8 April 2004
Introduction
The UH Business Process Council (BPC) was convened in Fall 2003 with a charge to recommend improvements in UH business processes across all areas, beginning with the specific task of recommending a direction for the future of UH financial management information systems. The BPC includes representation from key system-wide constituencies in central offices and user communities (see Attachment 1).
Background Work
The BPC began by reviewing the recent in-house studies, reports and recommendations regarding financial management information systems over the past several years. These include the FMIS 5-year review (Attachment
2), the “Raleigh Report” on Research Infrastructure (Attachment 3), and User
Requirements for Fiscal and Administrative Information System that were provided as input to the Research Transition Task Force (Attachment 4). The
BPC also reviewed a number of recent external reports on the “Build v.s. Buy” question for administrative systems in higher education.
BPC members were presented with an overview of the current UH financial management information system and how it works. BPC meetings included demonstrations of recent in-house developments that have been rolled out or are underway to improve financial information and processing through webbased front-end systems, ancillary databases and the financial datamart. The
BPC also had several remote presentations on software used at Indiana
University. In addition, many members of the BPC and much of the interested University community had already been exposed to one of the leading commercial financial management systems for higher education through a 2-day intensive demonstration.
UH Requirements
Through this process the BPC developed a comprehensive list of highest priority needs, both short-term (Attachment 5) and long-term (Attachment 6).
The needs for electronic improvements throughout the area of research administration, including integration with financial management, were significant and comprise their own section (Attachment 7).
Recommended Approach to Meet UH Needs

The BPC then considered how to best meet these needs. It was the unanimous position of BPC members that the UH should not acquire a new commercial financial management information system at this time unless absolutely necessary.
Different BPC members had different primary rationale for reaching this conclusion, but among the reasons cited were:
• UH cannot currently afford the full cost of acquiring and implementing a new commercial financial management package.
• UH administrative staff are currently so overworked, including with the implementation of the financial components of the new Banner Student
Information System, that they cannot effectively participate in the implementation of a new commercial package at this time.
• None of the currently available commercial packages represent the future of financial management systems for UH, and we should not engage in a major time-consuming and expensive project that does not take us to our desired future.
• If we were to purchase a new package and begin implementation, all of our immediate efforts would go to implement the package “as-is,” including migrating our account structure and recreating the many required external interfaces. So we would not begin to see benefits or be able to address any unique UH requirements until the end of that multi-year process.
• UH has not developed and utilized FMIS as fully and completely as possible due to lack of committed resources. Priority investments in specific enhancements and improvements will be the most efficient means of achieving progress.
Over the long term the BPC believes that the UH financial management system should operate in an open, cost-effective and modern technical environment. But there are no viable short-term options that meet this objective. The BPC therefore considered the medium-term viability of the current financial management application and our ability to improve services for customers using the current system as a base.
Viability of the Current System
The current application runs on proprietary (IBM) hardware in a proprietary software environment (Software AG). While the hardware is at the end of its lifecycle and will have to be replaced, a 5-year hardware replacement (e.g., 5yr lease/purchase) is expected to be roughly cost-neutral. From a software perspective, there is enough Software AG presence in the marketplace that even if the company were to experience problems, continued operation of the
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current environment would not be in danger. There is no vendor support for the current financial management application itself, but UH staff have been maintaining the application software in-house for a number of years – including successfully handling Y2K remediation and achieving compliance with recent GASB changes. So the BPC believes that, given a supported hardware platform, the current financial management application can be maintained.
The BPC then considered whether or not UH can make the current system meet our functional requirements. Based on the prior reviews and demonstrations of new capabilities that have been put into production and are in progress -- e.g, e-Purchasing, e-Inventory, e-Travel and the financial datamart —the BPC believes it is clear that the technology can support our requirements and we have the technical capability to meet user needs. The
BPC believes that our inability to address user needs with our system is more a question of commitment, priority and investment than technology or capability.
As has been pointed out time after time, UH has long under-invested in administrative infrastructure for business processes, including both information systems and staffing. Examples includes the inability to fund the implementation of the University’s Strategic Plan for Information Technology and the failure to make the investments recommended more recently in the
Raleigh Report. Improving the capabilities of the current system to meet user needs at anything other than glacial speeds will require commitment, priority and investment. However, the BPC believes that investing in ourselves and our current system can produce more improvements faster and at lower cost than implementing a new commercial system.
In addition, that investment can be at a pace dictated by our needs and financial capacity.
Importance of Improving Our Business Processes
We will not achieve the benefits of automation if we simply move online our current processes that we know are not optimal. As noted in the Raleigh
Report, UH needs to not only automate its practices but significantly restructure processes and responsibilities . The current reliance on centralized control in order to protect against any error must be balanced with a more sophisticated assessment of risk and the delegation of more responsibility closer to the decision points – accompanied by the meaningful assignment of accountability. Business Process Improvement, including reconceptualizing our organizational approaches to administration, may yield as many benefits to efficiency as automation.
Financing
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Addressing the short-term requirements carries an estimated cost of
$750K/yr. This funding will primarily be used to hire programmers and analysts to implement improved automated business processes. It will also include support for consulting to help with specialized or short-term project components, and some travel funds to ensure that UH developments are consistent with best practices at other institutions. Reliance on consultants is not recommended since the cost is at least 4 times that of in-house staff, and when the consultants leave we will have lost our expertise on the work done.
The full costs of implementing electronic research administration as described in Attachment 7 have not yet been developed. The BPC observes that the
University and RCUH have not yet developed a shared understanding around the organizational responsibilities of how research will be supported and executed over the next 5 years. The BPC believes that many of the most critical concerns of researchers will be addressed through the short-term requirements list shown as Attachment 5. The BPC recommends that additional resources be identified for some o f the “back-end” requirements in research administration once responsibilities are clearly understood between
UH and RCUH and before the federal government requires institutions to interact with them electronically.
Our Desired Future
As noted above, over the long term the BPC believes that the UH financial management system should operate in an open, cost-effective and modern technical environment. During Fall 2003, as the BPC analysis was underway, the University began discussions with a new national-scale Open Source
Financial Initiative (OSFI). OSFI is an effort spearheaded by the National
Association of College and University Business Officers (NACUBO) to leverage the broad expertise and resources within higher education in order to create a viable alternative to the commercial financial management systems in the marketplace.
In general, “open source” refers to any program whose source code is made freely available for use or modification as others see fit. Open source software is often developed as a public collaboration. Proponents believe that the contributions of many developers improve the quality of the resulting software. Some of the most widely used software in the world is open source, most notably, the Apache web server software which is the most commonly used web server in the world, and the Linux operating system which continues to gain market share in the server market and is increasingly viewed as a viable alternative for the desktop.
Until recently, open source applications were not widely used in higher education. One of the first significant breakthroughs was the development of the uPortal software by a university consortium with commercial assistance
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and financial support from the Mellon Foundation. uPortal is now in production use at nearly 100 universities around the world, including at the
University of Hawaii, and has commercial support available for those who want it. The Mellon Foundation has now funded a number of additional open source initiatives in higher education. These include the Sakai project to develop an open source learning management system (Stanford, Michigan,
MIT and Indiana), the OSPI open source portfolio initiative (Minnesota,
Delaware and the r-smart group have now been joined by Rhode Island,
Georgetown, Indiana, and Michigan with support from the Carnegie
Foundation), and the Westwood project, which engages 25 universities with the Open Source Applications Foundation to extend the emerging open source “Chandler” personal information manager (email, calendar, contact, tasks) for use in higher education.
The Mellon Foundation provided a planning grant to NACUBO in late 2003 to develop a full proposal for the OSFI. The concept was to identify an existing, functionally rich, financial management system for which could be reprogrammed as a native web-based application in a modern open-source technical environment. Indiana University, a national leader in IT and participant in several other open source initiatives, has such a system and is now (as of April 2004) trying to clear the intellectual property rights. They will be the lead academic partner in OSFI. In addition, a commercial partner with extensive experience in higher education software is also participating in
OSFI. So institutions that want commercial-grade support will be able to obtain it in the marketplace. Availability of commercial support services has been recognized as a key component in many successful open source software initiatives.
The working concept for OSFI that will be fleshed out in the full proposal is a
$4m - $5m re-programming effort that will take 18-24 months. Half the funding would be provided by the academic partners and half by the Mellon
Foundation. The financial commitments from the academic partners (half the total project cost) will be used to pay dedicated staff at their own institutions to execute the project. So the institutional commitment to OSFI is actually an investment in one’s own staff to work with others toward a shared goal.
While OSFI is not yet a reality, the BPC believes that this represents the desired future for financial management information systems at UH. An open source financial management system will uniquely provide the University with the ability to maintain functional and technical currency and control our destiny while containing costs in today’s extremely volatile technology marketplace. OSFI is an excellent technical match with the work that has been done at UH over the past several years, with the skill-set of the
University’s IT staff, and with the internal academic programs (ICS, CBA) that are the primary educators of the University’s employees. It is also a strong
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“cultural” match with for UH, which already has a long tradition of maintaining its administrative applications internally.
The BPC recommends that UH commit as a partner in the OSFI project and negotiate its role in a manner that maximizes the extent to which its
OSFI efforts can enhance the functionality available to the University even before the full OSFI system is implemented . E.g., some of the UH staff funded through the UH investment in OSFI might work on modules that are of greatest urgency to UH and, through interfaces to the current financial management system, make these new modules available for use at UH before OSFI is finished. UH has extensive experience in interfacing this type of new software to our current financial management system.
The BPC acknowledges that it is recommending a direction that is not yet considered mainstream. We observe that the Gartner Group, a leading and relatively conservative source of industry analysis, has noted the rising vision in higher education of open source as an alternative model for mission-critical infrastructure and applications. They attribute this interest to:
• Tight budget times, which have focused attention on software acquisition costs;
• A growing resentment of vendor power, particularly in the wake of price increases and licensing changes that many institutions felt powerless to reject;
• Political pressures in some parts of the world to favor local software development and to pool software development costs; and/or
• The strong cultural appeal of open source software in academia.
We believe that OSFI is at the forefront of bringing to the enterprise a movement that already includes the open source portal that UH is now using, an open source electronic portfolio system that UH is investigating, the open source course management system that UH sees as a possible future, and an open source calendar and personal information manager now under development with 25 universities. Assuming that the OSFI project comes together and UH can arrange favorable terms of participation, as noted above, an additional $250K/yr will be required. This will initially be used to supplement the programming and analysis efforts, with resources shifting to the multi-year implementation of a new open hardware and software platform to host our OSFI implementation at the end of the lifetime of the replacement mainframe needed for FMIS.
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Timeline and Risks
We have shown an overall projected timeline as Attachment 8. This assumes that OSFI starts up during 2004, as expected. If the OSFI initiative does not emerge at all, the BPC will re-assess our options in 3-5 years to see if there is a more favorable approach available to reach our desired end-state. At that time we will have achieved the required service improvements and can consider any commercial packages in the marketplace or other options.
The BPC believes that these recommendations protect UH against risks associated with major cost increases and churn in the technology marketplace as the well-known difficulties associated with complex system implementation projects. While our existing system has many shortcomings in the services provided to end-users, it is a solid and proven fund-accounting system that serves UH core institutional functionality reasonably well. The biggest risk associated with this recommendation is that we will relax, fail to invest, become complacent with our processes, and/or not make the procedural and structural changes necessary to deliver the administrative services our customers need. The BPC plans to mitigate this risk with vigilance and regular reports on progress, accompanied by a willingness to escalate serious concerns to the most senior UH executives.
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