Monday, 12 December 2011

The Price is Right

Last Friday I was speaking at a UCISA event on What Price Your Service, which covered a number of aspects of pricing and costing services.

First up was Andrew McConnell who is chair of the British University Finance Directors Group, and has also sat with me on the UUK Group looking at Modernisation and Efficiency.  Andrew gave a good overview of the financial environment and the challenges facing HE. Continuous change and uncertainty, cuts in resource, competition for student numbers, inflationary pressures on pay and non pay costs, the impact of spending on the REF and cash flow changes all contribute to a difficult picture. Although the viability of institutions does not seem to be an issue at the moment,  we are operating on very fine margins, and many institutions are not generating enough surplus. So, we need to have entrepreneurial leadership and generate income from  diverse sources, have robust financial, institutional and growth strategies and take the efficiency agenda seriously. I've written before about the UUK report (commonly being referred to as the Diamond report), and of the 17 recommendations, 11 touch on IT. Andrew called for better collaboration between UCISA and BUFDG, and between Finance and IT generally, working together and overcoming the language barrier that sometimes exists between us. He reminded us what Ian Watmore had said at  the launch of the Diamond report - we used to say we had to spend to save, now we have to save to spend.

Next up was the University of Oxford, who have been looking at how their services are costed. Originally they worked on a simple basis, allocating expenditure to different cost centres, but more recently have been adopting the TRAC approach, and looking in detail at all aspects of expenditure including power, space, overheads, dependencies on other services etc. They received funding from the JISC, and have produced a toolkit for costing IT services, available here.  They've found this model to be extremely useful in looking at how much services actually cost, especially in departments. For example they found a small department running their own exchange server instead of making use of the central one, who insisted it didn't cost anything. However, it actually cost twice as much as the central one.

Then I spoke about the work we've been doing at looking at where our expenditure actually goes, rather than how much things actually cost. We've changed our accounting structure to match our seven service areas, but this year manually allocated all expenditure - staff, non staff and capital, as well as expenditure in those areas which generate income - to those areas. So, using expenditure as a proxy for activity, we get the following results:

Then each of the service areas can be broken down, and we can see where the expenditure is coming from  - is it mainly staff, capital etc. There's loads of information, and it's thrown up some interesting questions, as well as highlighting some issues. If you're really interested in seeing the results, and how and why we did it, you can see the talk here. All of the talks given on the day are here, and you will need Silverlight to view them.

4 comments:

Anonymous said...

I'm not sure that using "expenditure as a proxy for activity" is something that would stand up to much scrutiny (very much imho). That part, a very useful and welcome insight.

Chris Sexton said...

Interested to know why you think that?
We've looked at it and think it's a pretty good proxy.

Mike Hounslow said...

I think expenditure is a splendid proxy for activity in Universities in general - mainly because we spend a pretty uniform fraction of our money on people. Others can speculate on whether people = activity.

The striking thing about the allocation of CiCS expenditure is how little is badged research. 1/4 of the University's income each year is direct research funding, to which we could add QR and PGR.

Is this because teaching is "corporate" and research is "personal"?

Chris Sexton said...

Yes, its the research one that jumps out at you isn't it? It's one we're trying to increase, but one of the reason's it's lower than say learning and teaching is that we run a lot of generic learning and teaching services - student computing rooms, the VLE for example. Research is much less generic, and much more specialised.