Transitioning from “Cost Center”
Historically, college IT units are characterized as “cost centers,” performing an increasingly critical function for the college’s educational and administrative mission but representing an increasingly expensive part of the budget. IT services across campus have become more expensive as faculty members, administrators, and students have demanded access to the latest hardware and software. IT budgets and staffs are taxed to keep up.
At the same time, many US colleges and universities face increasingly severe problems that threaten their ability to survive. Overall, the cost of delivering a college education is rising, and the price charged for that education is increasingly seen by the public as exorbitant and out of control. Demographic changes, such as a declining number of 18-year old’s and decreasing interest by international students in a US education, have pushed the challenge to crisis proportions. Recently, we have seen an alarming number of intuitions close or look for merger opportunities. Northeastern college closures began with Dowling College several years ago. Mt. Ida College’s closure in the Boston area a year ago brought the issue to the forefront. Recently, the dominoes have begun to fall with announcements at Hampshire College, the College of New Rochelle, Burlington College, New Hampshire Institute of Art, Newbury College, Green Mountain College, and Southern Vermont College. It is becoming increasingly clear that the traditional business model for small colleges, especially small liberal arts colleges, is threatened.
Becoming a Strategic Revenue Center
As college IT units have become increasingly sophisticated, they have developed the capacity to be more than a technological “heat sink.” IT units have the capacity to initiate projects that increase the efficiency and effectiveness of teaching, thereby reducing the costs of student success. Additionally, IT units have opportunities to develop projects that can increase the revenue base of the college. These opportunities clearly move the IT unit from a “cost center” to a strategic revenue center for the college.
This shift in focus is obvious at the very large universities. The development of extensive online degree programs by institutions such as Southern New Hampshire University or Arizona State University or the absorption of a for-profit university by Purdue University clearly bring these universities’ IT units into a different place within the university budget. The University of Massachusetts has recently announced a major initiative joining these institutions in the development of comprehensive online degree programs.
The development of large online universities can be seen, on the one hand, as an increased threat to small colleges. On the other hand, online opportunities are not restricted to large universities. Small colleges with the assistance of creative IT departments are in a position to implement “limited residency” and online programs that can compete with larger universities. The key is finding a niche and a student service proposition that is not being met by the large university programs. FedEx’s Fred Smith is noted as saying: “Who wins the fight between an alligator and a bear depends on where you have the fight.” The same service proposition that served small colleges in previous decades (one-on-one service and programmatic flexibility) can serve them again in the digital age. It will require, however, a clear understanding of comparative advantage and a nimble business plan—one that can be executed on the college’s turf, not that of the large university.
CIO & CFO Relationships
Shifting the focus from “cost center” to “strategic revenue center” requires a close partnership at a minimum between CIOs and CFOs and Provosts. Unfortunately, there are many barriers to developing such cross-university partnerships. Let me mention four prominent barriers:
- First, universities are historically composed of extremely well-defended silos. Not only is it difficult for Academic Affairs and IT to have a serious conversation, the business school and the science school may even lack the mutual trust for productive conversations.
- Second, the IT unit has a vocabulary in its day-to-day operations that is foreign to much of the rest of the university. The IT world of servers, networks, packet switching, and bit chain, not to mention the control mechanisms of project management, is foreign to most of the rest of the university.
- Third, what technology does for the rest of the university is viewed as a “black box.” Users might understand what IT is providing but they do not know how it works. Unfortunately, IT has often encouraged this lack of understanding.
- Finally, the dynamic of both Finance and IT is focused on support as opposed to entrepreneurship. IT and Finance have to believe that they are part of the core of student success before they can think about potential new applications.
At a recent Higher Ed Tech Pros MeetUp hosted at Showa Boston Institute for Language and Culture, we explored the development of these issues with a group of college CIO’s and CFO’s. Our panelists confirmed the difficulty of shifting the focus of IT from “cost center” to “strategic revenue center.” However, they were able to identify both strategies for “breaking out” as well as examples of success. Their insights will be the focus of our next blog.
Avoid costly mistakes and wasted time – talk to an impartial peer in Higher Ed!
There is nothing like speaking with a peer who has implemented the same product – send us a request.
You can also provide general feedback, inquire about additional free resources, submit a topic you’d like us to cover, tell us about a feature you’d like to see, or request the best staff for your project.