Cloud Computing: A Financial Boon or Bane for Educational Institutes?

Jim Long, Director of IT, William Woods University
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Jim Long, Director of IT, William Woods University

How do you see the benefits of cloud computing in the Education industry, and how have you embraced it?

For good or ill, there seems little doubt the cloud is here to stay. Vendors and educational institutions alike are moving to the cloud and, as with any new process or service, figuring out the details as they go. Are there benefits? Yes. Are there issues? Yes. Does it matter? Not really. Do you have a choice? Increasingly, no.

Vendors are moving to the cloud at an increasing rate. While the cloud may not have been specifically designed to change economic models, it certainly has. Led by industry juggernauts like Microsoft, vendors are changing their models and moving to the cloud. Rather than providing goods, they provide services. For a company like Microsoft, this makes a lot of sense. They achieve better license control, improved revenue, and better ability to plan with a cloud-based product like Office365. For vendors, therefore, the upside is very good, and they have multiple compelling reasons to change their sales model to a licensing model–and that is the fundamental shift, from selling to licensing.

Previously, most, if not all, software was sold by license, despite the illusion of a purchase. Whether you went to a big box store or ordered online, you purchased the software, installed it, and used it. Chances are, you clicked through the End User License Agreement (EULA) to get the install up and going as quickly as possible. These agreements were clear, as much as any contract could be, you were licensing the software without warranty and had no rights to the software itself. All well and good, as far as that went, because you could use the software to your heart’s content, be that six months or six years. Updates and the acquisition of newer versions were totally in your control. The software continued to open your files, enable editing, saving, and the typical things users like to do on their computers.

  Failure to project future costs can lead to long-term financial problems 

With the cloud, however, that model has changed. There is much more capability for a vendor to control its license. Sharing software is a thing of the past. Piracy can be better controlled or countered. As someone who previously financially relied on people actually purchasing the software I created, I believe this is a great thing. Everyone who uses the software actually has to pay for it. My creative efforts (and those of my colleagues) are appropriately rewarded. However, what about the other side of the equation?

As someone who has to license a growing catalog of software for the faculty, staff, and students of the university, the associated costs are potentially problematic. Gone are the days when we could license a specific version of a piece of software and use it as long as required. We were allowed to make the decision about whether to upgrade or make do with our current version, based on the priorities and budget of the institution. While the goal is always to have the latest and greatest, that is not always practical in the education industry. Sometimes we have to keep a specific version a bit longer than desired to have funds to purchase other software (or hardware). While I may initially pay less for a piece of software with the licensing model, keeping it for multiple years typically means I am paying much more over the life of the product than I did in the past.

Our institution has worked within the licensing model for many years. Much of our software, whether cloud-based or premises-based, is licensed. We are used to the model, in that we understand that the licensing costs will increase year over year. Now, a growing number of our critical applications are moving to the cloud and the licensing model is changing. How do we prepare for the change?

First and foremost, we must budget appropriately. While the cloud potentially saves in some areas, the license fee grows every non-contract year, typically by around 5 percent. When we budget, which is well in advance of the yearly cloud-based license invoice, we plan on an increase of 5 percent. While we are occasionally surprised (one way or another), this number is typically accurate. In practical terms, we request a 5 percent budget increase in our licensing budget, to stay even. For us, licensing is our second largest budget line item, after salary and benefits, so this is impactful and must be carefully considered.

Second, working closely with the president’s office and CFO, we must educate, so there is no sticker shock when others see the initial budget request. We are careful to plan for cost increases and examine whether we have alternatives–can we walk away from the license? Often this is not practical, even if it is possible. Can we really stop using Illustrator in the classroom when Adobe moves to the cloud? Our answer, this year, was no, we cannot. So, how do we budget for the increased costs?

Third, and finally, we work with vendors to maximize our budget and our options. What pricing choices do we have? What happens to the data if the license expires? Increasingly, we are finding the data is ours, but it is completely unusable, so we are now careful to plan an exit strategy for the license. While we may find we are constrained in our options regarding portions of the license, vendors are willing to work with us in other areas.

For all the technical benefits the cloud brings, there is bound to be a financial cost. It is becoming increasingly important to properly budget for that cost and carefully plan, not simply for the coming academic year, but years in the future, to appropriately understand the rise in expense associated with cloud-based licensing. With careful planning and vision, it is possible to maximize the benefits of the cloud without breaking the bank; however, failure to project future costs can lead to long-term financial problems.

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