CIOs find creative ways to cope with painful budget woes.
The state of New Jersey made headlines this past summer when a $4.5 billion shortfall spurred Gov. Jon Corzine to close down Atlantic City casinos for six days while his administration and legislators hammered out an agreement for filling the gap. Receiving far less attention is the long-term impact the state’s multiyear financial angst is having on its state-supported colleges and universities, some of which rely on state funds for a third or more of their budgets and significant portions of their IT spending.
While New Jersey’s casinos are back in business, school CIOs are wondering how much longer they’ll be able to deliver service levels that students and faculty have come to expect.
This fiscal year, Rutgers University is seeing a shortfall of $80.4 million in state support. The state budget is about $500 million, almost a third of the school’s total budget of $1.6 billion. “It’s the worst [reduction] in the history of the state’s relationship with the university,” says Michael McKay, vice president for information technology and CIO.
By the time the cutbacks trickle down to IT, McKay’s state budget will drop by about 10 percent this year alone. This is an especially painful prospect as he tries to develop a strategic plan intended to ensure that the IT direction is aligned with the university’s long-term goals.
Others share his pain. Nadine Stern, CIO at The College of New Jersey, is being forced to cut her former $2 million IT capital budget by about $500,000. Even in an era of cost-cutting, “this has been the most horrendous year I’ve seen,” she says.
As they try to cope, these CIOs are developing financial strategies to get them through the budget crisis. They are discovering best practices that can help their schools — and others in similar financial positions — stay in the forefront of technology even when money is tight.
Feel the Pain
Expansion projects are among the first casualties in New Jersey’s state-supported schools. The College of New Jersey will have to delay its planned additions to its wireless infrastructure, with no new locations added this year, Stern says, adding that it also excised from its budget $50,000 earmarked for software purchases for the faculty.
Stern is even rethinking how she takes advantage of competition among providers of network services. “We either use the decrease in costs per megabyte to increase our bandwidth and keep our expenditures the same, or we keep our bandwidth the same and cut costs,” she explains. “In prior years, we would have definitely gone with more bandwidth. But this year, we may have to settle for more bottlenecks and possible dissatisfaction among our resident students.”
Other strategies involve squeezing another year out of desktop and server refresh cycles. That could help managers bring in the numbers for one year, but it could have severe consequences, such as server failures, in the future. “We’ve been able to avoid server failures by maintaining an effective replacement cycle of four to six years,” Stern explains. However, failures could become more of a problem because of refresh delays, she adds.
Susan Bowen, CIO at Camden County College, is also delaying PC purchases and sees a potential ripple effect on the school’s plans to upgrade to Microsoft’s upcoming Windows Vista operating system. “We’ll have to look closely at what we realistically can do with the current machines we have,” she says.
Stern will keep some vacant IT staff positions unfilled at The College of New Jersey, while McKay contemplates cuts to Camden’s already strapped staff.
Despite budget cuts, all is not gloom and doom. The CIOs are proactively cutting costs in ways that sometimes even improve services. Rutgers’ size “makes us an 800-pound gorilla,” McKay says, and it provides leverage for renegotiating software and services contracts.
For example, even though the school was satisfied with its former antivirus site license, it opened up the contract for new bids. An alternative vendor, intent on acquiring new business, offered some additional features, including bundled spyware, at a savings of $37,000 over the old contract. “That’s the kind of thing you have to do in this environment just to keep your head above water,” McKay explains.
Similarly, he downgraded premium network-infrastructure service contracts that, in some cases, guaranteed response times of four hours or less, even for outages that occurred after hours or on weekends. This returned $336,000 to be used as a part of the budget cut.
A philosophical change helped Bowen reduce software licenses and equipment costs at Camden County College. Rather than continuing to run the student e-mail system using commercial software and school-maintained servers, she opted for a hosted service available to schools through Microsoft. She says that the $20,000 saving in licensing fees “helped us save some money that we were going to put into the infrastructure to accommodate the 25,000 e-mail accounts we have.”
Rutgers’ McKay says the crisis has changed his outlook as a manager. When it comes time to negotiate budgets, he has learned to think in basic financial terms rather than just being technology focused.
Realizing that tenths of a percent could help save critical personnel, McKay asked his boss to “just give me back two-tenths of a percent” of the proposed budget cut, which would save one of the much needed technical positions.
“I put it in terms that he understood very clearly,” McKay says. Did it work? Yes, special consideration was given to save the critical technical positions.
Alan Joch is a veteran technology writer based in New Hampshire.
One for All in IT?
Tough times can engender radical ideas, and some New Jersey college CIOs are finding themselves contemplating thoughts they’ve never imagined.
Way-outside-the-box thinking is especially prevalent among executives who belong to NJEDge.Net, a consortium of New Jersey university CIOs. Realizing that they’re all facing similar budget crises and recognizing that their schools run many of the same hardware and software systems, some of the IT heads are wondering how they can join forces.
One idea, still in the nascent stages, could work like this: One institution would launch a large enterprise application, such as an enterprise resource planning system or a financial system, and maintain the program on dedicated servers in its data center. Other schools would pay to use the resources through an on-demand model similar to those becoming popular in the corporate world. “Maybe another school could run it for us, or we could run it for them,” says Nadine Stern, CIO of The College of New Jersey and a co-chair of NJEDge.
The proposed arrangement raises many questions, including how to establish pricing for the services, what commitments subscribing schools would have to make to the hosting institutions and whether the plan is legal under software licensing contracts.
“There are also challenges because several of us compete for the same students,” adds Susan Bowen, Camden County College CIO, who nevertheless doesn’t dismiss the idea.
The College of New Jersey’s Stern agrees it’s a radical thought. “A year ago, I would have said, ‘Probably not,’” she acknowledges. But not today. “We have to be more open to those kinds of discussions than any of us have ever been before,” she says.
After the obvious money-saving options, like delaying equipment-refresh cycles and leaving open staff positions unfilled, CIOs have additional tools to cut costs.
Re-bid software and services licenses. Vendors hungry for new business may bid lower costs and offer additional feature bundles.
Renegotiate service contracts. Dropping uptime thresholds and response times in service-level agreements can bring about significant savings.
Bank the cost savings associated with evolving technologies. Reduce payments as network per-megabyte costs decline, rather than maintaining spending levels for bigger bandwidth.
Consider outsourcing. Hosted e-mail systems can result in big cuts in licensing and infrastructure fees.