12 Options for IT Project Financing
While enterprisewide IT projects are generally funded through a central operating budget and approval process, smaller projects may depend on the resourcefulness of the department head or even a professor to get done.
Texas Tech University has an example of the type of multi-layered funding model that many institutions employ. Beginning in the fall of 2003, the university launched an initiative that resulted in a new, more centralized process for requesting, evaluating, and approving IT projects. Called PRISM, for Projects and Resources for Information Systems Management, the initiative stemmed from a need to address a backlog of project requests and a desire to involve functional managers more closely in the decision making, says CIO Kay Rhodes.
Enterprise IT systems shared between sister institutions Texas Tech University and Texas Tech Health Sciences Center are financed through the general budget, under Rhodes’ oversight. For non-enterprise projects, each college or department has its own IT staff in charge of finding funds to cover its needs.
“We work very closely with them, because we share a lot of the same data,” Rhodes says. “But each of those institutions has a different process for providing IT work.”
For the projects they have to pay for on their own, divisional leaders at Texas Tech and other institutions can tap a variety of sources. Sometimes the solution is to work within existing budgets or generate additional funds internally; at other times, they look for external assistance. Here are a dozen options for finding and applying money to IT projects.
1. Budget Dust
When there ends up being some cushion in a departmental budget—perhaps from unanticipated cost savings or a conservative estimate—a small, unplanned IT acquisition might be easy enough to absorb. “Budget dust” is the term sometimes applied to those extra dollars, explains Rodney Tosten, vice president of IT and a professor of computer science at Gettysburg College (Pa.). “If you estimate and plan your projects well, and you execute them well, there might be some dollars that fall to the bottom,” he says.
Consultant Jerry Bishop, founder of The Higher Ed CIO blog, says most cost center managers also have some latitude to apply leftover funds from operating budgets to department-level projects, especially when facing a “use it or lose it” proposition. Flexible spending is more of a challenge when a project becomes a capital expense, Bishops says, since those centrally held capital funds are usually already committed. He also sees budget surpluses becoming rarer these days.
“So much of that slack or flexibility in budgets these days has been squeezed out, particularly in the public sector,” Bishop says. “Everybody is under tight financial constraints right now.”
2. Piggyback Projects
One way to deal with the constraints of capital budget allocations is to attach a small project to a larger one that already has been incorporated into the budget, Bishop says.
An example of this tactic is a project that recently came up in the financial aid department at Gettysburg. Knowing the college was already planning to upgrade its ERP, Tosten worked with financial aid to co-fund its IT project from the same pool.
For piggybacking to be effective as a cost-saving measure, department leaders must communicate with one another about how they are using IT solutions locally, says John Curry, managing director for the Boston office of Huron Education, a division of Huron Consulting Group. In a case involving one of Huron’s clients, for example, it turned out that the same software had been purchased multiple times by individual departments. Substantial money could have been saved by purchasing a group license. “I’d like to see at least some central coordination, if not central funding,” Curry says.
3. Partnering in the Cloud
Cloud computing allows institutions to create pilot programs that several departments can join with minimal financial risk to each participant, notes Shelton Waggener, senior vice president of the nonprofit networking consortium Internet2 and former CIO at the University of California, Berkeley.
“Partnering with another department at your institution is a very good approach, because you both get the exposure you need and you don’t necessarily have to put up all the resources,” Waggener says.
Another bonus in using cloud services is the ability to customize a technology with a few tweaks. One of the hindrances to cross-departmental collaboration on IT projects in the past has been that one department’s system might be too localized to apply to another, according to Waggener.
4. Identity Switch
Another work-around funding tactic is to reclassify the project from an IT initiative to one that is sponsored by the head of the department using the technology, letting the CIO take on a more supportive than leading role, Bishop notes. “I’m from that school of thought that says there are really no IT projects. Even if it’s just upgrading a network, you do that for a particular business or academic benefit. So the project needs to be framed in that context, and that’s the context for the CIO looking more to help the department heads develop the business case for these initiatives.”
In this scenario, the department leader might get help from central IT in doing a cost-benefit-analysis of the project.
5. Technology Fees
Charging students a general fee is certainly not an unheard-of way to fund projects. An Educause Core Data Service study, "Funding-Model Archetypes for Central Information Technology Functions," published in January 2012, found 62 percent of respondents reporting that their institutions charge a student technology fee. Nearly three-quarters (72 percent) of public institutions said they do so, versus 37 percent of private institutions. The median annual fee ranges from $191 for associate’s degree-granting institutions to $370 for non-liberal arts bachelor’s degree-granting institutions. The fees are most often used for education technology, support services, and communications infrastructure.
Seattle Pacific University applies its student technology fee to programs such as the mobile app from Blackboard that features GPS-enabled campus maps, library databases, and course catalogs, according to Blackboard spokesperson Meryl Draper. Students helped guide the design of the app.
6. Internal Grant Programs
While most of the funds generated by student tech fees at the University of Florida are used for enterprise projects, $1 million is set aside as grant money to be distributed to other selected applicants from throughout the university, says Anne Allen, assistant director for academic technology in the IT department.
“We accept applications from anybody in the university community. If it’s a great idea, it can come from a student, faculty member, staff member—it doesn’t matter.”
Initially, university IT leaders expected to focus on awarding four or five grants a year in the neighborhood of $200,000 to $250,000 each. “But people have shown us that some of the smaller grants we’ve funded have made a tremendous impact,” Allen says, citing as an example one $25,000 award that funded a pilot project for the libraries to acquire Netbooks for students to check out. “That was such a success, the library was able to get funding from another source and double the capacity. Student government asked this year that iPads be made available, so we are expanding the program.”
7. External Grants
In 2010, Houston Community College used funds from a Title III grant from the U.S. Department of Education—$1.5 million over three years—to expand the video conferencing system at its Coleman College for Health Sciences, located in the Texas Medical Center, explains William Carter, vice chancellor of information technology at HCC.
The institution also partnered with the city of Houston to obtain a $900,000 Broadband Technology Opportunities Program (BTOP) grant from the Commerce Department’s National Telecommunications and Information Administration. That grant enabled the college to purchase Kindles and iPads for students to check out, as well as to buy other digital resources for its library, such as software, audio books, and headphones.
8. Open-Source Solutions
Gettysburg College uses community-source software for its content management system. “We try to use community-source and open-source software or materials as much as we can,” Tosten says.
Bishop, who is writing a report about the number of free widgets and plug-ins on college campuses, offers this caveat when it comes to acquiring open-source software: “Oftentimes the cost-benefit analysis really doesn’t dig deep enough into the ongoing expenses.” There are other tradeoffs too, he says, such as the acceptance of data mining or advertising from the sponsors.
9. DIY Technology
It’s a strategy that Claudia Myrick, who spent 13 years as an instructional technology coordinator at Belmont University in Nashville, has experience with. “A lot of the portfolio systems and software out there are very expensive and [the academic departments] didn’t have the budget for that,” says Myrick, who is now business development manager for higher education at Panasonic System Communications Company of North America. “We found a way to repurpose some of the technology we already had and kind of make a home-grown solution.”
Houston Community College uses the money-saving DIY approach in another way—by installing most of its own technology and hiring vendors mainly for consulting and cross-training, Carter says.
10. Subscription Sales
Some institutional departments that have developed their own IT solutions are generating revenue—and offsetting maintenance costs—by selling subscriptions to departments on other campuses, says Waggener at Internet2.
Say, for example, that a software engineer in one location creates a program for archiving of library data. In the past, he or she may have distributed that program as open-source code, Waggener explains. A department at another campus would have had to pick up that code, learn it, and run it. “Now that department can simply subscribe to it,” he says. “The home campus generates some funding to allow for further innovation, and the partner campuses reduce their costs ... by subscribing to a solution that’s already available.”
11. Vendor Assists
“Your relationship with your [supplier] partners is extremely important,” says Carter. “If you’re implementing their products well, your partners will come to you and say, ‘How can we help? Is there anything we can do to take you to the next level?’”
Cisco, one of HCC’s longtime vendors, provided $675,000 worth of free consulting to help HCC upgrade its infrastructure and has donated credits to the college for online training. When HCC was purchasing some new Dell Computers, Microsoft approached that vendor offering $30,000 in upgrades for the email servers.
Panasonic, which offers such technologies as digital signage, IR audio equipment and video equipment for lecture capture, has been brainstorming possible funding partnerships with educational institutions, which will in turn help the company promote its product line. “When we’re trying to introduce more of a full educational solution to a campus, we are thinking of ways we can help fund a portion of the purchasing so we can showcase it,” Myrick says.
12. Holding Contests
Some campus organizations have raised money for IT by turning a technology need into a competition challenge.
“You publish some criteria and offer a prize for the lightest weight, fastest application that can solve a certain problem,” says Waggener, who adds that a commercial partner often underwrites these contests. “You’re actually crowd-sourcing your application development, because there is a lot of talent in the community, particularly when you think about a mobile application or a spot function. ... Even if the applications that are built are not immediately usable, you often dramatically shorten the time from idea to execution because they give you the prototype.”
Whether a technology project is spearheaded by the CIO, a divisional IT head, or someone else, funding depends on making a solid business case for the purchase, especially given the current financial stress higher education is facing.
“In the end, the IT project has to stand up and have a real business benefit or operational impact,” says Peter Eschenbach, managing director for Huron Education at Huron Consulting Group in Chicago. “If institutions look at their spending decisions, they are making trade-offs. They are not able to do everything they want to do.”
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