Tuesday, May 16, 2006

Is IT The Solution Or The Problem?

Computer Generated Voice of Post via TextAloud

Today’s quote of the day (from the Google homepage) is by George Orwell. It says
To see what is in front of one's nose needs a constant struggle.

Sounds like a a motto worth adopting. So what are we looking at or at least trying to see? The big issue from where I sit is that we on campus don’t know how to cannabalize, by which I mean end services, departments, or even larger units that either are no longer in demand or perceived as of quality below the rest of the institution. Every activity has some constituency and is considered important by them. Schumpeter talked about creative destruction. In contrast, we have uncreative, and really unspoken about, retention.

What’s the big deal. Universities keep on keeping on. We’ve known that for some time. Anybody who adopted learning technology in the ‘90s and wanted to see that as the spur for institutional change had to wake up to the fact that universities are conservative instituions, especially because of faculty governance, but also because the interdependencies are substantial, its not very likely to excise units or activities that under a “corporate” approach would have been axed a long time ago.

The implication is that to do anything new either new revenues have to be found to fund the activity, or the activity itself must be cost saving in other areas so it is implicitly self-financing, or it just can’t be done. This wouldn’t be so terrible, but for the politics. New revenue comes with strings attached. There are earmarks. So for bottom up activities, and while I’m reasonably highly placed in the campus administrative hierarchy, I still view teaching and learning with technology as primarily a bottom up activity, new revenue becomes something of an oxymoron. This leaves cost saving or doing nothing as the viable alternatives.

But let’s not focus on teaching and learning here and instead consider IT more broadly. One might sensibly ask, “How can IT be part of the problem? It’s such a big factor in our lives. It’s an integral part of the way we work, how we communicate, what we produce. It’s the solution, not the problem, isn’t it?” And from the point of view of a home owner who has a PC in the office with a cable modem, some other rather inexpensive hardware and software, it sure seems like total cost of ownership is low, while benefits from use are extremely high. The access to information, timely stuff, interesting stuff to read, reference stuff to fill in personal gaps of knowledge, fun stuff to entertain when the mind goes blank from work, all of that is a wonder in itself. And, of course, it’s not just the getting but also the making and communicating about it. There’s email, blogs, IM and a lot more. It creates an unbelievable sense of connection. And most of the stuff is free. Surely IT paves the virtual road to the brave new world.

Consider Google. I don’t know about you, but I’ve learned, for the most part, to ignore the ads and promos, unless I’m actually in shopping mode when that is what I’m searching for. In this respect about using Google, it’s like TV commercials, press the mute button, get a tall one, and come back when the programming has resumed. Many of us learn this type of behavior and once learned it’s not that big a deal to have this type of external presence. But, of course, if everyone behaves this way than the ads don’t have impact, Google can’t generate sufficient revenue to support its exploding infrastructure, and then the walls start tumbling down. So, we who are in love with being online but also in love with being cheapskates hope the rest out there are “power shoppers” and give Google’s commercial clients a tumble. We can then leech, er, really I mean free ride, on these others who actually do provide the financial skids to the system.

So all the cool software services that are provided out there seemingly for free to us have at root a Catch-22 style foundation – it’s the ads that make it work, but we try our darnedest to ignore the ads. Is this a stable business model on which to rest the case about IT being part of the solution? I don’t know the answer, but I do know that I don’t find this a comforting thought.

Now let’s turn to big IT inside the university, where clearly there is no ad financing of university activity and, I believe, state law actually prohibits that from happening. (But if the state share of the university budget continues to wane perhaps that law changes and then maybe the university starts to emulate Google in this resepct. Perish the thought.) I believe the new hot issue is data integrity and data security. Research data, financial and personnel records, grade information, etc. All of this needs state-of-the-art storage and archiving, insurance against power outage or hardware failure, and proactive steps to ensure confidentiality and privacy. The needs in this area are growing geometrically as our business processes become digital and we increasingly rely on those.

State of the art, in this case, means having expensive “data centers” with appropriate environmentals – temperature control, no direct sunlight, redundant electric power, secure physical access, and as leakproof as possible. Big servers take up a lot of physical space. As our data preservation needs grow, the square footage of data center space that is needed also grows. We are currently estimating new data center growth on the order of 1% or 2% of the campus operating budget to handle needs for the next five to ten years.

Normally, it is a mistake to consider capital projects like building a new data center, which has a multiyear lifetime, and therefore the installation costs should be amortized over the lifetime of use, with operating budgets, which are calculated on an annual basis. This is the standard stocks versus flows distinction that we teach in economic principles.

But in this case I made a point of making “this mistake” because new data centers typically won’t carry additional external revenues with them (although one could argue that the revenue is there in the overhead from federal grants, but there is the countervailing argument that the overhead money has already been fully allocated) and hence such data centers are not self-financing. They also don’t seem to be directly cost reducing. That leaves only one other way to get them built, via a diversion of operating revenues from their current allocation. With this line of thinking, its not hard to view IT as part of the problem.

To an economist, the real problem is an abence of markets. Things like data centers are funded off the top and are therefore lumped in with unavoidables like increases in heating bills do the the rise in price of crude oil. Instead we’d argue there should be Pigouvian taxes (or their Groves-Ledyard equivalent to ensure incentive compatibility) so that we jointly determine the level of public good provision and who pays for it. But this really only makes sense if every individual faculty member and administrative officer plays the role both of tax payer and consumer.

Yet this idea is so alien from our culture that I don’t believe it will ever happen. Instead we live in a world where deans are customers, in the sense that they control budgets that are potentially subject to a campus imposed tax, and individual faculty and administrative officers are users, who want every service on campus to be provided according to the “Library Model,” where except for late charges everything is offered up for free. In this world there is a gap in expecations and demands between the customers, who tend to be more penurious about IT, and the users, who tend to be more expansive about IT. A big part of managing IT on campus is about reconciling that gap.

Is IT part of the solution or part of the problem? I say, “yes, it is.”

1 comment:

Kate said...

;) Cool huh?! Another post on the audio coming shortly...