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CIOs take new look at sharing IT infrastructure, apps

Thomas Hoffman | Aug. 28, 2009
The idea of IT services shared among industry rivals isn't new, but attempts to establish them have a spotty track record.

ERP, Community Style

Some academic institutions have looked to shared software development to provide applications that drive down IT and operating costs. In early July, Colorado State University and San Joaquin Delta College each implemented an ERP-style financial system that they codeveloped with other members of the Kuali Foundation, a group of 31 colleges and universities that also includes the University of Arizona, Indiana University and Cornell University. Collectively, the group has invested $9 million toward software development for the project, says Brad Wheeler, vice president for information technology and CIO at Indiana University.

The "soup to nuts" system includes general ledger, accounts payable, accounts receivable and other financial modules. The Kuali Foundation ran the ERP project as a community initiative, and next month, Wheeler says, it will be made available under an open-source license.

For its part, Indiana University contributed five software developers from Wheeler's 700-person staff to help with the ERP project from its launch in the summer of 2005. While the project demanded a lot of time and attention from Wheeler and other founders--including defining the modules that would be developed and setting time lines--he says it was worth the effort to build a system that better fit higher education business processes.

Wheeler observes that some large universities have invested more than $100 million to purchase and install third-party ERP systems in recent years. Besides saving each of the participants millions in software licensing and implementation costs, each of the participating college IT staffs know the ins and outs of the Kuali system, says Wheeler. Although each institution will host its own system, a core group will continue to share software development.

The Devil in the Details

Getting the benefits of shared IT services, however, requires a lot of negotiation and hand holding. These partnerships are fraught with challenges ranging from contractual issues to security and liability concerns.

Interim discussions among the top research universities touched on some of the potential difficulties they would face, including how service-level agreements would be structured and how the group would resolve differences when participants are split on adding new technological capabilities, says MIT's Grochow. "There would have to be a significant amount of attention paid to this," he adds, referring to the myriad legal questions inherent in a shared services arrangement.

Issues such as where competitive data or a set of applications resides physically takes time to resolve, notes CHF International's Odeh, as does developing a level of trust between participants. Entrusting IT operations to an outsourcing provider with an established track record "is one thing," says Steven John, CIO at H.B Fuller, a specialty chemical manufacturer. "Sharing IT resources with another entity is a higher degree of risk," he adds. Running a shared service or hosted application "isn't a core business for the organization and the participants typically don't have the experience running such an operation."

 

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