Bucking the Trend

Insourcing Technology

Robert M. Kuhn, Ph.D.

Executive Director of Technology

Simmons College

Copyright Robert M. Kuhn, 2005. This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright statement appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author.

Agenda

• Why outsource?

• Remember 1998

• Choices 1998

• Environment 2003

• Choices 2003

• Conclusions

Why H.E. Outsources

Primary Reasons to Outsource

0 10 20 30 40

Lack of In-house Skills

Operating Efficiencies

Cost Savings

Access to Innovative Services

Other

Percent of RespondentsHassett, et al., IT Outsourcing in Higher Education, ECAR, 2002

Benefits of Outsourcing

0 5 10 15 20 25

Access to Superior Technical Solutions

Lower Risk

Cost Savings

Better Functionality

Streamlined Operations

IT Staff Reduction

Percent of RespondentsHassett, et al., IT Outsourcing in Higher Education, ECAR, 2002

Remember 1998

Compensation for recent IT graduates:

• Starting salaries of $40,000 – $60,000

• Up to $10,000 signing bonus

• Immediate stock options

Computerworld June 22, 1998

Remember 1998

$74,605

$57,557

$74,915

$52,905

$63,048

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Senior IT Manager

Net. Mgr/Director

Other IT MgmtIT Staff

Overall Average

Total Compensation, 1998

Castronuovo et.al. Net Worth, Network World, Nov. 1998

Remember 1998

9.59.4

10.3

10.9

10.1

8.5

9

9.5

10

10.5

11

%

Senior IT Manager

Net. Mgr/Director

Other IT MgmtIT Staff

Overall Average

Average 1997-98 IT Pay Increases

Castronuovo et.al. Net Worth, Network World, Nov. 1998

Simmons College

• Four-year, private, non-sectarian undergraduate women's college with a comprehensive liberal arts and professional curriculum

• One of New England's most successful undergraduate programs for adult women, the Dix Scholars Program

• Co-ed graduate programs in health studies, education, liberal arts, communications management, social work, and library and information science

• MBA program designed specifically for women

Simmons Students

• 1,823 undergraduate women students

• 2,500 graduate women and men students

• 20% self-reported: African American, Latina, Asian, Native American, and multi-racial students

• 7% international students

• 40 states and 39 countries represented

Simmons College, 1998

Major immediate challenges:

• Terminal based email

• Computers: eclectic and quaint

• Slow network

• Deferred major ERP upgrade

Simmons College, 1998

• ½ person for technology support

• 4 wired classrooms

• 0 classes with an online presence

• 0 remote access to online library resources

• 0 residence halls wired

• 797 total computers on campus

Outsourcing Decision

• Need to build quickly

• Employment climate, 1998

• “Booster rocket”

• Vendor Selection:– Higher Ed experience, particularly

implementing infrastructure– Neutral w.r.t. HW and SW choices– Expertise with ERP (Datatel)

Organization ’98 – ‘03Office of Information Technology

Outsourced Management

Web Design

AV/Media

Lab Management

Training

Faculty Dev’t

Academic Technology

Internal Management

Admin. Comp

Networking

Help Desk

Organization ’98 – ‘03

Admin. Comp

Networking

Help Desk

Office of Information Technology

Outsourced Management

Existing group and manager augmented with 2 outsourced technical personnel

New group created, outsourced manager + technical person, largely Simmons staff

2 existing personnel, group formed, outsourced manager + 2 technical personnel

Outsourced Director, Simmons admin

Financial Commitment

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

FY 93 FY 94 FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04

Simmons

CLAC

IT Spending as % of Operating Budget

OIT Org. 2003

Exec. Dir.

Manager

PCSupport

PCSupport

MacSupport

PCSupport

PCSupport

Assoc.Dir.

Prog./Analyst

Prog./Analyst

Prog./Analyst

AdminAss’t

Operator

AdminAss’t

Trainer

Tech. Dir.

PCSupport

UNIXSystems

TelecomMS

Systems

UNIXSystems

Network

Help Desk Network Admin.Comp.

Snapshot 2003

After (2003)• 20 technology support

staff• All 45 classrooms wired• 542 courses online in

Fall 04• 8 million accesses to

library databases • Every room wired • 1,867 total computers on

campus

Before (1998) • ½ person for technology

support• 4 wired classrooms• 0 classes with an online

presence• 0 remote access to online

library resources• 0 residence halls wired• 797 total computers on

campus

Environment 2003

Bureau of Labor Statistics

U.S. Unemployment Rate

5.6 5.44.9

4.54.2 4

4.7

5.86

5.5

0

1

2

3

4

5

6

7

%

Environment 2003IT Salaries Slumping

0

20000

40000

60000

80000

100000

120000

2001 2002 2003

Bonus

Base Pay

Havenstein et.al. IT Feels the Squeeze, InfoWorld, June 2003

Scorecard for Outsourcing

Reasons for outsourcing, redux:

• Lack of in-house skills

• Access to: – Innovative services– Superior tech. solutions

• Cost Savings

• Op. efficiency/Streamlined Ops

Mitigated

Did not eventuate

Short term

A wash

Risks

• Societal impacts– Cultural dilution– Mutual suspicion/conflict– Jealousy– Servants of two masters

• Hostages

• Cost

Insourcing Strategy

• Take advantage of economic environment

• Negotiations and alternatives prepared in advance of contract expiration

• Exit strategy prepared when outsourcing– Split Academic & Admin– No group entirely outsourced– Don’t let internal resources atrophy

Insourcing Advantages

• Cost savings

• Unifying

• Managerial simplicity

• Operational efficiency

Bucking the Trend?

0 10 20 30 40 50

All

Public

Private

Research

MA

BA

AA

Percent of Respondents

Probability of Insourcing Currently Outsourced Functions

Hassett, et al., IT Outsourcing in Higher Education, ECAR, 2002

0 10 20 30 40 50

All

Public

Private

Research

MA

BA

AA

Percent of Respondents

Don’t Assume

Hassett, et al., IT Outsourcing in Higher Education, ECAR, 2002

Likelihood of Outsourcing Additional Functions to New Vendors

Conclusions

• Outsourcing isn’t all or nothing

• Outsourcing can be used as a stage in service development

• Outsourcing requires management

• Outsourcing decisions depend on institutional and more general environmental issues

General References

• Compass Consulting International, Inc; Outsourcing, Is It Right For Higher Education Technology Services? http://www.compassconsulting.com/html/articles.html

• Ellen Hassett, Peter Cunningham, Emillia Kancheva, Matt Newsome, Sara Wells; IT Outsourcing in Higher Education; ECAR Research Study; http://www.educause.edu/ResearchStudies/1010

Questions?

Copyright Robert M. Kuhn, 2005. This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright statement appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author.