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Financing IT ServicesFinancing IT ServicesRecharging & Core Funding StrategiesRecharging & Core Funding Strategies

Common Solutions GroupCommon Solutions Group

J.W. McCredieJ.W. McCredieFebruary 3, 2000February 3, 2000

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CSG Agenda

• Overview of CSG mini-survey

• Update on implementation of UC Berkeley network funding model

• Discussion

• Next steps for CSG

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CSG Mini-survey -- Universities

• UC Berkeley• Carnegie Mellon• Chicago• Columbia• Duke• Georgetown• Harvard

• Maryland• Michigan• Penn State• Stanford• Virginia• Yale

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Important Services -- Recharged

Most cited• Telephone services• Data networking• Cable TV• Administrative apps.• Consulting• Programming• Licensed software

Also mentioned• PC support• Repair• ADSL & ISDN• Volume printing• Teleconferencing• Facilities mgt.• Video production

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Important Services -- No charge

Most cited• Help desk• Email• General inst. support• Dial-in modems• Student clusters• Administrative apps• Crucial software• Net file storage

Also mentioned• PC support• Repair• ADSL & ISDN• Volume printing• Teleconferencing• Facilities mgt.• Video production• Training

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Important Services -- Heavy Subsidy

• Data network• Administrative applications• Excess capacity• Software licenses• Printing• Disk space• Student labs• Site licensed software

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Network Charging

• Yes - 11• No - 2• Full cost ~ 50%• Subsidized ~50%• Many responses indicated unhappiness

with current model and indicated university was searching for a better way.

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Percent of operations recharged

• Low 10 - 15%

• High 80 - 97%

• Question was ambiguous because of varied roles of voice services and technology stores.

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Suggested topics for discussion

• Network funding models -- several

• Distributed applications

• Role (and problems) of cross subsidies

• Comparisons with commercial rates

• Models that demonstrate value of services rather than make IT organiza- tions look like money grubbing vendors.

Update on UC Berkeley Network Funding Model Implementation

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Methodology

• 1st -- Determine true costs of operatingthe network (replacement cost ~$200M -- without user computers)

• 2nd -- Develop the internal gap between cost and recovery

• 3rd -- Examine ways to close the gap• 4th -- Estimate impacts of funding

mechanisms

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Terminology

• Utility:– Infrastructure & Services for the common

good (a.k.a. -- centrally funded)

• Market:– Recoverable services where costs may

move with the market -- visible to depts.

• Lines Of Business (LOB):– Identifiable service centers

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Building B Building A

Face PlateStation

Device

HorizontalWire

CoreMDF

Electronics

Key Data Network Components

Terminology

BDF

Riser

Network ClosetElectronics

~ 9~240

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Terminology

• Direct Costs– Directly Related to providing a LOB

• Charges from telcos for long distance• Maintenance on backbone system

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Terminology

• Indirect Costs– Not directly related to providing a LOB but

required for the LOB• Training of staff who perform the LOB• Office supplies

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Terminology

• Overhead – Ongoing administrative expense of the

enterprise• Rent• Insurance• General and Administrative

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Policy Driven Model

• Created Four Levels of Choice– Expenditure Classification– Utility vs. Market Proportion– Allocation by LOB– LOB Grouping

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VCAC Next Steps

• Reaffirm decision about whether to charge for data network charges

• Should charges be on a per node, or more aggregate level (subnet, depart-ment, college, control level, etc.)

• How much should be charged?

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Implementation Task Force Results

• Charter to decide on implementation details surrounding recharging proposal developed by previous committee, adopted by Chancellor’s Cabinet, and approved by faculty commission

• After one year of deliberation, the task force did not support partial recharge of approximately $7-10 per month per node (8-4)

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Implementation Task Force Results - continued

• Voted to support recharging if departments “made whole” at transition.

• Unanimously voted to move forward with recharging plan if departments “made whole” at transition.

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Computing and Communications Policy Board

• Reviewed VCAC presentation

• Reviewed Implementation task force recommendations

• Reviewed action at UCSF

• Discussed policy of “making departments whole”

• Chancellor’s new idea

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Computing and Communications Policy Board

• Chancellor’s new idea

• “Often the best ideas appears after you think you’ve run out of them.”

• Node bank

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What to do?