Surgical Strike

When Chicago Public Schools opened its doors in fall 2003, faculty and students had a big surprise waiting for them. The district had been hit with the Blaster virus over the summer, and when the computers were powered up, the virus spread. The district hadn’t installed virus protection software on its vast network of PCs. It cost a half-million dollars to eradicate.

“That was an easy one to fix,” says Robert Runcie, who had just started as CIO and put antivirus software on the top of his to-do list.

Since then, Runcie has undertaken a long list of projects to run the district more efficiently and shave costs off its information technology budget. He’s cut $7 million annually by in-sourcing certain functions and outsourcing others and is implementing a Voice over IP system that’s expected to save $6 million in annual telecommunications costs.

“We’ve taken a very deliberate and focused approach to work smarter,” Runcie says.

Challenged to stretch their limited IT budgets, many school districts struggle to keep outdated equipment running without even assessing whether it adds value. Some districts have been mismanaged for so long that there’s nothing left but IT chaos. But systems chiefs such as Runcie say that taking time to find redundancies and outdated procedures can uncover hidden IT dollars.

“Most technology organizations probably don’t run as efficiently as they could,” Runcie says. “I believe we don’t spend enough time looking at the internal IT processes so that they’re optimized.”

To begin, school districts need to understand the total cost of ownership, or TCO, for their IT infrastructure, says Bill Rust, research director for Gartner in Stamford, Conn. That includes direct and indirect costs.

For instance, replacing new computers every three to five years might seem like a luxury, but the hidden costs of keeping aging equipment — repairing and monitoring machines and having teachers tinker with them during class time — can be higher than the cost of buying new equipment, Rust says. “This is one case where spending money saves you money.”

In April, Chicago Public Schools plans to go live with a new human resources system to replace an antiquated 35-year-old legacy system.

“There are literally a handful of people alive who can do maintenance on it,” Runcie says. “It’s a scary situation to be in. We’re working for the technology versus the technology working for us.”

Taking Stock

With nearly 22,000 employees, more than 164,000 students and 238 schools and centers, taking stock of Fairfax County Public Schools’ technology inventory was easier said than done. But in 1999, with year 2000 looming, the Virginia district undertook the monumental task and found a lot of duplication.

By centralizing IT purchases, standardizing software and ensuring licenses were up to date, the district — the 13th largest in the country — was able to boost its buying power and secure bulk discounts from vendors.

“The first thing you need to do is to figure out what you have,” says Maribeth Luftglass, CIO and assistant superintendent at Fairfax.

Runcie agrees and suggests working closely with the purchasing department. Chicago buys and leases more than 15,000 computers annually, which translates into tens of millions of dollars in purchases — similar to the purchasing budget of a Fortune 500 company, he says.

Early in his tenure, Runcie told the district’s vendors that they would all be on a probationary period for 18 months, during which time his department would evaluate their products and services. At the end of the probation, the district would choose two vendors, one to supply PCs running Microsoft Windows and one to supply Apple systems.

“They worked for it,” Runcie says. Many vendors even started providing full-time onsite support staff at no extra charge. “It’s a whole different world than it had been before. And we hold their feet to the fire.”

At Los Angeles Unified School District, the second largest school district in the nation, recently retired CIO Megan Klee also set the ground rules for the district’s vendors when she started in 2001.

Rather than negotiate new contracts for every project, Klee invited vendors to apply for a master contract that would prequalify them to bid on task orders. When new projects started, everything was set except for price. That strategy cut the cost of contracts by 50 percent during Klee’s tenure because her department didn’t have to go through an entire solicitation process for each new project.

She also worked hard to attract small vendors, which she found to be more eager to please customers. “We actually turned some small vendors into large vendors,” says Klee, who stepped down as CIO last summer.

Any organization looking to cut costs should look closely at its contracting process, Klee advises. When she started in Los Angeles, she says the district spent an inordinate amount of time cleaning up litigation from vendors seeking payment. Working with the district’s new general counsel and new procurement staff, she was able to negotiate tighter, more competitive contracts and make lawsuits a thing of the past.

“Be willing to go toe to toe with the vendors” and demand better prices and terms, Klee says.

Maribeth Luftglass, CIO for Fairfax County Public Schools, says it’s crucial to start with a systems inventory.

Photo Credit: MICHAEL JN BOWLES

Dream Teams

Initially, Klee also found that Los Angeles had a problem with squatters. Often, it was district employees who unofficially took over vacated buildings and offices where phone lines were accidentally left on, but sometimes outsiders moved in. Klee found an Internet café operating out of an old district office.

One of her first duties as CIO was to hire a qualified telecommunications expert, who in turn hired recently retired telephone company employees. By verifying the legitimate use of the district’s school-run sites and vacating unused offices, the team cut $30 million from the district’s phone bill over the course of five years — a period that simultaneously saw increases from new digital telecommunications lines to support local area networks at 750 school sites.

“It’s real money,” Klee says. “This was probably 30 years of installations that needed to be cleaned up.”

With the right team, IT leaders can find tremendous savings and efficiencies. The challenge is choosing the best players.

Klee also netted savings from another of her first hires: an IT security expert. The district didn’t have any antivirus software or a working firewall when she arrived, and the network was in such bad shape that a major Internet service provider had blocked all e-mail from the district because its domain had been commandeered by spammers.

“We had a very vulnerable network,” Klee says. “If you’re going to do business electronically, security is a primary factor. It will cost you more initially, but save you so much over the long run.”

Another place to look for savings is consulting fees. In Chicago, Runcie discovered his department used a large number of maintenance consultants. Believing that consultants should be used for projects with a beginning and an end rather than for ongoing jobs, he hired the consultants as full-time staff and shaved $3.5 million a year from his budget.

“You can’t just outsource your whole operation,” he says. “You need to look at each cost individually.”

For instance, internal staff were maintaining the district’s legacy mainframes. Runcie had planned to retire the machines in a few years, so rather than devote more staff and resources to them, he outsourced mainframe management and cut $1.5 million from Chicago’s annual budget. Finally, Klee adds, once you get the right employees on board, it’s critical to keep them motivated. It boosts productivity and makes a tremendous difference to the bottom line. Klee liked to give her staff the authority to make improvements they found necessary.

“I told my staff, ‘If you haven’t screwed up at least once a year, you probably haven’t tried enough new things,’ ” she says.