Higher Education Budgetary Estimates to Move Legacy Finance, HR, and SIS to the Cloud
One of the questions higher education institutions most often ask Tambellini is “how much will it cost to move our legacy finance, HR, payroll, and student systems to the cloud?”
If your institution is struggling to estimate what it might cost to migrate from legacy finance, HR, payroll and SIS solutions to a modern, cloud solution, you are in good company. Hundreds of institutions are planning to migrate on-premises administrative solutions to the cloud over the next several years.
When clients ask Tambellini to provide budgetary estimates for cloud implementations, analysts spend considerable time gathering critical information. And even with the best information, assumptions have to be made.
Estimating budgetary requirements to replace legacy finance, HR, payroll, and student systems is a difficult task when institutions begin thinking about new, modern cloud or Software as a Service (SaaS) solutions. Costs such as annual recurring subscription fees and implementation expenses are commonly recognized as items to consider in a budgetary estimate.
And while annual recurring subscription fees may be significant, the cost to implement and operate a new finance, HR, payroll, and student system in higher education includes expense categories that are easy to overlook in the planning process.
Estimating the cost of a system replacement is complex, and when moving to a cloud system, some of those costs are different from previous on-premises implementations institutions may have performed. Often, vendors provide incomplete cost estimates and fail to include critical information even for their solutions. For example, it is common to see budgetary allocations for SaaS solutions with minimal or no training considerations for project teams and end users. It is also common for institutions to overlook or undersize a budget for change management.
Institutions need to consider the answers to many questions to estimate budget requirements to replace legacy solutions. The experience of any given institution will vary depending on many factors. A partial list of questions to consider is listed below to offer institutions an idea of the complexity of developing budgetary estimates.
- Will the institution implement all systems at once? Or, will the implementation take place one system at a time?
- What is the effort and cost to retrofit systems for the interim?
- How long will the implementation take?
- How much will it cost to run concurrent systems and operations?
- Does the institution have staff capable of managing the project?
- Are the current IT and business staff skilled in projects?
- If the institution has to hire a project manager, how much will that cost?
- When will the institution begin paying SaaS fees to the vendor?
- Will you plan to hire additional staff in addition to using contract help?
- What is the timing of the decision? (If the decision is within the calendar year, the institution may try to estimate negotiated pricing based on pricing from vendors to similar size and type of institution.)
- How much will project team training cost (including time out of the office, travel, and expenses)?
- How much will end user training cost, and who will deliver it?
- How much will consultant/implementation team and institutional travel cost?
- How will the institution handle change management? How much will it cost?
- Do vendors have any upcharges that are not part of SaaS fees or vendor implementation fees?
- How much is the implementation based on the approach and the modules the institution is contemplating?
- Are there related systems that will also need to be replaced or updated while replacing the core systems?
- How much does the institution need to budget for contingency?
- How much does the institution need to budget for new modules that are known to be required?
- How much does the institution need to budget for new modules that are a contingency for other modules later determined necessary or added by the vendor?
- How much of the current spend will be eliminated and when?
- What level of change do you desire? (Lift and shift of current process, or broad transformation of the business?)
- How much back-fill of existing resources is needed for those who will work on the project?
- What should the budget be for integrations, and who will do the work?
- Which systems will be decommissioned? And what will you need to do with their data?
- Will additional space, hardware, equipment, or supplies be required for the project team?
- Do you expect to hire a QA or IV&V partner?
- What is the expected range of product cost the institution is willing to bear?
- What assumptions does the institution want to include in the budgetary estimate? How do you want to account for assumptions that don’t bear out? (i.e., contingency)
- Does the institution want to track salary cost of existing personnel that will be assigned to the project?
The options for creating estimates are varied. There are also just as many questions to ask about ongoing operational costs of maintaining the new solution, which we may cover in a later Top of Mind blog.
Vendors offering new, modern, cloud solutions have a single goal in mind. The goal of vendors is to sell institutions multi-year agreements for software and services.
The burden to understand the total cost of implementation, support, operating costs, etc., falls to the institution.
Also, consider the cost of implementing and maintaining cloud solutions compared to running on-premises solutions. Regardless of the provider, institutions may gain efficiencies, and a potential return on investment (according to experts) by moving finance and HCM/payroll to the cloud. Be clear about your institution’s rationale for moving to the cloud—is it savings in IT, the business areas, the colleges, and departments? Or is it related to other non-financial improvements?
For higher education institutions, operational efficiencies related to cloud deployment are generally not seen as reasons to move to the cloud.
There is a myriad of complexities involved in setting institutional strategy to move to the cloud, above and beyond financial considerations. For example, Tambellini research indicates that institutions are interested in clarification around definitions relating to cloud and cloud versus hosted solutions. It can be confusing to consider the difference between Amazon (AWS) and Microsoft based systems (Azure).
Can institutions gain similar efficiencies from cloud/hosted solutions as from private cloud solutions? Can institutions expect the same capabilities from private cloud solutions that institutions might expect from a multi-tenant cloud?
Institutions care about risks and outcomes, but may not understand the benefits or risks of multi-tenant versus single-tenant implementations of cloud solutions. The distinctions are critical to the outcomes, flexibility, and operations after the implementation, plus the institution’s budget.
Contact The Tambellini Group today to schedule an analyst call to learn more about planning your institution’s HR/Finance/Student replacement project.
You may also want to read Tambellini’s research on the SIS and ERP market, which can be found here.