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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
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Brad WheelerChief Information Officer,
Dean, & Professor
Annual Planning Processes
10
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
15
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
