2024 EDUCAUSE Top 10
#9: Balancing Budgets

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Costs tend to increase rather than decrease, but technology expenses are shooting up much faster than usual. Inflation, supply chain disruptions, and a strong job market are the primary culprits. Technologists are in particularly high demand. The Dice Tech Salary Report for 2023 found that the average technology salary had increased by 2.3 percent in 2022 but that increases for the ten jobs with the greatest salary growth ranged from 6.1 to 15.6 percent.^Footnote1 Inflation is moderating, and that may continue in 2024, but weather disasters as well as global conflicts and competition may continue to destabilize supply chains.

The history of interactions and partnerships between higher education and corporations has been uneven. At the best of times, institutions and companies form enduring partnerships that benefit both. Companies get brand-building access to students as an emerging market, a reputational lift by associating themselves with a trusted industry, and in some cases, opportunities to work with brilliant faculty. In return, institutions can get prices even lower than the standard educational or nonprofit discounts, direct access to corporate leaders and senior engineers, and the opportunity to influence developing products and services.

These are not the best of times. Many CIOs still have trusted relationships with various companies. But many are also receiving invoices with jaw-dropping price increases of 10-20 percent or more for software licenses, cloud services, and other solutions, often with relatively short notice. After navigating the rather difficult transition from CapEx to OpEx funding to move from institutional solutions to SaaS, IaaS, and other cloud solutions, technology and procurement leaders had been managing a relatively stable renewal process until now.

Other industries swallow expense increases by passing them on to their customers. Not so higher education. Students, legislators, and the media are already impatient and unhappy with the cost of a college education. This is no time to seek double-digit increases in the technology budget, especially with no ROI beyond "keeping the lights on" to offset them.

The Promise

Leaders will be very challenged to contain the costs of core technologies, but those who do won't have to reduce services and service levels and defer new investments. They will find it easier to maintain staff morale, which can plummet in an atmosphere of fiscal stringency. They will be able to focus institutional leadership on using technology to benefit and transform the institution.

QuickTakes

Find your friends. Form partnerships with peer institutions to collectively negotiate prices and service agreements. Both sides benefit: institutions have a larger market to offer, and corporate representatives have to work with only a single group rather than multiple institutions.

Consolidate. Now is the time to eliminate redundant licenses and agreements and consolidate technology solutions so the institution has a single point of contact with solution providers.

Negotiate. Work with individual solution providers to eliminate waste, find creative financing and funding options, and leverage your knowledge of the market. If you can, hire or contract with a vendor management specialist who has expertise in contract negotiations.

Get smart. Calculate the ROI and TCO of solutions. Are you really getting good value for your investment? Evaluate the alternatives, such as finding other companies, working with a consortium, leveraging all the value in other solutions you use, or even building your own or doing without.

The Key to Progress

Taking the time to build strong extra-institutional partnerships and relationships with solution providers can help CIOs and vendor management professionals negotiate the most favorable pricing.

From Strategy to Practice

What You're Saying

"We have an extensive data warehouse. Our area tracks monthly usage and overall satisfaction with some tools. We're aware that sometimes we have to make decisions that mean losing some tools that aren't used, even if we like them. Transparency is really important in sharing how and why we make these decisions to keep or remove a tool. More units could use this approach, but many keep adopting tools or requesting adoption and funding without considering the long-term impact."

"What can I say—budget crunch, staff cuts, three pandemic years of no new capital expenditures. We are trying to improve our financial data and budgeting processes/technology to help us make those tough decisions."

"The numbers don't lie, but we have to be at a place where we are willing to accept it. We aren't fully there yet."

Solution Spotlights

"Portland State University has a rich toolset and years of broadly integrated data in the data warehouse with advanced reporting using Cognos and Tableau. Over the next few years, we'll be leveraging this information to make tough decisions, as we've been in a long-term enrollment decline and need to rethink our scope and capacity as a university."

Jerrod Thomas

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"California State University, Sacramento, is evaluating technology and business processes through the lens of our students' experiences. Working collaboratively with all University areas that support students, Sacramento State is developing an effective digital strategy in support of student success, including creating a current state of systems to business processes for each phase of the student's academic journey and identifying potential solutions to address barriers to digital enablement."

Peggy Kay

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"IT service managers in the University of California, Berkeley central IT department conduct quarterly reviews with our IT strategic sourcing and procurement staff to plan for upcoming contract and agreement renewals. These reviews include publicly available information on vendors, internal knowledge regarding their motivating factors, and information gathered from other UC campuses to negotiate either favorable campus agreements or UC system-wide agreements that leverage the full weight of combined spend. In addition to the features and functionality of vendor solutions, the accessibility, security, and resiliency of their offerings are primary considerations when reviewing potential agreements and carry significant weight in the purchasing process."

David Browne

What You're Working On

Comments provided by Top 10 survey respondents who rated this issue as important

Analysis and data

• Cost analysis for IT and budget reevaluations utilizing Workday spending and vendor management.
• Removing the covers and exposing our CapEx and OpEx spending with all levels of my team. Sharing the information and driving real tangible results in the performance planning and development. Doing encourages new and different and challenges the infamous "because we've always done it that way" mentality.Everyone is part of the problems and the solutions.
• Not exciting, but total review of all IT cost areas, to a granular level, and determining if said items are still necessary or can be replaced or eliminated. All vendors being called in to describe and justify how the product or service is currently used in the institution.

Changing budget models

• Creating an investment-based budgeting model to help leadership understand the full cost of services and choose which ones we can afford in any given year.
• We have lifecycle budgets in place to replace and enhance IT infrastructure.
• Implementing technology spend management. Rethinking the IT funding model.
• We performed zero-based budgeting two years ago, managing budget process through formal governance (local and institutional).

Consolidating services

• First, we are starting with standardizing and simplifying what is offered as services to our constituents. After this, we will evaluate what is the most cost-effective approach to deliver these services securely from anywhere, anytime using any device. Ultimately, our goal isto focus on services and solutions that will improve success for all of our constituents: students, faculty and staff.
• This year's strategic plan specifically challenges the organization to identify and retire out-of-date and no longer efficient services.
• Utilizing umbrella contracts so we can reduce administrative time with T&C's and negotiations.

Governance

• Set up a university-wide IT operating model that includes enterprise architecture. Established university-wide senior governance for all major IT projects.
• Planning all vendor contracts a year in advance so that negotiation and cancellations can occur.

Partnerships and collaborations

• We are re-exploring opportunities to collaborate and leverage consortium relationships with peer institutions.
• Creating strategic partnerships with procurement and other campuses.
• Reviewing current contracts, consolidating, and possibly collaborating with other institutions to have a bigger impact on cost reduction.

Procurement software

• We have been implementing a new technology business management model focused on removing the former campus funding transactional mechanisms that deterred collaboration and engagement.

Technology and sourcing changes

• Bringing more services in-house.
• We have outsourced the evening part of our e-learning helpdesk service to an external vendor.
• We have reduced our IT infrastructure costs by implementing cloud-based solutions. Recently, we conducted a study on the cost of migrating everything to AWS and the savings we can expect to achieve over the next five years for the college.
• We have created a process where we "bill the institution" for software cost increases, essentially treating software like utilities.

Vendor management and negotiations

• We are approaching three-year models to control the vendors along with adding more stringent up-front contracts.
• Working with individual vendors on creative financing and funding models.
• Reviewing existing licenses and eliminating waste.
• Determining outcomes of expenditures realistically.
• Working with vendors to lower pricing and being active, knowledgeable consumers when comparing services and prices.
• Negotiating vendor contracts.
• We have hired a software license supply chain manager who is an expert in contract negotiation.

Note

1. The Dice Tech Salary Report, 2023 Edition. Jump back to footnote 1 in the text.↩

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Brian Henderson is CIO, Director of Digital and Information Services, University of Aberdeen, United Kingdom.

Carol Smith is CIO, DePauw University.