plan• Understand costs to drive efficiencies• Reassure constituents that dollars

are being used wisely


Major Problems:IT Staff is Spread Too Thin

– 54% say half of workload is reactive, rather than proactive

– 55% say first area of need is more staffing for curriculum integration

– 60% couldn’t complete software installations in a timely fashion this year

54%55%

60%

Reactive not proactive Workload

Need more staff for curiculum integration

Couldn't complete software installatiionson time

Pct. of Respondents

Source: Unique Challenges Facing the IT Professional in Education ©2007 eSchool News


The Unique Challenges Facing theIT Professional in K-12 Education

K-12 schools have less than optimal IT staff levels

• Mean number of computers per technician: 550• During the past school year, 60% of those surveyed

were unable to complete all software installations in a timely manner; 21% hired contractors to help.

• 49% of those surveyed said that the school board understands the importance of IT as it relates to the overall goals but is not as supportive of it financially; 8% felt that their school board did not feel IT was important to the overall goals.

www.schooldude.com/IT_Report/


CoSN’s Taking TCO to the Classroom

•Launched June 1999•Includes:

–Web-based TCO assessment tool developed by CoSN and Gartner (U.S. Schools Only)–8 TCO Case Studies (plus 3 One-to-one Studies)

www.classroomtco.org


CoSN-Gartner TCO Tool: Output

• Total Costs – summary of direct and indirect district and per client costs

• Asset Metrics – breakdown of pervasiveness of client computers

• Asset Cost Metrics – amortized costs of computer and network hardware

• Direct Labor Cost Metrics – overview of district-wide and per client direct labor costs

• Direct Labor Staffing Metrics – illustrates number of client computers supported per support staff and average support staff costs


Analyzing Your Results

• A low TCO in any category is not necessarily good, and a high TCO is not necessarily bad

– Old or donated client computers reduce hardware costs, but…

• Case study high/low values help you to flag areas that require inspection


Measuring the Value of Investment

TCO is key to knowing your current costs (Where you are) and helps to anticipate future costs

But…

How do you determine the value of proposed investments (Which way to go)?


As Yogi Berra said…

• “When you see a fork in the road, take it.”• “If you don’t know where you’re going,

you’ll wind up somewhere else.”

• In response to, “Hey,Yogi, I think we’re lost,”he replies, “Yeah, butwe’re making great time.”

Where are you going?


Measuring the Value of Investment (VOI)

•A CoSN Leadership Initiative•Methodology to Help Schools Determine Costs and Benefits of Proposed Projects

•Includes Project Cost Estimator and Benefits Worksheet

www.edtechvoi.org


VOI and the School MissionThe business of schools is education

• Value of Investment = Total benefit towards school mission or goals vs. Anticipated costs of project

– ROI (used by business) is only effective as it allows resources to be diverted to school mission

– Need to determine and measure qualitative benefits

Costs can be estimated –

Measuring benefits is more difficult


Why Measure “Qualitative” Benefits

• Evaluate proposed projects– Projects competing for funding

• Sell a proposed project– Specifically, what we expect to accomplish

• Succinctly describe or justify a project– Specific terms

• Sustain a project– Going back for continued funding


Methodology Determining Costs and Benefits

1. Estimate project costs (Project TCO)2. Subtract and $ savings for net cost 3. Measure (score) benefits

• Align with school mission, goals, mandates• State in measurable terms• Effect of project on applicable goal(s) (+ or -)• Importance of affected goal

4. Assess risk5. Weigh anticipated risk-weighted benefits vs. estimated

net cost. . .

6. Was it worth it? - Evaluate Results• Actual costs• Actual benefits


3 VOI Case Studies

• Online Learning - Wisconsin District with 5000 Students

• Formative Assessment – Iowa District with 31,600 Students

• One-to-one Computing – Arizona District with 2,400 Students


1. Estimate Project TCO

Budgeted Costs• Initial & Implementation Costs• Ongoing costsReal Costs for Real VOI• Includes indirect labor for Project TCO

CoSN


2. Calculate Estimated Savings

Out-of Pocket Savings

User Productivity Enhancements

Cost Avoidance

Revenue to the District


3. Measure (Score) Benefits$ Savings have been covered…

Now determine Qualitative Benefits (The business of schools is education)

• State benefits in measurable terms• Tie project benefits directly to school or district

mission, values, goals, mandates• If evaluating 2 or more projects:

• Importance of the value, goal, mandate• Effect of the benefit on this value, goal, mandate


Project Benefits Worksheet

• Download (Excel .xls format)• Enter school/district mission, goals, mandates,

values• Assign relative importance• Align measurable project benefits with these

goals• Consensus effect of each project benefit on

the goals (+ or -)• Project score is calculated

CoSN


School or District Importance Anticipated Project Benefits* Effect* Score $Mission, Goals and Mandates 1 - 10 -10 to +10(Calculated) Savings

Raise one-to-one student math scores from 57% passing to 62% passing by 2011 4 28Raise one-to-one student language arts scores from 55% passing to 62% passing by 2011 3 21Increase graduation rate from 87% to 94% for this graduating 9 45

5.0 in 2011

90% of students will graduate with measured proficiency in the following 21st century skills by 2013: 5 40

Teamwork and collaboration (imbeded in social studies core) Higher order thinking (imbeded in math and science core) Communication and presentation (imbeded in social studies and language arts core)Each student will have 24/7 access to a computer, software image and internet 3 27Gap on standardized math for minorities will close from 8% to 4% by 2011 2 18Dropout rate for minority students will decrease from18% to 8% by 2012 2 18Close gap on standardized test scores for students wit disabilitie from 8% to 3% by 2012 1 9

Total Score and Dollar Value for this Project 206 $0Risk-weighted Dollar Value and Score for thei Project 0 $0

Provide equal opportunity for all students

9.0

Keep students in school through graduation

State in Measurable Terms (Substitute your specific project goals)

Perform within top 25% of schools in the state

Prepare students for workforce and college success

7.0

8.0


4. Assess Project Risk

Consensus of probability of success

• For project evaluation purposes only:– Apply to $ savings– Apply to qualitative benefits score


5. Evaluate Benefits vs. CostCompare projects competing for the same

funds• Student laptop pilot project

– Score 46 vs. cost of $53,000Bang for the buck = .87 score/$1000

• Upgrade and Refurbish auditorium and stage– Score 35 vs. $83,000

Bang for the buck = .42 score/$1000

Confidently articulate costs and benefits in measurable terms


Don’t Evaluate Technology in a Vacuum

Schools need to understand their educational goals and how technology will support their goals – something a TCO assessment and Value of Investment (VOI) project assessment helps to clarify

“Success” should ultimately be measured by whether the educational goals have been met

The business of schools is education


Thank You CoSN TCO/VOI Project Sponsors!


TCO/VOI Resources

• http://www.classroomtco.org– CoSN-Gartner Tool, Data definitions and case studies– White papers and presentations– Additional tools and resources

• http://www.EdTechVOI.org– Articles and presentation– One-to-one case studies– Technology Project Cost Estimator– Project Benefits Worksheet

• Support: [email protected]

The Cost of Technology: Total Cost of Ownership and Value of Investment - Rich Kaestner

Education

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