CSG Short Workshop: Metrics and Activity Based Costing & Measuring the Value of IT to the...

CSG Short Workshop: Metrics and Activity Based Costing & Measuring the Value of IT to the Institution

Brad Wheeler & Laurie Antolovic, IU

Bernie Gulachek, Minnesota

Dennis Maloney, UCB

What is right approach?

Measuring the value of IT Best practices for measurement and metrics How does $$$s translate into value? How to convey IT value to the institution? How to develop organizational discipline

around the value position? Aligning with mission – is IT acculturated? Impact analysis of methodology Lots, lots more

Understanding the Value of IT

Defining Value Realizing Value Structuring the Value Discussion Metrics

Educause Quarterly, November 2003

Workshop Format

Setting the stage IU, Activity Based Costing UM, Institutional Strategic

Alignment Workshop exercises = you work

2 applications of presented tools Wrap-up

What do we take-away???

Jeopardy Question #1

Author of “IT Doesn’t Matter”

Nicholas Carr

Bonus Question: What is the Value of IT?

Jeopardy Question #2

IT Metrics

What is one important component in demonstrating value of IT?

Jeopardy Question #3

Organizational Performance, the Impact of Project Initiatives, and Strategic Alignment.

What are additional components to determining IT’s value to the Institution?

Here’s Brad and Laurie…

Metrics, ABC, and the Value of IT to the Institution

Laurie Antolovic’Chief Administrative & Financial Officer

lantolov@indiana.edu

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Brad WheelerChief Information Officer,

Dean, & Professor

bwheeler@indiana.edu

Annual Planning Processes

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Financial

Activity-Based

Costing175 Services

10 Years of Data

User Quality ofServices Survey

2000 Surveys40% Response

Data Collection

DivisionalReview

Fiscal Year

QuarterlyDivisionalReview

QuarterlyDivisionalReview

CampusesBudget

QuarterlyDivisionalReview

Internal BudgetPreparation

Compilation & Reporting

Release AnnualUser Survey

Analysis &Reporting

Divisional ActionsResponding to

User Survey

CIO Cabinet Review..Continuous Interaction with Schools, Faculty Council, Committees, External

AnnualObjectives

CIO Cabinet Assessment Assessment Assessment

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Pruning & Reallocating

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UITS

EXPENDITURE REVIEW COMMITTEES

BASE FUNDS REALLOCATED

TOTAL

ERC 1 FY 1998 2,500,000$

ERC 2 FY 2002 600,000$

ERC 2.1 FY 2003 467,000$

ERC 3 FY 2005 2,182,000$

ERC 4 FY 2007 1,300,000$

7,049,000$

ERC 4 FY 2007 ~ 5% of base

to 2011

•Network Security

•Wireless

•Podcasting

•Disaster Recovery & Business Continuity

•Massive Research Data Storage

•Mobility Services

•Licensing Cost Increases

•More IT Classrooms

•High Performance Computing

•24 Hour Support

The Expenditure Review Committee process trims budgets for reallocation to new priorities. Formal proposals request funding for new needs.

Unending New Imperatives

…

Networks

Ownership

CMS

Wireless

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Outcomes: Information Technology Trends at Indiana University

Technology ClassroomsStudents and faculty reported an increase

from 18 to 29 hours/week in using technology over ~3

years

◊ WirelessWireless coverage of academic and informal learning areas increased from 1% to 95% in 3 years

◊ CMSCourse management system adoption increased with 88% of students and 80% of faculty using Oncourse by 2005

◊ NetworksClassrooms and residence halls’ network connections increased to 100% by 2003

◊ UsageReported computer usage increased by 10.6 hours per week in 3 years

◊ ClassroomsAll of IU’s 640 Registrar-scheduled classrooms will be enhanced with technology by 2007

◊ OwnershipPersonal ownership increased 53% in 14 years, to 96% of users reporting computers in their residence by 2006

Modernization and Lifecycle replacement

Indiana UniversityInformation Technology Strategic Plan, 1997 - Present

Garland C. Elmore, Indiana University, 2007

Activity Based Costing

Workshop

© 2007 Trustees of Indiana UniversityCreative Commons Attribution License 2.5

Financial and ABC…Different Purposes

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Service Owners and Providers

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Uses and Value of ABC

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In a business organization, Activity-based costing (ABC) is a method of allocating costs to products and services. It is generally used as a tool for planning and control. (from Wikipedia)

Example #1:Support Center Services

Establishing the Cost of a Service

See Handout Example

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Cost of Support Center Activities

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+ Personnel

+ Direct Costs

+ Suppliers (internal service providers)

= Fully-burdened Cost

Divided by unit = Service Unit Cost

see spreadsheet example…

Breakout Exercise #1

Establishing the Cost of a Service:

What is the Cost of Support Center Activities?

Download File from CSG Agenda Website

support-center-exercise.xls

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Cost of the Support Center?

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• Multiple Components of Support• Chat Online Services• E-Mail Consulting• Knowledge Base• Online Support Services• Student Orientation• Telephone Consulting• Walk-in Consulting

Breakout Activity

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• Work in groups of 2-3

• Complete the worksheet using the information on the ‘Data’ tab

• Derive the cost of each support activity based on cost allocation worksheets

• What is the total cost of the Support Activity?

• What are the costs per unit of activity?

Exercise #1

Discussion and Questions

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Exercise #2

Managerial Decisions Using ABC Reports

Messaging

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Breakout Activity

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• Work in groups of 2-3• What conclusions, if any, do you draw from

the Messaging Service 5 year information?

• Which ‘Activity Measures’ are the most useful? Why?

• Assess User Satisfaction Scores relative to costs.

The IU Experience

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• Based on BUDGETS (annual rollover) rather than ACTUAL costs

• Cash basis….works fine for steady state with life cycle equip replenishment

• Provides very useful information

• 1 FTE staff person per year

• Forces healthy dialogue within

• Excellent communication tool

Exercise #2

Discussion and Questions

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Implementing ABC?

Why? How? When? Who?

See ‘cause97.ppt’ Tutorial on CSG Site

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See Also

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• Wikipedia: Activity-Based Costing

• IU ABC Reports at http://www.indiana.edu/~uits/business/report_on_cost_and_quality_of_services.html

• Handout files on CSG Website

Here’s Bernie