1. 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

2. 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

3. Understanding the Value of IT Defining Value Realizing Value Structuring the Value Discussion Metrics Educause Quarterly, November 2003

4. 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???

5. Jeopardy Question #1 Author of “IT Doesn’t Matter” Nicholas Carr Bonus Question: What is the Value of IT?

6. Jeopardy Question #2 IT Metrics What is one important component in demonstrating value of IT?

7. 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?

8. Here’s Brad and Laurie…

9. Metrics, ABC, and the Value of IT to the Institution Laurie Antolovic’ Chief Administrative & Financial Officer lantolov@indiana.edu 9 Brad Wheeler Chief Information Officer, Dean, & Professor bwheeler@indiana.edu

10. Annual Planning Processes 10 Financial Activity- Based Costing 175 Services 10 Years of Data User Quality of Services Survey 2000 Surveys 40% Response Q1 Jul-Sep Q2 Oct-Dec Q3 Jan-Mar Q4 Apr-Jun Data Collection Divisional Review Fiscal Year Quarterly Divisional Review Quarterly Divisional Review Campuses Budget Quarterly Divisional Review Internal Budget Preparation Compilation & Reporting Release Annual User Survey Analysis & Reporting Divisional Actions Responding to User Survey CIO Cabinet Review..Continuous Interaction with Schools, Faculty Council, Committees, External Annual Objectives CIO Cabinet Assessment

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12. Pruning & Reallocating 12 UITS EXPENDITURE REVIEW COMMITTEES BASE FUNDS REALLOCATED TOTAL ERC 1FY 19982,500,000$ ERC 2FY 2002600,000$ ERC 2.1FY 2003467,000$ ERC 3FY 20052,182,000$ ERC 4FY 20071,300,000$ 7,049,000$ ERC 4FY 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 …

13. Networks Ownership CMS Wireless 100.0 % 90.0 % 80.0 % 70.0 % 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % 199219931994199519961997199819992000200120022003200420052006 Outcomes: Information Technology Trends at Indiana University Technology Classrooms Students and faculty reported an increase from 18 to 29 hours/week in using technology over ~3 years ◊ Wireless Wireless coverage of academic and informal learning areas increased from 1% to 95% in 3 years ◊ CMS Course management system adoption increased with 88% of students and 80% of faculty using Oncourse by 2005 ◊ Networks Classrooms and residence halls’ network connections increased to 100% by 2003 ◊ Usage Reported computer usage increased by 10.6 hours per week in 3 years ◊ Classrooms All of IU’s 640 Registrar- scheduled classrooms will be enhanced with technology by 2007 ◊ Ownership Personal ownership increased 53% in 14 years, to 96% of users reporting computers in their residence by 2006 Modernization and Lifecycle replacement Indiana University Information Technology Strategic Plan, 1997 - Present Garland C. Elmore, Indiana University, 2007

14. Activity Based Costing Workshop © 2007 Trustees of Indiana University Creative Commons Attribution License 2.5

15. Financial and ABC… Different Purposes 15

16. Service Owners and Providers 16

17. Uses and Value of ABC 17 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)costsproducts services

18. Example #1: Support Center Services Establishing the Cost of a Service See Handout Example 18

19. Cost of Support Center Activities 19 + Personnel + Direct Costs + Suppliers (internal service providers) = Fully-burdened Cost Divided by unit = Service Unit Cost see spreadsheet example…

20. 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 20

21. Cost of the Support Center? 21 Multiple Components of Support Chat Online Services E-Mail Consulting Knowledge Base Online Support Services Student Orientation Telephone Consulting Walk-in Consulting

22. Breakout Activity 22 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?

23. Exercise #1 Discussion and Questions 23

24. Exercise #2 Managerial Decisions Using ABC Reports Messaging 24

25. Breakout Activity 25 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.

26. The IU Experience 26 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

27. Exercise #2 Discussion and Questions 27

28. Implementing ABC? Why? How? When? Who? See ‘cause97.ppt’ Tutorial on CSG Site 28

29. See Also 29 Wikipedia: Activity-Based CostingActivity-Based Costing IU ABC Reports at http://www.indiana.edu/~uits/business/repo rt_on_cost_and_quality_of_services.html http://www.indiana.edu/~uits/business/repo rt_on_cost_and_quality_of_services.html Handout files on CSG Website

30. Here’s Bernie