At a time when aligning technology outcomes with student learning is more important than ever, funding for educational technology equipment and services remains constrained. According to Quality Education Data’s “Technology Purchasing Forecast, 2003-2004,” annual funding for instructional technology has decreased by $2.5 billion since 1998, to approximately $5.8 billion. While the most recent data show we are spending an average of $117 per K-12 student on technology, this is a decrease, in inflation-adjusted dollars, of more than 40 percent in five years. Studies and surveys conducted by the Rand Corporation, the Council of the Great City Schools, and the Integrated Technology Education Group (ITEG) have suggested that the amount needed for a self-sustaining, high-quality technology program can quickly rise to more than $400 per student, per year. With the need to do more with less, the role of Total Cost of Ownership (TCO) analysis takes on increasing importance and value.
TCO analysis has long been used in the business community to compare the financial implications of alternative product purchases and capital investments. The value of TCO analysis is that it requires the planning team to consider all costs–some of which might not be immediately apparent–over the life of the product or service; not just the initial cost, and not just the first-year expenses. TCO also serves as an investment roadmap that can guide the management team. This is of particular value in education, where personnel changes often interfere with the full implementation of a multi-year technology program.
Recognition of all direct and indirect associated costs provides administrators with the knowledge necessary to monitor, control, and possibly reduce expenditures. For example, a new technology initiative often requires building modifications, an increase in the use of electricity, additional demands on air conditioning, an increase in the number of hours that support personnel will spend maintaining the system, an increased need for professional development, and procurement of spare parts, extended warranties, and ergonomically appropriate furniture. Experience has shown that these types of indirect costs can account for up to 50 percent of a district’s total annual expenditures necessary for technology.
A school budget that relies simply on an annual technology line item will not have a clear picture of the true cost–now and in the future–that technology program decisions incur. By using a process that brings focus to the total cost analysis, decisions can be made that will optimize the planning process, the program’s implementation, and its long-term success. The K12 TCO Calculator, available free of charge at www.iaete.org/tco, can help school leaders recognize not only the cost of individual products and services, but also the cost impact of the broadest possible set of related services, as well as associated building and personnel requirements.
A TCO analysis can only quantify the cost of an investment option. It cannot determine if the investment can generate added value to the enterprise, and it cannot be used to ascertain whether the investment is appropriate to meet strategic business or educational objectives. Its use does, however, offer significant value to the education community.
For example, if properly applied to educational technology, the TCO process can (1) serve as the catalyst to formally document and monitor existing and new technology equipment and services; (2) quantify the cost of alternative, multi-year strategic educational technology plans; (3) uncover opportunities for cost reductions in technology, building modifications, and student and teacher support; (4) further integrate technology-related decisions into the larger decision-making process of the school district; and (5) support investments to assure the availability of the most effective tools and environment critical for student learning.
The TCO process is the ideal tool to support the financial justification for larger and more complex technology systems. The role of technology in schools is expanding beyond the classroom and increasingly is being applied to support multiple objectives, such as student and staff administration and security, as well as state and federal accountability reporting requirements. Technology has reached a level in schools where a “systems approach” to all aspects of its procurement, installation, and application can offer significant operational and financial rewards.
When we speak of a “systems approach,” the objective is to include all aspects of a district’s technology program under a single, district-wide planning and implementation effort. This effort must involve personnel from virtually all departments working together, from the curriculum development team and the business department to the facilities managers and the teachers. The reality of complex technology programs is that every decision impacts all other operations. Unless all aspects of a district’s operations are jointly considered, unanticipated costs will be incurred, technology goals will be compromised, and student learning will fall short of objectives.
A good example of this phenomenon is the relationship between the technology system and school construction. A new technology purchase might require additional electrical service, and this might call for building modifications; the heat generated by computer equipment could impact the school’s cooling system, the building’s communication system could be affected by building materials, and student safety issues could require classroom design changes. In each case, school operation costs would be reduced if potential building modifications were addressed in the early stages of the technology plan, and if the school construction program considered the implications of the technology program at the same time. A district’s technology plan also should include the requirements for school security programs and build in the potential for future school administrative programs. In this way, higher-capacity equipment can be procured up front, the necessary building modifications made, and total multi-year costs reduced.
As demands on schools become more challenging, the systems approach and TCO analysis become increasingly important. Without TCO analysis, the possibility of saddling future school administrations with unsustainable technology-related costs increases. The result will be an inability to continue to upgrade the embedded base of equipment and services, and an inability to attain and sustain a world-class ed-tech program in support of student learning.
While the K12 TCO Calculator, first released in 2002, was based on a well-tested model that incorporated widely accepted technology guidelines from the U.S. Department of Education (ED), we quickly found that the degree to which schools formally pursued these guidelines varied greatly. With more than 14,000 school districts of different sizes and demands, it was recognized that the technology planning process needed to be flexible, and a TCO program needed to be adaptable to any technology-planning program.
Taking these lessons to heart, the Institute for the Advancement of Emerging Technologies (IAETE) enhanced its free, online K12 TCO Calculator with the help of the calculator’s original developer, ITEG. Funded by ED, version 2.0 (released this past January) provides an easier and more flexible method for educators to run multi-year technology program cost scenarios.
Pivotal to the K12 TCO Calculator is the school district’s multi-year technology plan. The enhanced calculator encourages the development of a technology plan aligned with a district’s identified needs for improving student achievement rather than meeting arbitrary benchmarks, such as the previously applied student-to-computer ratio.
ED now encourages an integrated approach to technology planning, budgeting, purchasing, and implementation. In this way, the technology infrastructure that supports teaching and learning also supports the many systems that impact children in and out of the classroom. This approach also reduces total school costs. The K12 TCO Calculator fully encompasses this philosophy in its design. The organization of the calculator makes clear the interrelated nature of all the systems within a school district impacted by technology installation and operation.
TCO is not a single number, but rather a process that allows cost analysis of multiple scenarios, where each scenario can be defined by changes in criteria such as student population, classroom design, infrastructure quality, and student expectations. To limit the number of scenarios to be considered, TCO analysis should be tightly linked to a formal planning process. In this way, the practicality and affordability of a plan can be ascertained, and adjustments made, quickly. By walking through the input steps of IAETE’s TCO analysis, novice users can become better aware of the types of data they can and should be using to develop or update their technology plan. More experienced users will be able to run cost scenarios of their plan to help identify areas they might have overlooked or underrepresented.
The K12 TCO Calculator tries to maximize the ability for users to vary their input. As an example, it allows the user to select from three, four, or five-year planning cycles. Provision has been made for variations in construction cost across the country, eRate funding, and cost savings resulting from combining technology installation with school construction programs. The ability to customize product prices and modify future projections for inflation also has been included. A significant enhancement in version 2 is the ability to determine the total and sub-system costs for the entire district and for individual schools.
Among the most important uses of TCO analysis is its ability to maintain a current inventory of equipment and services and to project future additions and replacements. A detailed report is available for all hardware and software that includes the number of units needed as well as the number that should be junked. For each of these categories, the associated disposal costs, as well as annual and summary costs, also are provided.
In addition, a cost summary report provides valuable data for identifying gaps in the plan between expected revenues and expenditures. For example, a school district that focuses its technology expenditures on hardware purchases but does not fully consider the costs for increases in electrical power, repairs, supplies, software, and teacher training might determine from the summary report that its allotted budget will not be sufficient to meet its goals.
Integrated planning for educational technology is a critical step in helping schools meet higher accountability standards. TCO analysis–and, more specifically, a systems approach to technology planning and budgeting–should be a core component in the decision-making process.
Al Zeisler is president of the Integrated Technology Education Group, LLC (www.iteg.com). John Ross is director of the Institute for the Advancement of Emerging Technologies in Education at Appalachia Educational Laboratory (www.ael.org).