June 2002
Volume 18
Number 3
Assessing IT Investment
The very large outlays of money that have built IT on campus have been justified in many ways but rarely until recently in classic terms of investment. In the commercial world an investment is made in anticipation of a return in kind – money out for money in – or accomplishment of a well-defined goal. The academic world has been generally reluctant to talk about its financial outlays as "investments." The difficulty is partly semantic, because language of products and services does not fit habitual ways of describing what institutions of higher education return for the money they spend. But the problem is also that the growth of IT was largely uncharted, neither forecast nor evaluated in the planful manner implied by "investment." Finally, IT also poses unique challenges in assessment by transforming the institutions in ways not intended at the outset.
Assessing return on investment in IT has become an increasingly often discussed topic in higher education, addressing one of two objectives: determining the value and effectiveness of IT capabilities developed up till now or evaluating prospective forays into new technologies and services. The first two decades of campus-wide IT (beginning around 1980) were a period of infrastructure and systems building – the time when the field was inventing itself. Since the mid-1990s, emphasis has shifted to settling the place of technology in education and integrating it into the life of educational institutions. Now the prospective analyses have expanded to include new offshoots and directions, as IT moves into a new wave of growth layered on the base established so far.
IT leaders are now expected to justify all costs in terms that conform to the values and rules applied to everything else on campus. Proposed expenditures are subject to scrutiny similar to that directed at longer established and more familiar areas of activity. IT planning is now subject to the same need to close the loop between decisions to spend new money and the anticipation of specific benefits. Arguments claiming that IT needs to be developed in order to transform institutions to benefit in ways not yet predictable have become less persuasive.
The stakes in figuring out how to talk about return on investment in IT in higher education are basically to compete successfully for funding now that the gold-rush era has passed – and educational leaders are asking tougher questions about results – and to compare and contrast the value of IT investments to other needs institutions face. The challenge for IT leaders is to assess opportunities in ways that satisfy traditional financial analysis while also speaking effectively in the language that the academic community uses when discussing its core purposes.
Starting behind
The IT community brings several handicaps to the discussion of return
on investments. The background expectation accompanying the initial
build-up of IT was that it would deliver cost savings through greater
efficiency and productivity increases due to the new capabilities staff
and faculty would have. The origin of these expectations was the general,
industrial model of capital investment already shaping discussion of IT in
the commercial sector before colleges and universities began to make
comparable investments.
Efficiency is a matter of accomplishing tasks with a minimum of wasteful expense. Technology can lead to improvements in efficiency by reducing the amount of work required to get something done. Productivity is a measure of the cost to achieve a certain result. Here technology’s benefit comes in the increased amount of work done by workers.
Initially, the large expenditures in computing on most campuses (with the notable exception of a few research institutions) was in the automation of administrative work. Subsequently, much of the campus IT investment was justified as supporting teaching and research. Forecasts of efficiency and productivity gains were sketchy at best for administrative work and not considered relevant for the academic side. As a consequence, past IT investments are subject to skeptical assessments, not about whether they were good or necessary, but regarding how they were "sold" on campus.
Shifting ground
The growth of IT during the last quarter of the twentieth century
coincided with unprecedented expansion of the scope and detail of
administrative services on campus. Some of these (e.g., student advisement
and counseling) were not related to technology; in total, the addition of
administrative workers at the same time that colleges and universities
spent money on computers and software seriously muddies the water for any
analysis of efficiency or productivity. In a similar vein, during that
same era, class sizes and faculty workloads (as measured by courses taught
per semester) tended not to changed much at all. Concern over efficiency
and productivity in instruction are more recent; if they are applied to an
examination of the general build-up of campus IT, they do not reflect well
on the investment (leaving aside the matter of that perspective being at
odds with anyone’s intentions at the time).
The grounds for evaluating the original investment in higher-education IT are slippery: other changes mask those due to technology; the values used in the assessment come more from current concerns and awareness than from the reasoning that prevailed when the investment was started.
A new baseline
A more realistic retrospective on the return due to the investment
that produced campus IT as it stands today would need to focus on new
assets in information made available for instruction, research, and
administration. And although it is a more difficult case to substantiate,
improvement in quality of work accomplished in those same areas – if it
can be documented – would do much to help recover from lingering
skepticism about how much value was gained. Claims of higher productivity
are very hard to make when more is being done with more, but that has been
the reality for IT.
The importance of doing an assessment of the results to date lies in the decisions ahead for new projects. Too much discussion of the current state of IT in the academic world concentrates on how it might still transform the enterprise even more. While that topic is valid and interesting, it leaves unanswered the shortcomings in past assessments, bypasses the opportunity to sort out what gains have been made, and fails to establish a useful baseline for future reference.
Comparative values
During the glory days of IT-building, pressure to invest in other
aspects of academic plant and services were growing as well. Financial aid
has become the perennial competitor for new money, as colleges and
universities struggle to offset the impact of increases in tuition and
fees. Insurance costs have also increased alarmingly – and show no signs
of easing. New construction and renovation has also been a major sector of
investment. That none of these contributes to improved efficiency or
productivity is interesting to note but does not lessen the need for
assessment in IT spending.
The ability to make a persuasive case for the return on investment in IT might shift to comparisons with other, competing claims on available funding. In principle this has always been true, but in reality IT has benefitted (and still does for the most part) as a special a project able to claim an unprecedented exemption from ordinary cost/benefit analysis. If that status ends, IT will have to compete more nearly head-to-head with other projects. At that point, IT leaders will need to be adept at convincing senior administrators – including the CIO’s peers – of the value of IT projects in explicit relation to competing claims on funds. The significance of this change in grounds for justifying IT growth is hard to overstate: until now the case has been how the institution will benefit in a before-and-after comparison for the functions affected by the infusion of IT. Now the focus will be a comparison of IT-derived changes versus gains that other projects promise in completely unrelated areas. The next generation of IT projects will likely face sharper competition from other sources on campus.
External competition
Because most colleges and universities have by now established their
basic IT infrastructure and services, it is reasonable to expect that
further expansion will increasingly be assessed in terms of competition
with other institutions. Some of these will be the traditional
competitors, but there is some chance that new competitors (such as
e-learning alternatives) will figure as well. IT leaders will need to be
judicious in making arguments of this kind, as these might be viewed as a
retreat from the discipline of return-on-investment analyses. There is a
risk that IT spending could, in these circumstances, re-awaken old
feelings that IT is a black hole of expense.
Still, there are legitimate goals in recruitment and retention of students and faculty for which IT may bring advantages. These kind of arguments will divide between not falling behind or seeking to do better than selected rivals. Either way, these are cases IT leaders have not often needed to make before. As faculty, students, and staff grow more adept at evaluating colleges and universities as IT providers, they may give more weight to it as a criterion in choosing an affiliation.
Today, very few colleges and universities treat IT as a strategic investment – one that determines whether they succeed or fail or that distinguishes them significantly from others. Having established IT infrastructure and capabilities to something approximating an "industry standard," they will need persuasive reasons to make substantial additions to their current, baseline investment. Increasingly, the persuasive rationale will have to be how IT advances other objectives, particularly those that are truly strategic.
Mission and strategy
It would be challenge enough to test new IT projects against
institutional mission statements and the non-IT sections of strategic
plans. At some level, almost any plan can claim a connection to a mission
statement. But to tie a return on investment to results assessable at that
level of impact is very rare. Many mission statements, for example, say
something about fostering "community." Any IT plan that spends
money on network or telecommunications can claim to be building community
and therefore supporting the mission. But for that claim to be worthy of
"strategic" importance there would need to be a change at the
institutional level. With respect to "community," the result
would need to be more like a significant change in student-faculty
interactions than greater bandwidth to dormitories. Those interactions
have changed, but setting out to transform "community" through
planned objectives in IT is still much more the exception than the rule.
For colleges and universities facing enrollment or financial crises, the promise that IT investments could make a difference is an even more difficult proposition – but not unprecedented. The problem is that when resources are in short supply any outlays must go to initiatives viewed as directly affecting the crisis; the lead time generally required for a major IT project does not lend itself to crisis response.
New frontiers
Investments that would redefine the institution’s mission are the
far frontier of IT potential. Already, distance-bridging technologies for
instruction have expanded the student base, quite dramatically in a few
cases. The same capabilities are also being explored for their potential
for schools to cooperate, sharing academic resources across organizational
boundaries as well as distance.
To a lesser extent, IT serves as a zone of overlap with commercial enterprises, through technology transfer and business incubators. In a few cases, this activity includes undergraduate students, whose education is profoundly affected by the practical, problem-solving aspect of linking education with business-building.
Still waiting to be tried are initiatives to use technology to achieve better education. Word processors make revisions of writing easier, but almost nobody claims to be graduating substantially better writers as a result. The same can probably be said for statistical software and computer-based algebra and calculus programs. A few of the more specialized applications, in physical chemistry and geographic information systems can make a substantial claim to training students in skills and areas of knowledge that did not exist previously, which is a major contribution to new knowledge. But by and large, the net contribution of information technology to the curriculum has been modest and uneven in distribution.
Why ROI matters
A more thorough and convincing assessment of the value IT has brought
to the academic enterprise is overdue. Evaluating the return on investment
in terms that will be persuasive beyond the IT establishment would
counteract lingering doubts about the era of build-up that has recently
peaked. Looking ahead, the ability to make predictions that prove out
conclusively will be critical for future growth in IT investment,
particularly as access to funding becomes more competitive. While more
stringent accountability for investment results would mean a leaner era in
the evolution of IT, it also marks a level of maturity and credibility the
field has long sought. TW
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