One-off purchases

Leasing changes the traditional approach to Divisional support for individual purchases of equipment.

In the past when staff have requested a non-standard item (especially computers) in place of the Divisional issue, they contribute the difference in the cost between the standard issue and their preferred configuration. We have then purchased the item as a one-off and spilt the cost across the IT Loan and their nominated cost centre.

With leasing this becomes more complicated. We lease in batches rather than individually for a number of reasons including for convenience of tracking, and we don’t want to take lease payments for an individual item out of two cost centres every three months for the three-year life of the item. Our preferred option is for people wanting non-standard issue items in the future to purchase or lease the item with full payment coming from their cost centre.

2006 IT Loan

The Division has extended its last IT Loan.

Financial Services Executive Director agreed that the Division could extend its 2006 Infrastructure Fund loan (the IT Loan) to 31 March 2007. Commitments against the loan to 28 February 2007 now equal the amount of the loan. No further commitments will be made. Further approved equipment purchases and leases will be funded from the Division’s 2007 budget.

Projects still outstanding for which allowances have been made in the 2007 budget are:

1. New and replacement desktop, portable and server computers (mainly leased);
2. Media Facilities refurbishment (completion);
3. Multimedia Showcase of Student Work; and
4. Autocue

Computer purchasing

Cost-savings in PC purchasing.

ICT Services has been working all year to develop a preferred supplier for desktop and portable PCs: to leverage the University’s buying power to reduce the cost of PCs. An announcement was expected this week on the successful supplier, but last-minute approaches from a number of potential suppliers have delayed the decision.

ICT Bids

Each year the Division calls for bids to purchase ICT (Information and Communication Technology) equipment for the following year.

The Deputy Head of the Division has initiated the bid process for next year’s Divisional spending on equipment. Because of changing circumstances with budgets and purchasing arrangements (a new finance system, move to leasing rather than buying), it is unclear at the moment how the process will be resolved.

The Division is half-way through replacing photocopiers and printers, and will need to continue this process to replace older, out-of-warranty, more troublesome equipment: about $80,000 of equipment will need to be purchased or leased to cover replacements. Between 120 and 240 desktop, portable, lab and server computers will need to be replaced in 2007 if we are to keep to our policy of disposing of equipment once its warranty expires: replacements will cost from $240,000 to $480,000.

Next year the Division will begin the year with a commitment to honour at least $85,000 in lease payments in 2007 for equipment leased in 2006. Leasing $320,000 more equipment in 2007 will cost around an additional $110,000 in lease payments over a full year.

Financial Services has not provided the Division with details of the cost of leasing the equipment leased in 2006: the figures provided above are based on a rough estimate of the costs of leasing outlined by Financial Services during introductory seminars on the University’s arrangements with Macquarie Bank. The theory is that we pay roughly the same as we would have paid for the equipment if we had purchased it outright, but with 12 payments spread over three years. At the end of the lease the equipment is returned to Macquarie, with additional charges possibly due then if the equipment is not returned in good order.

Leasing IT Equipment

Leasing IT equipment will change the way we operate as a Division.

On Wednesday 10 May 2006 Director of Financial Services gave a presentation on leasing of IT equipment. According to the Director VCAC has approved that the University move from owning to leasing of eligible IT equipment, effective immediately. A paper copy of his presentation is available on request.

Under leasing arrangements, the leasing company (Macquarie Bank) pays the vendor for equipment acquired by the University, and Macquarie charges the University a lease payment every three months for the period of the lease (normally three years). At the end of the lease the equipment goes to the Bank through its Macquarie Technology Services (MTS: formerly known as Reboot) group. MTS resells the equipment to make the Bank’s margin on the arrangement. At the end of the three-year period the cost of the equipment to the Division is almost exactly the same as it would have been had the Division purchased the equipment outright, except that the payments would be made quarterly over the life of the equipment rather than the full cost being paid upfront as is done now. Leased equipment is not on the University’s Asset Register and not subject to depreciation and is therefore easier for Financial Services to manage.

Eligible equipment covers desktop and portable computers, printers, photocopiers, network equipment and servers. While media equipment was not included in the list, it is open to the Division to approach the leasing company through Financial Services to discuss leasing of other items like video projectors, production equipment and studio infrastructure. Last year about 40% of the Division’s IT Infrastructure Fund loan was spent on media equipment.

If an item of leased equipment is lost or stolen, the Division will have to pay out the balance of the lease. Any repairs not covered by warranty will be at the Division’s expense. Leasing does not cover Operating System and application software, except where the software is part of the original purchase. Any upgrades will continue to be the Division’s (or the University’s) responsibility. In some cases original packaging, documentation and disks that come with a leased device will have to be kept in storage and given to MTS at the end of the lease with the equipment. The Division will need additional storage space to keep the required material.

As existing eligible equipment that was purchased outright is retired and replaced with leased equipment, in the first year of lease payments the Division will pay lease payments equal to one third of the capital cost of the equipment leased (only one third of eligible equipment will be leased in the first year, the rest is still owned outright). In the second year two thirds of the eligible equipment will be leased: and by the end of the third year all eligible equipment will be leased.

Assuming that the Division leases the same amount of equipment it currently buys, as much will be spent on lease payments from the beginning of the fourth year on as would have been spent each year in outright purchases: that is, assuming there is no difference in the amount of equipment used by the Division in four years’ time because of leasing, in four years’ time the Division will be committed to lease payments about equal to that which it now spends each year on capital purchases (there will however be savings in the first three years, and there should not be any requirement to replace a piece of equipment after three years when the original item is handed over to MTS so if the equipment is no longer required a saving could be made there).

Leasing does not provide additional funds for purchasing more equipment; it just spreads the cost over a nominated life for the gear. What is lost is the flexibility to vary expenditure on equipment year by year by, for example, reducing the number of new computers purchased in a lean year by keeping old computers for four years instead of three. There is also no longer a store of old equipment that can be sold, or repurposed to provide, for example:

• postgraduate students with computers, or
• staff using Macintosh computers with access to Callista (or Finance One), or
• old gear to host dynamic websites, or
• additional capacity for streaming television services.

These are all things the Division does now that won’t be an option if the equipment is all leased. From a Technical Services Unit point of view leasing is an advantage to us since the TSU is no longer required to look after old equipment and support a variety of services running on older equipment: for the same amount of money there will be less of a variety and extent of equipment and services available. Financial Services will handle disposal, but overall it is difficult to determine how the management of leased assets will differ from managing purchased assets. Certainly some current issues with disposing of old equipment will disappear, but there is uncertainty about how work is involved with any new procedures to be introduced.

It is expected that the IT Infrastructure Fund will disappear next year, 2007. Financial Services is preparing a submission to VCAC proposing that the money the University now spends on the Fund each year ($700,000?) is distributed among the Divisions in their budgets. Since the Division of Communication and Education repays its IT Infrastructure Fund loan each year, in theory this means that each year from 2007 the Division will receive sufficient funding to spend as much as it does now from the Fund.

Lease periods can vary from the three years suggested for IT equipment, but a condition of the lease is that the original manufacturer’s warranty on the equipment has to cover the lease period plus three months: in the case of a computer this would mean negotiating a non-standard warranty arrangement with the supplier (not impossible, just an added complication in the process).

Financial Services is proposing to establish an IT Procurement section to manage the leasing of IT equipment that will, among other things, be responsible for negotiating discounts with suppliers for standard configurations. Financial Services would pass on any savings to the Divisions in the form of reduced lease payments, but it seems these arrangements would be the same if equipment is leased or purchased (after all, the suppliers still get paid the full amount up front, either by the Bank or the University).

Since leasing has been mandated by VCAC (according to Financial Services), the best option for the Division might be a gradual transition to leasing over a number of years by continuing to purchase some equipment but leasing more each year. The IT Infrastructure Fund loan for 2006 is approved and can be spent to purchase equipment outright, or Financial Services has raised the prospect of being able to use the IT Infrastructure Fund loan in 2006 to service lease payments. The Division can purchase outright equipment that can be repurposed for non-core uses after its initial job is done, or equipment like installed media studio gear that is normally kept long after its warranty expires and it maintained by outside providers. The approach could be reassessed each year to see how the benefits of leasing compare with outright purchase and purchasing decisions adjusted accordingly.

Prioritising the IT Loan

Basis for giving priority to bids for equipment funding.

When Executive considers the IT Loan bids they should endorse the principle that items purchased through the Infrastructure Fund should, where possible, be made available to the whole Division through the CRC or TSU.

The bids for video and still cameras in this year’s IT Loan bids should only be approved subject to the cameras being available for loan through the CRC or TSU, with demand timetabled through the Media Facilities Users Group (MFUG).

Central funding for software

It may take a while for the University to completely manage software licensing centrally.

PVC Research and Information Management has indicated that he would like to investigate whether funding software licensing centrally would save the University money. He has proposed an audit to find out currently what the Divisions are paying and for what.

Nothing will be in place for 2006, so the Division will need to continue funding licensing for software like Adobe Creative Suite and Final Cut Pro at least until a decision is made to fund it centrally.

IT Loan Fund

Over time the original intention of the IT Loan, or IT Infrastructure Fund, has become a little blurred.

In 1998 VCAC introduced an IT Infrastructure Fund (the ‘IT Loan’) that allowed Divisions to 'borrow' against future budget expectations for the purchase of information technology equipment. An assumption underlying the establishment of the Fund was that if Divisions could upgrade their infrastructure to new and uniform equipment, the savings made on not having to repair, maintain and support a wide range of obsolete equipment would allow them to pay back the loans. Adrian Westerman reported to Council in February 1999 that:

This fund had worked well with significant improvements in IT infrastructure throughout the University being realised during 1998 and most cost centres repaying loans through savings during the course of the year. [http://www.canberra.edu.au/secretariat/committees/council/1990-/1999-docs/1999-02-05.pdf]

The Division of Communication and Education has failed to realise the full benefit of the Fund because the old equipment that is supposed to be replaced by the new purchases is being recycled (in an attempt to satisfy increasing and insatiable demands) rather than being sold or trashed.

Each year there is more technology of increasing variety and age: maintenance costs are higher, older equipment restricts our ability as a Division to, for example, provide training, expert support and to roll out new operating systems and services like remote assistance.

Staff and student numbers (at least in some units where resource costs are high, and postgraduate student numbers) are growing, and staff and student expectations of the quality and sophistication of the resources that should to be available to them are also increasing. These issues are not being addressed effectively in the Division’s resource planning, at least in relation to the provision of space, infrastructure and technology.

Heads of School need to be mindful of the resource implications of proposals they endorse especially with respect to:

• projections of student numbers (are there enough items to be bought to satisfy the projected demand?);
• costs of commissioning of any new hardware or software;
• staff numbers and their skills;
• training costs for existing and future staff required to use or demonstrate the equipment or systems;
• additional infrastructure, licensing or provisioning requirements; and
• ongoing maintenance and administration costs.

Executive should ensure that the IT & Infrastructure Committee considers these TCO (Total Cost of Ownership) issues in making its recommendations, and that all the members of the IT & Infrastructure Committee agree with the whole approach to managing any particular proposed resource over its life.

Total Cost of Ownership

TCO is one of a number of things to consider when considering purchasing equipment.

Try this quick quiz:

How much does a dog cost?

1. Nothing: you get them free from the pound
2. $150-$1,000 depending on the breed.
3. $10,000

According to HP, the cost of owning a dog for its lifetime of around 10 years is over US$8,300 (http://h71032.www7.hp.com/tco/). So why is this important? The same HP article goes on to quote a Gartner Group study that gives the five year Total Cost of Ownership (TCO) of a US$2,000 PC at around US$21,000 when administration and management costs are taken into account.

Recent presentations to the University from the Commonwealth and Macquarie banks quote research that shows costs actually increase as equipment gets older: with more support and maintenance required as equipment gets older, and the higher costs associated with supporting increasingly complex environments as items of equipment of differing ages and capabilities are mixed together. What the banks propose is replacing the equipment every two to three years to eliminate the increasing costs, and of course the banks will be pleased to provide the finance through leasing plans to help the University manage their equipment (including media equipment) to keep it all current.

Leasing ICT equipment

The University is discussing leasing arrangements with a number of potential partners.

The Commonwealth Bank, with its partner ComputerFleet, has approached the University with a proposal to consider leasing rather than buying ICT equipment like computers, monitors, printers and even media equipment like digital cameras.

The system could work like the current IT Loan system to the extent that Divisions retain their autonomy to purchase equipment that fits their needs, although the University may also be separately considering centralising some purchasing if it can be shown to drive down the cost.

Under the ComputerFleet proposal, the University would replace equipment like desktop computers every two years, and end up paying less than the University pays for the computer if it buys a replacement every three years. Under the current IT Loan arrangements, the Division only pays 67% of the cost of new equipment (the rest is funded by the University centrally to encourage the Divisions to keen their stock of IT equipment current), so it may cost the Divisions more if they were to absorb the whole cost of leasing.

Benefits of the ComputerFleet proposal include:

• Replacement of ICT equipment every two years;
• Asset tracking is handled by the ComputerFleet’a ClientXpress software, management of which can be decentralised to the Divisional level or even finer;
• Using the ClientXpress software, costs can be applied easily to local cost centres and easily transferred as needs change (like research projects that may be completed, for example);
• At the end of the lease period ComputerFleet’s partner, APCD, disposes of the assets.

Replacement equipment

Policy on funding replacement equipment bought originally from research and consultancy funds needs clarification.

In investigating computers around the Division in need of replacement, a number of machines older than three year that were bought originally with research or consultancy funds have been identified, raising the question should a computer purchased with research or consultancy funds be replaced using central Divisional funds when it goes out of warranty?

The Technical Services Unit can’t support the older machines, and it doesn’t seem appropriate to upgrade them with computers purchased from central Divisional funds.

[Update 6 May 2005] At its meeting on 6 May 2005, Executive noted that if equipment purchased from Research or Consultancy funds needed replacement, it should be replaced with research or consultancy funds. The Technical Services Unit is not expected to support outdated equipment.

2004 IT Projects

Major projects funded in 2004 include:

New and replacement computers
245 new and replacement computers were purchased for the Division, including staff desktop, portable and student lab machines, covering replacement for three student labs; replacement of all the existing computers in the ILTC plus 20 new ones; portable computers for loan from the CRC and ILTC. Also 10 new servers were purchased: 7 new ones for the video recording and reticulation system, and 3 replacements for older servers.

Staff desktops for all full-time academic staff in the School of Languages and International Education, and some desktops used by part-time staff in the School, are being refreshed with new computers all capable of receiving, recording, editing and saving to DVD or streaming server, analogue television services from the RF reticulation system (the services available include foreign language services in Spanish, Japanese and Chinese, as well as the local analogue free-to-air channels, SBS World News, and a number of English-language news programs).

Data projection
Seven new data projectors were installed around the Division.

SmartBoards
As required by the NILL group, four SmartBoards have been fitted around the Division, and anotherone installed in one of the teaching labs.

Mini Disc recorders
With the change in format of the mini disc recorders during the year, the Division purchased a number of the older format. The older format is compatible with other Divisional equipment, whereas the newer, HD format is not compatible. High maintenance costs with older recorders meant replacing them was sometimes more expensive than purchasing new ones, where stock of the older format was still available.

Digital SLR still camera
The Division's photographic service is now fully digital, with Alan Nicol purchasing a Nikon D70 camera and parts for taking marketing photos and documenting Divisional activities. No more waiting for processing, scanning images and managing bits of film and paper photos: the results are available immediately for print or electronic delivery. Also no more film processingreduces ongoing costs.

Microteaching upgrades
The Microteaching rooms can now be used to videotape presentations, lectures, demonstrations, counselling interviews and a range of other activities using 2 cameras, a computer, and/or the SmartBoard. VHS and miniDV formats for recording and playback to monitor or video projector are both supported; the sound quality has been greatly improved; and lighting will be renewed soon. It is even possible, with some additional hardware (and expertise), to stream the live activities in the rooms over the Internet.

eMeeting Videoconferencing
The hardware and software required to allow videoconferencing between desktop computers has been purchased and will be installed for testing in January. A one-year trial licence of Marratech eMeeting will be available in calendar 2005 to see whether the Division (or the University) can use this approach to teaching.

The limited twelve-month licence we have purchased will allow for one unlimited "auditorium" session at a time, where any number of participants can join in, and 20 "mix-and-match" seats that can be used in any combination to provide say two concurrent 10-seat tutorials, or four 5-seat tutorials, or any other combination up to twenty concurrent participants.

A perpetual licence will cost around $70,000 for the same capacity, with an annual maintenance charge of $12,000 ($82,000 in the first year including the maintenance charge, then $12,000 per year after that for software maintenance and support), should the University wish to continue with the service after 2005.

Participants will be able to video and/or audio conference (if they have a video camera and microphone), text chat, and share a whiteboard or screen shots of applications and presentations with the whole group. While the licence for the server software that allows all this to happen is expensive, the end-user's client is free and can be downloaded from the Internet for Macintosh, UNIX or Windows computers.

Satellite reticulation and recording
The ongoing saga of the satellite system continues, but huge progress has been made: six terrestrial and 11 satellite television services, and three local and four satellite radio services are now available on the RF networks in Buildings 1, 5, 9 and 20, and linked to the CIT. A Video on Demand Server with 10 TB of storage (that should be enough for over 3,000 hours of high quality video, including backup and working files) is installed and being commissioned, and as a trial the First Test between Australia and New Zealand was available streaming live over the University network in full digital splendour if you knew where to look.

What we support

With limited resources, the Technical Services Unit can’t always satisfy a client’s every wish...

Recently there has been some discussion around the Division about what the TSU supports in relation to desktop and laboratory computers.

All computers purchased conform to a standard hardware configuration (that changes over time as technology changes and prices drop). The current configuration is Pentium 4 or Macintosh G5, 512MB RAM, Combo Drive (reads and writes CDs, reads DVDs), Flat Panel Display.

Staff desktop computers in the Division are imaged with standard environments, with additional software added for some users with specialist requirements where the additional applications are properly licensed (and usually paid for from the cost centre associated with the end user). Staff can install additional software on their computers (they must ensure they have the legal rights to install the software), but the TSU will not be able to support this additional software. Should the computer require re-imaging, the TSU will apply the current image to the computer: all end-user installed software and locally saved data may be lost during this process.

Images for lab computers are developed after consultation with stakeholders around the Division. Images are built from properly licensed software and tested to ensure all the available applications work together properly. Applications already in the image are normally given precedence to new software if there is a conflict. Applications requested may be rejected for any (or all) of a number of reasons, including but not limited to:

• Lack of compatibility;
• Size and complexity;
• Cost; and
• Support issues.

Further information about the Division's policy on software requests and lab images can be found on the TSU website at http://www.ce.canberra.edu.au/tsu/soft_requests.htm and http://www.ce.canberra.edu.au/tsu/labs.htm.