Funding the Info$tructure.rsn

Funding the “Infostructure”

A Guide to Financing

Technology Infrastructure

in Higher Education

Ronald A. Phipps and Jane V. Wellman, The Institute for Higher Education Policy

V o l u m e 3 • N u m b e r 2 • A p r i l 2001

NEW AGENDA SERIES™

LU M I N A SM

AcknowledgmentsThis report was made possible by the support of the Lumina Foundation for Education(formerly the USA Group Foundation). It could not have been written without the help ofmany experts in the field, especially:

Michael Baumgartner, Indiana Commission for Higher EducationJonathan Brown, Association of Independent California Colleges and UniversitiesJarret Cummings, Strategic Consulting Services, Eduprise, Inc.Patrick H. Dallet, Florida Postsecondary Education Planning CommissionRoger Elliott, Texas Higher Education Coordinating BoardRobert Goertz, New Jersey Commission for Higher EducationLarry Goldstein, NACUBOMichael Goldstein, Dow, Lohnes, and AlbertsonK.C. Green, Campus Computing ProjectDennis Jones, National Center for Higher Education Management SystemsWilliam Lovejoy, Wyoming Community College CommissionMark Luker, EDUCAUSEPatrick McElroy, LCX CorporationRobert E. Nicol, Vermont State CollegesDiana Oblinger, University of North Carolina/EDUCAUSERichard Petrick, Ohio Board of RegentsJack Rayburn, Minnesota Higher Education Services OfficeGeorge Tamas, Governet

We appreciate their generosity and willingness to share their knowledge with us despite the heavytime commitments they all face. Any errors of interpretation or omission in this report are ourresponsibility, not theirs.

Jane Wellman and Ronald PhippsSenior Associates,The Institute for Higher Education Policy

W ith this publication, New Agenda Series™ takes on the name and independence of Lumina Foundationfor Education. Formerly USA Group Foundation, Lumina symbolizes a new beginning for our foun-dation, and for its newly enlarged mission and scope.

What’s in a name? For us, Lumina Foundation signifies the significant change we have undertaken — from acorporate giving program to a private foundation, separately endowed. While we are respectful of our roots, weare now independent of them.

The primary mission of the Lumina Foundation for Education is to expand access to education by supportingresearch, innovative programs and communications initiatives. The Foundation focuses its work in three areasrelated to postsecondary education: financial access, student retention and attainment, and nontraditionallearners and learning.

Future publications of the Lumina Foundation for Education New Agenda Series will therefore reflect the complexand important issues surrounding these three areas.

We hope you continue to benefit from these publications, and share our excitement about our new beginnings.Working together, we hope to shape a brighter future for Americans and their higher education experiences.

Robert C. DickesonExecutive Editor

Editor’s foreword○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Executive summary1

Introduction2

The landscape of technology financing3

A new form of digital divide?3

Needs assessment and planning4

The problem of terminology5

Recommended definition of technology infrastructure6

Sources of revenue for financing technology infrastructure7

Conclusions and recommendations12

References14

Appendix16

Table of contents○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Executive summary

1

C omputer technology is bringing rapid andprofound change to higher education, asit has to virtually every aspect ofAmerican society. Unfortunately, toomany colleges and universities fail to fully

realize technology’s promise because too few campusofficials know how to plan, pay for and maintain theinfrastructure that makes technology work.

Though no one can ignore technology’s impact oncampus, little has been done to estimate the cost of thisinfrastructure accurately or to establish policies andplans to pay for it. Most of the work that has been doneon financing technology is confined to distancelearning or educational technology. It does not addressthe larger topic that all institutions now face: the needto plan for and maintain their technological infrastruc-ture. This report attempts to fill that gap. It is based ona survey of state finance officers and interviews withexperts and institutional representatives on technologyfinancing. The findings include:

■ Officials see technology as a key issue for theirschools’ success, whether it’s used to providedistance learning, enhance student services, orsupport the work of administrators and researchers.

■ An institutional “digital divide” seems to beemerging; larger, wealthier institutions find iteasier to stay technologically “current” than dosmaller, less well-funded schools.

■ Though planning and budgeting for technologyare recognized as increasingly important tasks,they are complicated by several factors:

• Methods of capital financing traditionallyused in higher education do not work well infunding technology infrastructure.

• Higher education officials lack a commonlanguage that allows them to communicateclearly about the individual, rapidly changingpieces of the technology puzzle.

• Officials are unfamiliar with the innovativefunding sources that may be appropriate forsome elements of information technology.

Based on these findings, this report makesrecommendations that can help campus officials andstate and federal policy-makers develop regularfunding policies forinformation technology.The report also offers anew lexicon for thecomponents of technologyinfrastructure, creating acommon language that isneeded to establishfunding policies and plans.This new lexicon isspecific enough to allowfor clear communicationabout technology amongan institution’s various components, yet flexible enoughto accommodate technology’s rapid changes. Thereport also identifies a range of options for fundinginformation technology, examining the advantages anddrawbacks of each. Finally, the report urges state and

This report offersa new lexicon forthe componentsof technologyinfrastructure.

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

federal policy-makers to address the disparities ininstitutions’ ability to pay for technology. Thesedisparities, if left unattended, will erode the capacity ofmany institutions to provide quality education to futuregenerations of students.

This report can be considered a primer fornewcomers to the topic of technology infrastructurefinancing. We hope it will promote discussion andaction about the topic among university officials,policy-makers and researchers. Such discussion andaction are sorely needed. The issues surrounding on-campus technology funding will become more complexas the players in the higher education arena becomemore numerous and diverse. This report — if reviewedby the people who are working to create solutions andby those who need the solutions — can providecontext for both groups.

Introduction

T echnology is fundamentally changing howhigher education works — within conventionalclassrooms, through distance learning and the

ubiquity of e-mail, in research and writing, and indetermining how services are provided. Technologyalso has helped move instructional delivery beyondconventional colleges and universities, extending it toproprietary and vocational institutions and to short-course credentialing provided by corporate education.1

The changes are so rapid and seemingly inevitable thatsome experts insist we are seeing a fundamentalrestructuring in institutional capacity. From thisrestructuring, three kinds of providers are likely toemerge: conventional, residential campuses (“brick-based” institutions); campuses that augment coreservices with technology (“clicks and bricks” institu-tions); and institutions that offer services solely throughtechnology (“clicks” institutions — all clicks, nobricks).2

Although the landscape of higher education isbeing dramatically altered by technology, relativelylittle attention has been given to financing technology,what it costs and how to pay for it. This informationgap persists despite the fact that technology costs arewidely perceived to be high and growing, contributingto rising college tuitions.3 To address this crucial lackof information, the Lumina Foundation for Education,formerly the USA Group Foundation, commissionedThe Institute for Higher Education Policy to prepare an

overview report on financing technology in highereducation.

The research for this report was conducted throughreviews of printed and Internet-based literature,interviews with individuals in the finance andaccounting fields, surveys of state finance officials, anddiscussions with technology planning officers. A surveyinstrument was field-tested and distributed to statefinance officers in all 50 states. In addition, the surveywas used as the basis for interviews with nationalexperts in financing technology.

The survey asked respondents about major sourcesof revenue in their states for funding technology, thestatus of planning for educational technology, the useof personnel (including consultants) in financialplanning, and ways of defining and characterizingtechnology infrastructure. (A copy of the surveyinstrument can be found in the Appendix.) Completesurveys were returned from just 21 of the states.However, follow-up telephone interviews indicatedthat the majority did not respond because they did notknow enough about technology financing in theirstates to do so — which, in itself, is a telling response.

This report synthesizes the results of the researchinto an assessment of the issues related to technologyfinancing, including:

■ A general overview of the topic and the chal-lenges of assessing costs for technology.

■ The emerging issue of a new kind of institutionaldigital divide.

■ A discussion of the problem of needs assessmentand planning.

■ The problem of terminology for characterizing“technology infrastructure.”

Rising out of this assessment, a new definition oftechnology infrastructure is suggested, one thatencompasses the topic, but is sufficiently flexible toallow for the inevitable changes in technology.Different sources of revenue for technology infrastruc-ture are identified, and their relative benefits orproblems are discussed. The report concludes withrecommendations for policy-makers at the institutional,state and national levels.

2

A new form ofthe digital divide?

One of the emerging policy issues affectingtechnology is that of the “digital divide,” orpatterns of uneven student access to

technology along racial, economic and geographiclines. An examination of institutional financing fortechnology infrastructure suggests that the digitaldivide has another connotation in terms of gaps inaccess to technology capital among different types ofhigher education institutions. Large, well-financedinstitutions have greater access to IT funding than dosmaller colleges with fewer resources. Snapshots frommany sources raise this issue in stark terms:

■ Disparities indistance learning.Research suggestssignificantdifferences amongsectors of highereducation in theuse of technologyfor instruction. Themost comprehen-sive nationalsurvey of distance-learning practicesat degree-granting,public andnonprofitinstitutions was conducted by the United StatesDepartment of Education (USDE) in 1997.7

This survey reveals that, in academic year (AY)1997-98, almost 44 percent of all highereducation institutions offered distance-basedcourses, an increase of one-third since AY 1994-95. Growth has been greatest among types ofinstitutions that already were offering distancelearning prior to the AY 994-95 survey. Publicinstitutions were more likely than privateinstitutions to offer distance-based learning: 78percent of all public four-year institutions and 62percent of all public two-year institutions offeredsome form of distance-delivered courses, incontrast to only 19 percent of private four-yearand 5 percent of private two-year institutions inAY 1997-98. Larger institutions were more likelyto offer distance education than smaller colleges:

The landscape oftechnology financing

F inancing technology infrastructure is a pressingissue at many of the nation’s colleges anduniversities. In a recent survey by EDUCAUSE,

institutions were asked to rank the most seriouschallenges in higher education information technologyand resource management. The results are striking.Among 27 issues ranging from support servicedemands, to digital libraries to intellectual property, thetop-ranked issue was information technology (IT).When asked which issues have the greatest potential to“explode in the future in terms of their strategicimpact,” distance education ranked first and fundinginformation technology ranked fourth. In response tothe question “Which of the issues below are you as anIT leader or administrator spending most of your timeaddressing?” IT staffing and human resources manage-ment ranked first; funding IT again ranked fourth.4

Market Data Retrieval (MDR) has been conductingperiodic surveys of technology spending at collegesand universities that focus specifically on academic andadministrative computer hardware and software. Fromits most recent survey conducted in 2000, MDRestimates that higher education institutions spentapproximately $2.7 billion on computer hardware andsoftware in 1999-2000,5 the bulk of which (nearly $1.2billion) was spent on academic computer hardware.Total spending for administrative hardware wasprojected to be $727.8 million, and spending for allsoftware around $762.8 million. As these figuresinclude hardware and software costs only — excludingbuilding infrastructure, personnel, training, and othercosts — they significantly understate total spending fortechnology.

Kenneth C. (Casey) Green, president of theCampus Computing Project, has developed the mostreliable picture of information technology in highereducation through comprehensive surveys of institu-tions in the annual “Campus Computing Report.”Aspects of financing and planning for technology areperennially reported as major issues. The 2000 surveylists integrating technology into instruction as the topissue, followed closely by user support, and byfinancing and replacement of technology equipment.6

Developing budget models for finance also is listed as amajor concern.

3

One of theemerging policyissues affectingtechnology is thatof the “digitaldivide” ...

87 percent of institutions with more than 10,000students offered distance-based classes, whileonly 19 percent of institutions with fewer than3,000 students did so.

■ Disparities in student and user support services.Differences in schools’ approaches to distancelearning may be the result of simple institutionalchoice rather than lack of funding. However,Green’s additional research reveals disparitiesbetween research universities and teachinginstitutions that probably reflect access toresources more than institutional choices. The2000 Campus Computing Survey reveals publicand private research universities have the bestratios of IT staff to full-time equivalent (FTE)students; are most likely to offer admissions,financial aid, course registration and libraryresources over the Internet; and have off-campus, dial-up Internet services for studentsand faculty.8 Small private colleges and

community colleges,generally lagging inoffering services viatechnology, are,ironically, the two sectorsof higher educationthat list service to studentsand teaching as theirhighest priorities.

Clearly, there aremajor differences infunding by sector acrosshigher education, withsignificant disparities

between types of institutions in their access to capital.Gordon Winston, of the Williams Project on Econom-ics of Higher Education, recently has documentedthese disparities by organizing public and nonprofitprivate institutions into hierarchical expenditure“deciles.”9 His research shows that well-financedinstitutions (both public and private) are able to spendmore than four times the amount per student that thepoorest schools spend. Although students in thehigher-spending institutions are charged higher tuition,they receive significantly greater value from public andinstitutional subsidies than do students in poorerinstitutions. In fact, the share of total spending thatcomes from student tuition is highest in the poorestinstitutions: In the poorest private colleges, studentsspend an average of 91 cents to receive a dollar’s worth

of spending from public or institutional sources; in thebest-supported public institutions, a student pays lessthan 8 cents to receive that dollar.

Other researchers, including Michael McPherson,Morton Schapiro and Thomas Kane, have documentedthat student academic achievement is associated withthese spending hierarchies, with the most selectiveinstitutions able to pick from among the best academi-cally prepared students.10 Because of the strongrelationship between family income and academicachievement,11 these patterns too often perpetuate theeconomic and educational inequalities found at theelementary and high school levels.

The problem of institutional financing fortechnology infrastructure is not confined to distancelearning. Even campuses that have chosen not to offerdistance learning must invest in information technologyto remain competitive. Students demand Internet ande-mail access to augment conventional classroom,library and research resources. These tools are essentialfor faculty research as well. Campuses must have accessto IT to meet administrative and student services needs,including filing reports with federal and state agencies.In a highly competitive marketplace, institutions thatfail to offer students and other clients easy access totheir institutions through technology risk losingmarket share.

Needs assessment and planning

N eeds assessment and planning are central tothe success of any school’s approach toinformation technology; according to our

research and Green’s 2000 survey, more institutions andstates are doing such planning. Despite this trend,however, most observers say institutions fail toincorporate technology planning into financialplanning. As is often typical in higher education,academic and administrative planning are doneseparately, and financial planning — if it is done at all— fails to match priorities with funding options.Instead, the approach is to document needs, developplans, and assume that funding will follow — a kind of“Field of Dreams” approach: “If you plan for it, therevenue will come.” More important, the financialprocess tends to be driven by the need for specifictechnology, not by an overall vision of technology’srole in serving the institution’s mission. Thus, evenwhen planning occurs, it often fails to address coreinstitutional policy issues about technology.

Clearly, there aremajor differences

in funding bysector across

higher education.

4

Institutions often are unable to identify theirtechnology infrastructure needs and match them withappropriate funding strategies. Most conventionalhigher education capital financing is based on twocriteria:

1. The predicted life cycle of the investment (30years for most buildings, 5 to 10 years forscientific equipment, and between 10 and 50-plus years for infrastructure such as electricity,sewer systems and roads).

2. The expected use of the building for instruction,research, administration or mixed use.

Items with life cycles of more than 10 yearsgenerally are candidates for debt-based capitalfinancing; buildings associated with self-supportingauxiliary enterprises (such as residence halls and healthcenters) are funded through fee-backed debt financing;scientific equipment and ongoing infrastructuregenerally are funded through operating funds formaintenance and equipment.

Confusion about terminology and difficulty inidentifying specific needs hamper institutions’ efforts toplan for technology infrastructure. Large institutionsand state systems do relatively comprehensiveplanning, while smaller colleges and universities usemore piecemeal, project-specific efforts. In many cases,both large and small systems depend on outsideconsultants to help with needs assessment and capitalfinancing strategies.

Carol Twigg and Charles Karelis12 both haveobserved that institutions tend to fund technology asan add-on, with “new” money lashed onto existingprograms. Not only does this practice limit IT’sadaptability, it also drives up the cost of technologybecause it prohibits officials from making consciouschoices to use technology as a substitute for labor.Green’s observations are similar: Most institutions relyexcessively on bond revenues, year-end savings andother forms of “budget dust” to pay for technology.Green argues that the ad hoc approach to funding isperpetuated by budgetary and asset-managementtechniques that have not kept up with the demands oftechnology. He also identifies four factors that impedefinancial planning for technology:

1. Failure to establish effective asset-managementprograms for technology.

2. Failure to adopt a life-cycle approach totechnology budgeting in which various types oftechnology costs are organized and annualizedinto a portfolio of longer-term costs.

3. Failure to segment these longer-term costs intogroups that can be matched to appropriatefunding streams (student fees, operating budgetlines, annuities from technology endowments,etc.).

4. Failure to develop reliable methods to measurethe institution’s return on investments intechnology.13

The problem of terminology

One of the primary problems with technologyfinancing is the lack of standard terminologyfor describing the elements of technology

infrastructure. The accelerating pace of change intechnology and the arcane language often associatedwith new advances have hampered the development ofa common vernacular. For instance, just a few years agoinstitutions were buying instructional television andsatellite hook-ups as a primary investment in educa-tional technology. These investments rapidly becameoutdated, replaced by the Internet and the race to wirecampuses with fiber-optic cables. The advent ofwireless technology suggests another wave of change isupon us. Without funding categories that are broadenough to accommodate change and clearly identifydifferent components of technology infrastructure,many institutions and states will continue to struggle indeveloping consistent policies to pay for it.

IT and finance officers identified the absence of acommon terminology as a key factor in their inabilityto track revenues and expenditures. Traditional terms ofclassification used for budgeting and finance systemsare not useful in this arena because they tend to isolateexpenditures into specific areas, which include physicalplant, infrastructure (electrical systems, plumbing andsewage, heating, telephones), maintenance, administra-tion, teaching and research, and student services.Technology touches all of these categories, and more.For instance, administrative information systemsfrequently serve central and departmental administra-tion, student services, and faculty research andteaching. Networks used for research also are used fordistance-delivered instruction and e-mail. The

5

interaction and overlapping of terms for these newactivities and services has led Green to suggest that theterm “infostructure” be used instead.14

Our research indicates that imprecise terminologysignificantly hinders campus officials’ efforts to plan fortechnology and pay for it efficiently. There simply aretoo few commonly accepted definitions of the variouscomponents of information technology infrastructure.The resulting confusion too often leads officials to viewtechnology as a bottomless pit that will gobble upmoney indefinitely. Officials also can be paralyzed byconflicting fears — one that whatever planning they dowill be wasted because technology changes so rapidly,the other that if they don’t plan for technology — anddo so quickly — they’ll lose students to otherinstitutions that were able to make the investmentsmore quickly.

Recommended definition oftechnology infrastructure

C learly, a new lexicon is needed — one flexibleenough to adapt to the rapid changes intechnology, yet specific enough to create a

framework for programand financial planning.Based on our research, wehave developed such alexicon, or at least thebeginnings of one, thatorganizes elements oftechnology infrastructureinto three broad clusters:building infrastructure; systemsinfrastructure; and personnelinfrastructure. It was field-tested through focusgroups with state financialofficers and campusinformation officials, andtheir suggestions havebeen incorporated.

Defining technology infrastructure

Building infrastructure describes those compo-nents that need to be incorporated into a facility tomake any technology operate effectively. These

components include: 1) the conduits/raceways in whichcomputer and network cables are laid in the building;2) the cables and electrical wiring for computers andother communications technology; and 3) the electricalpower and related building features such as electricoutlets.

Systems infrastructure connects various technol-ogy components. For example, computer networkinfrastructure consists of the software that runs thenetworking function linking all computers in a class orcollege, or to external computers. It also includeshardware that runs the network, such as servers(computers with large information-storage capabilitiesthat allow many users to share information). Modems— devices that allow computers to communicate witheach other through phone lines — are another basiccomponent of systems infrastructure, in addition torouters, switches and hubs. Systems infrastructure linksdata, voice, video and multimedia systems. Wirelesstechnology would be included in the category.

■ Data systems include computers connected toperipheral devices, such as printers. In additionto administrative purposes, a baseline datasystem enables instructional computers tocommunicate with similar devices in theclassroom or institution (local area networks).Optimally, a data system also encompassescomputer networks compatible with outsidesources (wide area networks) such as theInternet, computers within the system officeor at other institutions, home computers and avariety of databases. In addition, data systemsinclude a set of software applications andservices from external providers, such as licensedlibrary and research services, Internet servicesand other outsourced network services.

■ Voice systems include two-way voice communi-cation and messaging (telephone) systems. Anoptimal system includes sufficient outgoing andincoming lines and capacity to allow fortechnologies such as voice processing and voicemail.

■ Video and multimedia systems provideaccessibility to televised communication and allforms of video transmission within and outsidethe institution. An optimal system includescapacity to send and receive instruction (i.e.,two-way interactive video classes) within theinstitution and among other institutions.

Traditional termsof classification

used forbudgeting and

finance systemsare not useful in

this arena ...

6

Personnel infrastructure includes the humanresources necessary for the efficient operation of theoverall technology infrastructure. Specifically,personnel infrastructure encompasses the humanresources included for: 1) network management;2) training and technical assistance; 3) course contentdevelopment; 4) administrative support; and 5)student support services related to technology-aidedinstruction.

It is vital to include personnel, training andongoing course development as we redefine technologyinfrastructure. Traditionally, the term “infrastructure” inhigher education refers only to buildings and equip-ment. With respect to technology, however, humanresources and ongoing education are essential elements.Without people involved in network management,training and technical assistance, course contentdevelopment, and administrative and student support,the system would grind to a halt. Green’s research andour interviews show that most institutions cite skilledpeople and ongoing training as the highest prioritiesfor building and sustaining technological capacity.

Sources of revenue forfinancing technology

infrastructure

For decades, higher education institutions haveused separate and distinct financing methods fortheir capital and operating budgets. These

financing habits simply don’t work well for technology.Campus officials need a menu of options to financetechnology infrastructure. Decisions about how to fundprojects should be guided by a policy framework thatmatches revenues with needs to ensure that funding iscost-effective, and that technology is integratedfinancially and academically into the planning for theentire institution.

The literature on technology contains relativelylittle about sources of revenue, although there has beensome attention to “new” sources of revenue through e-commerce, public-private partnerships, and for-profitsubsidiaries. In Hezel Associates’ 1994 “State by State”analysis, several revenue sources were cited, includingfoundations, technology companies, federal grants,state grants, student user fees and general revenues.Some states have enhanced general revenue ofeducational communication through incentive funding

programs, incentive regulation and taxes. Missouri’sVIDEO program, which relies entirely on a videotaperental tax, represents a unique approach. States such asGeorgia and Michiganhave realized windfalls foreducational telecommuni-cations because oftelecommunications rateregulations.15 Others,including Montana andNew Jersey, have providedone-time appropriationsfor specific projects. Somestates, such as NewMexico, have leveragedstate funds with federalmonies to supportnetworks.

To complement theHezel analysis for thisstudy, we asked surveyrespondents how they payfor the different elementsof the infostructure. Roughly 40 percent of statesresponded; those responses show a variety of ap-proaches:

■ Building infrastructureBoth debt and non-debt instruments were usedto finance this component. In addition to stateand institutional bonds, state appropriations(both restricted and unrestricted) and studentfunds were used. Some states also used fundsfrom auxiliary enterprises.

■ Systems infrastructureThe major sources of funds for this componentwere non-debt instruments and included stateappropriations (both restricted and unrestricted),student funds and auxiliary enterprises. In someinstances, however, state bonds were used, andone state received a federal grant.

■ Personnel infrastructureAlmost without exception, the major sources offinancing for this component were non-debtinstruments — both state revenues and studentfunds. In some cases auxiliary enterprises wereused and, in one instance, local resources wereprovided.

It is vital toinclude personnel,training andongoingdevelopment aswe redefinetechnologyinfrastructure.

7

Mark Luker of EDUCAUSE says many campusadministrators inaccurately view technology funding asa capital rather than an operating expense. Capitalbudgets are designed to pay for major, permanent items(land and buildings) or for periodic expenditures (every10 years or longer) on items that retain or even increasevalue over time. Capital budgets are typically fundedthrough bond revenues. Though some elements oftechnology may appropriately be built into capitalbudgets (such as when buildings are built or renovated),a substantial portion of technology costs are operatingexpenses.

Attorney Michael Goldstein of Dow, Lohnes, andAlbertson in Washington, D.C., argues that bondfinancing is generally inappropriate for technologyequipment because technology assets typically arereplaced or lose much of their value after two years.Goldstein says technology requires repeated “cyclicalcapital investments,” meaning that institutions shouldlook to new sources of revenue through capital markets.To do this, institutions need to assess which areas arelikely to grow in demand, have unit cost structures thatcan be contained, and provide programs or services thatallow for-profit subsidiaries without undermining theinstitution’s core identity and values. Non-creditcourses, some graduate and certificate courses, and coreservice areas are identified as potentially appropriatecandidates for the formation of for-profit subsidiaries.16

In particular, continuing education departments ofmany institutions are good candidates for thedevelopment of for-profit subsidiaries because they arefrequently self-supporting, have their own organiza-tional structure, and are only indirectly related to thecore mission of the institution.

Description of revenue options

Because the technology infrastructure touchesvirtually every component of an institution andinvolves both capital and operating budgets, variousfunding strategies are needed for informationtechnology. Our research points to a menu of financingoptions:

■ Debt financing (bonds, certificates of participa-tion, revenue anticipation notes).

■ Vendor arrangements (discounts, donatedservices or equipment, leasing arrangements,service contracts, performance contracting).

■ Leasing arrangements.

■ Revolving funds (seed money repaid eitherthrough revenue or budgetary savings).

■ User fees (special technology fees, tuitionincreases).

■ E-commerce (revenue-generating activities).■ Creation of for-profit subsidiaries.■ Other organizational and budgetary techniques

such as consortia, partnerships and fundingthrough internal recharge systems.

Taking these financing options in turn, we willdescribe each one, listing the advantages anddisadvantages of each. When weighing these options,campus officials should consider the cost of capital(including planning and management costs), statutoryor constitutional restrictions on the revenue (such asbond caps), the political cost of obtaining capital (suchas through tuition or fee increases), and the culture andmission of the institution.

Debt financing (usually through bonds)

Debt funding through bond instruments is acommon vehicle for funding long-term capitalinvestments and improvements at most colleges anduniversities. There are several types of bond instru-ments, and the options depend on whether theinstitution is public or nonprofit, its current financialsituation, and its future prospects. The two primarykinds of bonds are general obligation bonds (repayable fromfuture general revenues including appropriations,tuition and endowment earnings) and revenue bonds(repayable from revenue streams generated from theobject of the sale). For example, dormitories tradition-ally are funded by revenue bonds. Other instruments,such as certificates of participation (a form of leasefinancing available in public institutions) and revenueanticipation notes (short-term borrowing against futurerevenues), are also available for shorter-term debt. TheNational Association of College and UniversityBusiness Officers’ (NACUBO) Guide to Issuing andManaging Debt17 provides a comprehensive review of thetypes of instruments available, as well as the stepsinvolved in internal planning and outside reviewneeded to bring bonds to sale.

Bond revenues are a time-honored and widelyaccepted vehicle for financing higher education. Theyare best suited to investment assets such as land,buildings and some types of scientific equipment thatlose value slowly or even gain value over time. Bondcapital is more expensive than general-purpose

8

operating revenues because of the associated costs ofplanning and documentation. The documentationrequired before a bond sale can add up-front feesranging between 1 percent and 2 percent of bond sales— in addition to the assessments, management andcontract fees. Many small, private institutions lack theresources to secure favorable bond ratings, making thecost of bond capital even higher for them, or com-pletely out of reach. Many states require bonds to beapproved by voters. Institutions that face thisrestriction may choose to use certificates of participationor revenue anticipation notes, which do not requirevoter approval. However, these instruments areappropriate only for short-term debt when stable, long-term revenue is expected.

Bond revenues are appropriate to fund the buildinginfrastructure components of educational technology— installation of conduits and raceways in buildings,for example — because these assets do not need to bereplaced for several years. Bonds are less desirableinstruments for systems infrastructure (equipment ornetworks) because these items require continualupgrading and reinvestment. Revenue bonds may beappropriate vehicles for electronically deliveredservices or programs that ensure future revenues, andbonds can be used to establish revolving funds (seebelow) to seed projects.

Vendor arrangements

Many institutions collaborate with vendors, whichgives them access to equipment and services at reducedcost or creates cost savings through more efficientwork. Institutions use contract consultants to help withtheir planning and needs assessments and to providetraining assistance and advice on software packages.Institutions often lack this expertise on staff, or theirstaff members have other responsibilities. Manyinstitutions report that finding — and especiallykeeping — technology personnel is a huge challenge inthe current market; too often schools can’t afford thesalaries necessary to retain these sought-after workers.In this marketplace, vendor help with personnel-relatedneeds may be the institution’s most promising option.

Vendors are most frequently associated withequipment purchase and leasing, servicing, networkmanagement, software systems procurement andinstallation, and training. Most of the states respondingto our survey received donated equipment or servicesor discounts for purchasing, and half of the states say

they’ve used leasing as an alternative to purchasingsystems infrastructure.

Many institutions prefer to lease rather thanpurchase technology hardware because such equipmentis often obsolete after three years. Although leasestypically are seen as more expensive than purchasing,institutions often are able to negotiate vendorarrangements that include technical support andupgrades, thus adding value.

The clearest advantage of vendor arrangements isthat they can provide an institution with skills,equipment and services that may be superior to what itcan find internally or finance with institutionalresources. Vendors serve many institutions and canspread their costs over several clients to achievesubstantial economies of scale. Institutions and statesusing vendor arrangements say they save money andget good service. Vendors are particularly useful forsystems planning and design, and they provideinstitutions and states withbenchmarks based onwork outside highereducation. Also,recommendations fromoutside vendors havecredibility with statelegislatures and financeoffices because vendors’assessments of fundingneeds are consideredneutral and moreanalytically grounded thanrequests from advocates ofthe institution. Savingsreported from grouppurchasing and servicearrangements can reach 20to 30 percent. Thesesavings can sometimes beused as matching funds toreceive federal and stateappropriations. Leasing arrangements offer long-term costefficiency and provide an option for those who cannotobtain up-front capital.

Vendor arrangements seem to work well in biginstitutions or state systems, where vendors can sustainbusiness over a long period of time. Size helps generatediscounts for purchases and leases as well. Smallinstitutions are not as likely to reap the same economicbenefits from these arrangements, even if they receivethe service benefits. Another disadvantage of vendorarrangements is that institutions often do not know

9

Bond capital ismore expensivethan general-purpose operatingrevenues because ofthe associated costsof planning anddocumentation.

where to turn for expertise. Some institutions aredissatisfied with the standard software and systemspackages now on the market, and many have arguedthat a national referral service should be created toidentify firms with good track records in highereducation, as well as networks of institutions that haveused the services or products.

State budget policies, including contracting andpurchasing policies, may present obstacles to creativefinancing arrangements with vendors. Some statesrequire state entities to do business only withdesignated vendors; others prohibit public partnershipswith private and for-profit entities. Still others requireany contractor to meet public requirements forprevailing wages or follow other policies that determany private firms. As a result, some public institutionslack the flexibility to pursue a wide range of creative

funding arrangements,even if these alternativescan achieve long-termsavings.18

Vendor arrangementsare best suited for systemsand personnel infrastruc-ture. Several nationalvendors have developedconsiderable expertise indeveloping systems andpersonnel infrastructurethat is adaptable tovirtually any institution.Many institutions lack theexpertise to develop orupgrade these componentsof technology infrastructure.

Revolving funds

Revolving funds oftenare used to generate capital for technology, systemdesign, planning or equipment purchasing. The fundtypically is supported by seed funds, institutional, stateor foundation sources — even revenue bonds. Thefunds operate like an investment fund, making loansthat are repaid from revenue or savings from technol-ogy projects.

Revolving funds are limited in their appropriateuse. They are best suited either for areas that cangenerate revenue (such as some instructional programs)or where savings from technology can be captured andcounted as revenue. A revolving fund can serve as an

incentive fund at a state institution or large researchuniversity — something campus officials can use toincrease participation in technology.

Revolving funds might be useful for renovations indormitories or bookstores, where new technology canbe used to increase revenue and cut costs. If technologyis used to increase enrollment by offering distance-education courses, fees from these new students can beused to repay the fund. Revolving funds are lessappropriate for ongoing personnel and support costs.They may be most compatible with continuingeducation programs, which already are set up to run ona current cash and revenue basis in most institutions.

Supplemental user fees

The 2000 Campus Computing Survey and ourresearch confirm that most institutions have imple-mented special supplemental student fees to generaterevenue for technology. According to Green, this isparticularly common in research universities and publicfour-year colleges, but less common in private four-yearinstitutions and community colleges, perhaps related tothe disparities in funding between these sectors.Supplemental fees take two basic forms: 1) Technologyfees are charged to all students at the time of enroll-ment (sometimes at reduced rates for part-timestudents); and 2) user fees are charged to all clients ofservices offered by the institution. An example of a usercharge is a fee paid by off-campus clients for remoteaccess to the institution’s information systems. It also islikely that some institutions have chosen not to addsupplemental fees, but have included technology costsin their justification for tuition increases.

The biggest advantage of supplemental fees is thatthey provide a stable and recurring source of revenue.Fee-based systems also make it easier for institutions totrack technology expenditures and savings realizedthrough technology because most institutions alreadyuse separate accounting systems for fee-fundedactivities. The disadvantage is that supplementary feesare controversial: They add to the overall price ofeducation. Many public institutions — communitycolleges, in particular — have state-imposed policiesthat restrict supplemental fees. Institutions that aretrying to hold down tuition and fees but want toimprove student access to technology may require allnew students to purchase laptop computers rather thanfunding the purchase of laptops through the feestructure.19 This requirement is arguably a de facto

10

Manyinstitutions prefer

to lease ratherthan purchase

technologyhardware becausesuch equipment is

often obsoleteafter three years.

technology fee, although it would not be recorded assuch.

Supplemental fees are most appropriately used topay for direct services where the client, whetherstudents or others, can readily identify the benefits ofthe service. Supplemental fees also may be used tooffset ongoing technology costs in such areas asadmissions, registration and access to informationabout financial aid. In a state like California thatpermits student “fees” only when they are notattributable to the “direct” cost of instruction, studentfees are commonly used to pay for student services.

E-commerce and for-profit subsidiaries

E-commerce is an umbrella term that encompassesmany ways to generate revenue over the Internet,although it is also used to characterize all forms ofInternet-based transactions. Two examples: chargingadvertisers to post notices on the campus Web site, andmarketing goods and services from the campusbookstore to off-campus customers. In addition,institutions are beginning to create for-profit subsidiar-ies to exploit new markets — either through e-com-merce or by revamping traditional instructional andservice programs into profit-making ventures. Thesepractices are still relatively uncommon in highereducation, but they are generating a good deal ofinterest and discussion.

E-commerce and for-profit subsidiaries providevehicles for revenue from markets traditionallyconsidered off-limits to higher education, and both canexpand an institution’s client base. They can generaterevenue to pay for any portion of technologyinfrastructure — buildings, systems or personnel. E-commerce profits might also be used to repay revenuebonds. For-profit subsidiaries may be good vehicles tofund, not just technology infrastructure, but alsospecific programs and services such as housing andfood services, or continuing education. Goldstein’sanalysis suggests that many activities now outsourcedto vendors are candidates for profit-making activities.He also identifies non-credit courses, some graduateand certificate courses, and core service areas aspossible candidates for for-profit subsidiaries.20

Revenue from an e-commerce venture or asubsidiary may be unstable and hard to predict,particularly at the outset. Also, e-commerce and for-profit subsidiaries can be controversial for individualsand institutions that are uncomfortable moving into theprofit-making marketplace for any reason. Green

reports significant resistance to e-commerce in highereducation — highest in research universities, and lessprevalent in community colleges.21 E-commerce notonly challenges conventional ways of managingresources, it also can raise questions about aninstitution’s identity and mission. The traditional ad hocnature of technology financing means that manyinstitutions — or sub-units within institutions — enterinto these arrangements without fully considering theireffect on internal financing, accounting and governance.

Such ill-considered action is usually a mistake.Though it’s relatively easy for an institution to create afor-profit subsidiary and jump into for-profit ventures,it’s more difficult — and far wiser — for officials to firstidentify the programs or services that can generateprofits and serve the institution’s mission. Also, beforeentering into e-commerce or subsidiary ventures,campus officials should take pains to adopt anappropriate accounting system. This system mustensure that adequate money is reinvested in thebusiness, used to repay loans or used to pay investors.Officials won’t be able to take all of the profits andplow them back into cash-strapped academic programsas they do now with most subsidized programs.Institutions accustomed to spending according toBowen’s Law — “Raise all the money you can, andspend all you can” — will need to get used to the ideaof managing cost centers and generating revenues forinvestors.

Consortia

Although these are not, strictly speaking, “revenuesources,” cooperative agreements or consortia areanother option for institutions seeking new ways tofinance technology infrastructure. The large majority ofstates in our survey said they use consortia orsystemwide strategies for purchasing technologyinfrastructure or services. Members of the consortiainclude other higher education institutions, stategovernment and the private sector. Though most statesagreed that consortia help save money, they cautionedthat these arrangements might delay projects becausethey require cooperation and standardization amongseveral organizations.

Budgeting techniques

Internal recharges for central service functions areanother frequently used approach to paying for systems

11

and personnel infrastructure. Recharge systems allowbudgeting for infrastructure by helping to manage theresource and identify costs. In an internal recharge or“charge-back” system, technology services are providedcentrally, but the resources to pay for them aredistributed to the individual departments. Departmentspay on a fee-for-service basis, and charges are assessedby the information service department.

Conclusions andrecommendations

This project began as an effort to

highlight the waysthat technologyinfrastructure is paid forin higher education andto address potentialpolicy issues associatedwith changing thosefinancing patterns.Finding revenue to payfor technology is just oneissue related to technol-ogy finance, and it is notthe first issue that shouldbe addressed. Beforelooking for money,campus officials shouldfocus on planning andterminology and on

creating a system that properly matches revenue withtechnology components.

Most institutions continue to fund technologythrough a series of ad hoc initiatives. These initiativesrely heavily on add-on revenues, foundation grants andone-time government supports. Planning for technol-ogy, when it is occurs, rarely combines programplanning with realistic ways to pay for it. Institutionswant to be able to keep up with the latest develop-ments, but they cannot predict those developments.High-tech language is one source of confusion.Another is the failure to create clear distinctionsamong the costs for building infrastructure, systems,hardware, training and personnel. Inadequate planningand imprecise terminology contribute to ad hoc patternsfor matching revenues with components of technology.This can lead to the excessive use of bond revenues to

pay recurring operating costs. Such ill-consideredfunding for technology actually increases the cost oftechnology because it treats it as a perpetual add-on.

Financial inequities between well-subsidized andundercapitalized educational institutions are nothingnew. The demand for high-tech programs and serviceson all campuses, however, has exacerbated theseinequities. Small liberal arts and community colleges —any of whom serve economically disadvantagedstudents — are particularly hampered. They are oftengeographically isolated and have marginal access tocapital. The virtually prohibitive expense of developingcomprehensive, high-tech programs and services tocompete with larger institutions may limit the future ofthese smaller schools.

Financing technology also raises issues ofinstitutional governance and mission. Many institutionsadopt revenue strategies with little planning when theycreate for-profit entities or form affiliations withbusiness partners. These new ventures force changes ininstitutional accounting habits and affect the decision-making process by introducing new economic intereststhat can change core institutional values. Technologyfunding is particularly challenging for the roughly3,500 public and nonprofit independent colleges anduniversities that are most likely to operate eitherthrough “brick” or “click and brick” means in the future.Unlike the newer, for-profit providers of highereducation, these institutions have used fairly stablepublic and nonprofit traditions of fund accounting andprogram budgeting. Few of these institutions areaccustomed to funding initiatives through for-profitsubsidiaries, public-private partnerships or cross-regional consortia. The task is easier in large research-oriented institutions whose officials are used to internalexperimentation and decentralization, and haveexperience in managing outside partnerships.

Colleges and universities must think of technology,not as an add-on, but as an ongoing part of the way theinstitutions must do business — in distance learning,teaching, research and service functions. Institutionsmust keep pace and find ways to pay for high-techadvancements. To do that, they must develop regularpolicies for financing technology, beginning with aneffort to match different components of technologyinfrastructure with appropriate sources of funds. Newstrategies will be needed to maintain the capacity oftechnology infrastructure for personnel and ongoingtraining.

12

Revenue from ane-commerceventure or a

subsidiary maybe unstable andhard to predict,particularly at

the outset.

Nomenclature

Establishing a common language for discussingtechnology is a prerequisite to developing systematictechnology-financing policies. This new language mustbe adaptable enough to accommodate the inevitablechanges in technology, yet specific enough to allowplanning and funding policies to be developed. Thelanguage also should clearly identify and distinguishcost centers in buildings, networks and personnel —including training and development. We recommendour new lexicon as a starting point for institutional andstate-level audiences, and for national organizationssuch as NACUBO.

Planning

Those who choose and finance campus technologyshould follow time-tested procedures for strategicplanning. They must:

■ Identify strategic priorities for the institutions orstates, built on existing strengths.

■ Articulate the role of technology in achievingthese priorities.

■ Estimate the costs of the initiatives.■ Develop revenue strategies to fund these

initiatives.

Planning should include all aspects of technologyinfrastructure — systems, personnel, support, trainingand development. Decisions about distance learning,e-commerce and educational partnerships will shapethe future governance structure of the institution.Institutional leaders and governing boards shouldaddress these issues as part of the planning process. It’simportant that leaders make conscious, informed policydecisions about how technology should complementand facilitate an institution’s strategic initiatives.

Revenue policies

State and institutional leaders should identifyrevenue policies for technology infrastructure. Statesshould evaluate how their institutions are paying fortechnology, and they should revamp funding policies totake advantage of new revenue sources. Policies onpurchasing and leasing, vendor relationships, andalliances with for-profit entities should be reviewed and

updated as necessary. Statewide policies should bedeveloped that match revenues with components oftechnology to ensure that activities are funded cost-effectively.

The institutional digital divide

The institutional “digital divide” should beaddressed through state and national policy-makers.Imbalances in access to technology capital will hamperthe long-term ability of small private institutions andcommunity colleges to offer high-quality education.Most funding methods favor large, well-financedinstitutions — both because money attracts money, andbecause unit costs are lower in large-scale projects.State and national leaders need to support cooperativearrangements, new sources of funds, and regional andnational networks that link these institutions with oneanother. Even if new revenue sources are not available,expertise is a precious form of technology capital thatcan and should be shared.

This paper is itself part of that sharing effort. In itwe have laid out a definition of technology infrastruc-ture, pointed out disparities among higher educationinstitutions, discussed planning and needs assessment,identified an array of financing options and offeredrecommendations. In doing these things, we have triedto highlight the opinions and suggestions of the bestthinkers and experts in technology financing, and wehope this paper will contribute to a continuing dialogueon this important topic. ■

13

References○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

1 See Clifford Adelman, “A Parallel PostsecondaryUniverse: The Certification System in InformationTechnology,” Office of Educational Research andImprovement, U.S. Department of Education, October2000.2 Arthur Levine, “The Future of Colleges: 9 InevitableChanges,” The Chronicle of Higher Education, October 27,2000.3 See, for instance, the analysis of the National Commis-sion on the Cost of Higher Education in Straight Talk AboutCollege Costs, Washington, D.C.: Oryx Press, 1999. Thecommission attempted to find reliable estimates ofspending on technology, and concluded that none existed,but that the costs were substantial and likely to continueto increase for the foreseeable future.4 James Roche, Checking the Radar: Survey Identifies Key ITIssues, EDUCAUSE Current Issues Survey, 2000.5 Market Data Retrieval, Technology in Education 2000,www.schooldata.com/publications.html.6 The Campus Computing Project, 2000 National Survey ofInformation Technology in U.S. Higher Education, October 2000;www.campuscomputing.net.7 USDE, Distance Education at Postsecondary Institutions: 1997-98. National Center for Education Statistics, Washington,DC, 1999.8 Campus Computing 2000: Presentation to Educause 2000,October 12, 2000, Kenneth C. Green.9 Winston, Gordon C., “The Positional Arms Race inHigher Education,” Williams Project on the Economics ofHigher Education Finance, April 2000.10 For example, see Michael McPherson and MortimerSchapiro, The Student Aid Game, Princeton University Press,1998; and Thomas Kane, The Price of Admission, Washing-ton, D.C., The Brookings Institution Press, 1999.11 This relationship has been recently documented byPatrick T. Terenzini, Alberto F. Cabrera and Elena M.Bernal, Swimming Against the Tide: The Poor in America, NewYork: The College Entrance Examination Board, 2001.

12 Carol Twigg, “Can Education Be ‘Productive’?” EducomReview, 28, no. 6, November/December 1993; and CharlesKarelis, “Education Technology and Cost Control: FourModels,” Syllabus, February 1999.13 Kenneth Green and Robin Jenkins, “IT FinancialPlanning 101: Developing an Institutional Strategy forFinancing Technology,” NACUBO Business Officer, March1998.14 Kenneth Green, “Building a Campus Infostructure,”Trusteeship: Special Issue on Educational Technology, Associationof Governing Boards, Washington, D.C., available at:http://www.agb.org/spectech.cfm.15 Hezel Associates, Education Telecommunications: TheState-by-State Analysis 1994, Syracuse, New York: 1994.16 Michael Goldstein, “Strategies for Extending LearningResources in an Information Age,” in PostbaccalaureateFutures: New Markets, Resources, Credentials, Kay J. Kohl andJules B. Lapidus, eds., American Council on Education,Oryx Press, 2000.17 NACUBO Guide to Issuing and Managing Debt, NationalAssociation of College and University Business Officers,Washington, D.C., 1994.18 See Jerry Mechling, “Information Technologies andState Governments: Challenges for Political Leadership,”Discussion Paper, Program in Strategic Computing andTelecommunications in the Public Sector, John F. Kennedy Schoolof Government, Harvard University, 1995; and Lewis M.Branscombe, “Information Infrastructure for the 1990’s: APublic Policy Perspective,” in Building InformationInfrastructure, Program in Strategic Computing and Telecommuni-cations in the Public Sector, John F. Kennedy School ofGovernment, Harvard University, McGraw-Hill, 1992.19 See The Chronicle of Higher Education, “Massachusetts MayRequire Public College Students to Own Laptops,”November 3, 2000.20 Goldstein, 2000, op.cit.21 Campus Computing 2000, Presentation to EDUCAUSE,op. cit.

14

15

About the authors

Ronald A. Phipps

A leading authority on state-level academic policy and planning, Mr. Phipps’key areas of focus are now on distance learning and educational technologypolicy. Prior to joining The Institute for Higher Education Policy, he servedas assistant secretary for Academic Affairs and Planning at the MarylandHigher Education Commission, and executive director of the AlaskaPostsecondary Education Commission.

Jane V. Wellman

With experience in both public and private higher education and at the stateand national levels, Ms. Wellman brings diverse skills and knowledge abouthigher education policy, governance, and financing to her work at TheInstitute for Higher Education Policy. She formerly served as vice presidentof the National Association of Independent Colleges and Universities, anddeputy director of the California Postsecondary Education Commission.

16

Appendix○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

17

Individuals interviewed for this project were sent a projectdescription and a copy of the survey prior to the interview.Most of the interviews were conducted by telephone,

although several were done in person. The interviews,although structured to provide answers to the followingquestions, were open-ended so as to promote substantivediscussion.

1. What has been your experience with technologyfinancing in higher education? For example:■ Work as a consultant.■ Have been an information technology officer.■ Worked on the funding/budget side primarily.

2. Has your experience been primarily with publicor private institutions? Big, medium or small?

3. We are trying to get a handle on annual nationalspending for technology in higher education.Do you have any sense of what that might be?■ If yes: what is the number?■ Do you base that estimate on: a report or

reports, your own work, best guess, etc?■ If no, why do you think this is so hard to

estimate? (Definitions of what “counts” astechnology; “buried” expenditures; reliance onone-time funding; other).

4. How do you characterize the approach taken byhigher education to funding technology? (Thefollowing prompts were used if the respondentdid not offer an answer:)■ Aggressive, forward-looking and visionary.■ Confused, but forward-moving.■ Poorly focused. Planning (when it happens)

is on needs assessment and not on revenuestrategies.

■ Episodic, uncoordinated, poorly done.■ Other.■ Do you think that the approaches to

financing technology taken in highereducation help to reduce the costs oftechnology, or drive up the costs oftechnology, or have nothing to do with costs?

5. In your experience, what are the barriers facedby most institutions in funding informationtechnology? (If more than one apply, please givesome sense of relative ranks or dimensions.)■ Issues of expertise, for example:

• Inadequate attention to planning andarticulating the role of technology in theinstitution.

• Poor capacity to measure needs fortechnology.

■ Issues of terminology and measurement, such as:• Inability to break down the elements of

technology among hardware, infrastruc-ture and networks.

■ Institutional habits and ways of doingbusiness, such as:• Separation of academic and administrative

planning.• Inability to benchmark costs and identify

savings from technology.• Separation of capital and operating finance.• Resistance to creative finance, including

e-commerce, revenue centers, or privatecapital.

• Policies that discourage lease and servicearrangements.

• Policies that discourage participation incooperative arrangements.

6. Are large institutions or those that are part ofsystems advantaged in finding resources fortechnology? Is this primarily because ofeconomies of scale, or access to expertise, oraccess to capital?

7. Do you think that small private colleges areoperating at a serious disadvantage with respectto funding technology?

8. What are the sources of revenue that you haveworked with (or helped to identify) to fundinformation technology?

9. Other comments?

Interview format

18

The following survey seeks to determine how technology infrastructure is being financed at higher educationinstitutions. The Institute for Higher Education Policy, which is conducting this survey, would like to thank you fortaking the time to assist us in this important research. Upon completion, please return this form to us using theenvelope provided. If you would prefer, you may fax us your response at (202)861-9307. We will provide you a copyof the results upon completion.

Name:

Affiliation:

Title:

Address:

Phone:

Email:

Survey on how technology infrastructure is financed

19

Assessing Methods of Financing Technology Infrastructure

The Institute for Higher Education Policy is conducting a study to learn how institutions are financing technologyinfrastructure; what the terms mean; how institutions assess their funding needs for technology infrastructure; andhow they are finding revenues to pay for the needs. Please use the following working definition of “technologyinfrastructure:”

Definition of Technology Infrastructure

Building Infrastructure consists of those components that need to be incorporated into a facility to make anytechnology operate effectively. They include: (1) conduits/raceways through which computer and computernetwork cables are laid in the building, (2) the cables and electrical wiring for computers and othercommunications technology, and (3) the electrical power and related building features such as electricoutlets.

Systems Infrastructure links up various technology components. For example, computer network infrastruc-ture consists of the software that runs the networking function. It links all computers in a class or in acollege, or the computers in the college with computers in the outside world, as well as special pieces ofhardware such as servers (computers with large information storage capabilities that allow many users toshare information) whose purpose is to run the network. Internet service providers (ISPs), licensing andauthentication systems are another element. Modems-devices that allow computers to communicate witheach other through the phone lines-are another basic component of systems infrastructure, in addition torouters, switches, and hubs. Systems infrastructure links data, voice, and video and even multimedia systems.Wireless technology would be included in the category.

■ Data Systems include computers connected to peripheral devices, such as printers. In additionto administrative purposes, a baseline data system enables instructional computers to communicatewith similar devices in the classroom or institution (local area networks). Optimally, a data systemalso includes computer networks compatible with outside sources (wide area networks) such as theInternet or state-wide networks, computers with the system office or at other institutions, homecomputers, and a variety of databases. Also included in data systems are a set of software applicationsand services from external providers, such as licensed library and research services, Internet services,and other outsourced network services.

■ Voice Systems include accessible two-way voice communication and messaging (telephone) systems.An optimal system includes sufficient outgoing and incoming lines and capacity to allow for suchdeveloping technologies as voice processing and voice mail.

■ Video Systems provide accessibility to televised communication and all forms of video transmissionboth within and outside the institution. An optimal system includes capacity to send and receiveinstruction, i.e., two-way interactive video classes between classrooms both within the institution andwith other institutions.

Personnel Infrastructure includes the human resources necessary for the efficient and effective operation ofthe Technology Infrastructure. Specifically, personnel infrastructure encompasses the human resourcesincluded for (1) network management, (2) training and technical assistance, (3) course content development,(4) administrative support, and (5) student support services related to technology mediated instruction.

20

1. Have you done a comprehensive assessment of your needs for technology infrastructure in the past five years?

Yes _______ Some (planning, not comprehensive) _______ No _______

2. How have you identified your needs for technology infrastructure (check all that apply)?

_______ Formulae

_______ Standards

_______ Comprehensive planning process

_______ Contracted with consultants for needs assessment

_______ Statewide needs process

_______ Have not completed a comprehensive assessment of needs; have moved forward on a project

specific basis.

3. In your needs assessment, did you perform separate assessments for the different elements of technology

infrastructure such as those identified in the foregoing definition?

_______ Yes, we identified needs separately for different elements

_______ No, our assessment did not generate estimates of needs for the different elements of technology

infrastructure

4. Please discuss briefly the problems (if any) of terminology, including alternative definitions for terms and use

here: ___________________________________________________________________________________

________________________________________________________________________________________

________________________________________________________________________________________

________________________________________________________________________________________

5. If you have used funding formulae or standards to assess your technology infrastructure needs, how helpful

have they been in accurately identifying your needs? _____________________________________________

________________________________________________________________________________________

________________________________________________________________________________________

________________________________________________________________________________________

6. Did you contract with an outside consulting firm for your needs assessment? Yes _______ No _______

7. Did you include identification of revenue sources as part of the needs assessment process? ________________

________________________________________________________________________________________

________________________________________________________________________________________

8. How are replacement costs built into the budget and financing models? ______________________________

________________________________________________________________________________________

________________________________________________________________________________________

________________________________________________________________________________________

21

9. Have institutions in your state considered affiliating with, or creating, a for-profit entity to take advantage of

new financing mechanisms? Yes _______ No _______

10. Do you require standarized systems for technology (e.g. common platforms or software)? Yes ____ No ____

If yes, were costs a reason for standardization? Yes _______ No ______

If no, do you have general policies on compatibility? Yes _______ No _______

11. Have you used consortia or systemwide strategies for purchasing technology infrastructure or services?

Yes _______ No _______

If yes, please comment on the usefulness of these strategies in terms of efficiency, cost-effectiveness,

enabling access to expertise, or other attributes _________________________________________________

_______________________________________________________________________________________

_______________________________________________________________________________________

12. Do you receive donated equipment or services, or discounts on purchases from vendors or contracts?

Yes _______ No _______

If yes, describe briefly _____________________________________________________________________

_______________________________________________________________________________________

Do you monitor the value of costs avoided from donated services or equipment? Yes _______ No _______

13. Have you used leasing as an alternative to purchasing of systems infrastructure? Yes _______ No _______

If yes, please indicate the factors that influenced your decision to lease (check all that apply):

_______ More cost effective over the long term

_______ Concern about rapid obsolescence

_______ Unable to obtain up-front funding to purchase

_______ Service and training discounts with lease agreements

_______ Superior equipment

_______ Other

If no, please indicate the reasons for purchasing rather than leasing (check all that apply):

_______ More expensive to lease

_______ Better prices in package

_______ Required by regulation or policy

_______ Other

22

To better understand the ways in which technology infrastructure is being financed, we ask that you check the boxes

that correspond to the funding mechanisms institutions in your state use.

14. Using the definition provided, please indicate the top three financing mechanisms, in terms of dollar amount,

that institutions in your state have used for Building Infrastructure.


that institutions in your state have used for Data Systems Infrastructure.


that institutions in your state have used for Voice Systems Infrastructure.


that institutions in your state have used for Video Systems Infrastructure.

NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS

State bonds Local bonds Institutional bonds Other

NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS



that institutions in your state have used for Network Management Infrastructure.


that institutions in your state have used for Training and Technical Assistance Infrastructure.


that institutions in your state have used for Course Content Development Infrastructure.


that institutions in your state have used for Administrative Support Infrastructure.

NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


233


that institutions in your state have used for Student Support Infrastructure.

Additional Comments

Please use this space to expand on answers provided in the above questions.

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

NON-DEBT

INSTRUMENTS

State funds

a) restricted

b) unrestricted

Student funds

a) restricted

b) unrestricted

Auxiliary

enterprises

Donated

funds

Federal contracts

or grants

Revenue from a

for-profit entity

Local

resources Other

DEBT

INSTRUMENTS


24

Discounting Toward Disaster: TuitionDiscounting, College Finances, and Enrollments

of Low-Income UndergraduatesKenneth E. ReddDecember 2000

College Affordability: Overlooked Long-TermTrends and Recent 50-State Patterns

Jerry Sheehan DavisNovember 2000

HBCU Graduates:Employment, Earnings and Success After College

Kenneth E. ReddAugust 2000

Student Debt Levels Continue to RiseStafford Indebtedness: 1999 Update

Patricia M. ScherschelJune 2000

Presidential Essays: Success Stories —Strategies that Make a Difference at

Thirteen Independent Colleges and UniversitiesAllen P. Splete, Editor

March 2000

Also available from the Lumina Foundation for Education○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Are College Students Satisfied?A National Analysis of Changing Expectations

Lana LowFebruary 2000

Fifty Years of Innovations in Undergraduate Education:Change and Stasis in the Pursuit of Quality

Gary H. Quehl, William H. Bergquist and Joseph L. SubbiondoOctober 1999

Cost, Price and Public Policy: Peering into the HigherEducation Black Box

William L. Stringer, Alisa F. Cunningham, withJamie P. Merisotis, Jane V. Wellman, and Colleen T. O’Brien

August 1999

Student Indebtedness: Are BorrowersPushing the Limits?Patricia M. Scherschel

November 1998

It’s All Relative: The Role of Parents inCollege Financing and Enrollment

William L. Stringer, Alisa F. Cunningham,Colleen T. O’Brien and Jamie Merisotis

October 1998

The primary mission of the Lumina Foundationfor Education is to expand access to educationby supporting research, innovative programs

and communications initiatives. The Foundation focusesits work in three areas related to postsecondaryeducation: financial access, student retention andattainment, and nontraditional learners and learning.

The Foundation frames issues and explores newsolutions through research by gathering and analyzinginformation relating to these three areas. The LuminaFoundation encourages original sponsored research,which is typically commissioned by the Foundation toaddress critical issues surrounding access, retention andnontraditional learning.

Believing that published research may have the longest-term impact on higher education, the Foundationpublishes and disseminates articles, research reportsand books. We prefer topics and approaches that aremore practical than theoretical, and which emphasizepragmatic tools that will assist institutions and publicpolicy-makers.

Additional information about the Foundation’sresearch program may be obtained from:

Dr. Robert C. DickesonSenior Vice President for Higher EducationPolicy, Research and [email protected]

Additional information about Lumina FoundationSM

programs and communications may be obtained from:

Susan O. ConnerExecutive Vice President andChief Operating [email protected]

Lumina Foundation for EducationP. O. Box 7039Indianapolis, IN 46207-7039800-834-5756www.luminafoundation.org

Lumina Foundation for EducationNew Agenda Series™

Robert C. DickesonExecutive Editor

David S. PowellDirector of Publications

Jean B. RoseCopy Editor

Natasha SwingleyDesign and Production

Printed by SPG Graphics Inc.

Lumina Foundation for EducationEditorial Advisory Board

Martha D. LamkinJerry S. DavisDerek V. PriceJill WohlfordSara Murray-Plumer

Lumina Foundation for EducationNew Agenda Series™ is published periodically byLumina Foundation for EducationP.O. Box 7039Indianapolis, IN 46207-7039

First-class postage paid at Indianapolis, Ind.Copyright © 2001,Lumina Foundation for Education, Inc.All rights reserved.

POSTMASTER: Send all address changes toLumina Foundation for EducationP.O. Box 7039,Indianapolis, IN 46207-7039.

Funding the Info$tructure.rsn

Documents

Transcript of Funding the Info$tructure.rsn