The problem with Hegarty’s plan to save UT money? It costs too much

Alberto Martinez

For weeks, workers and student groups have been complaining about UT’s plan for implementing Shared Services, mainly because of the plan’s aim to eliminate 500 jobs. But the ongoing debate should be focused on an even bigger problem: the costly implementation of a new and unified information and finance system, or Workday, to replace the old system used by UT. 

Currently, UT administrators are trying to streamline and centralize operations. Shared Services is half the plan. The other is: “Enterprise Resource Planning,” or ERP. It consists mainly of buying and implementing Workday, a cloud application that would handle administrative transactions. But how would Workday benefit UT? 

Think of waiting in an airport. While there, you might ask the airline attendant to give you a window seat. More troublesome, you might need another flight. Usually, the attendant will carry out countless keystrokes to complete this request, as if you had asked a complicated and unusual question. Why? Because some airlines still use obsolete operating systems that were designed in the 1980s. Likewise, UT uses outdated software for its core financial systems. The job of many administrators and staff would be greatly simplified if only they used a more intuitive and efficient system. 

The immense problem, however, is the staggering price tag. At various meetings, UT’s Chief Financial Officer, Kevin Hegarty, has said that the new financial and administrative systems will cost “160 to 180 million dollars.” Yet the online Plan “for campus discussion” includes a Cash Flow graph that specifies that Shared Services and the ERP will cost even more: $213.5 million. 

Most of us have had no experience with a million dollars, so it’s difficult to imagine an amount of money as enormous as $213.5 million. That’s enough to give individual scholarships of $5,000 each to 42,700 students. Or, it can pay a $50,000 salary to each of 427 full-time employees every year for 10 years. 

How will UT pay for the ERP? 

UT administrators hope to generate at least $30 million per year by eliminating the positions of 500 employees that receive roughly $60,000 each in salary and benefits. Ostensibly, the proponents of Shared Services want to eliminate those 500 jobs in order to secure funds to support the core missions of the university: teaching and research. In practice, however, the Plan prioritizes the administration. The money “saved” will be spent paying for what Hegarty himself described as the “terribly, terribly expensive” ERP.

The Shared Services Plan predicts that these expenses might begin to pay back after six years. But this claim depends on an unbelievable assumption. The Cash Flow graph shows that by December 2015, the jobs eliminated will have generated $26 million! In order for that to happen, approximately 433 employees must quit a year before that date. They must quit by December 2014. What are the odds that so many employees, precisely in the relevant jobs, will quit just twelve months from today? I find it impossible to believe that there will be any such “payback” six years from today. 

Instead, suppose that each year 100 employees quit who are not replaced, until 500 have quit by December 2018. If so, it will take 9 years for there to be any payback, that is, if the ERP and Shared Services cost $180 million. Or, if it all costs $213.5 million it will take ten years: There might be some long belated “savings” in 2024.  

In the meantime, the incredibly expensive ERP will put UT in a terrible financial condition. Instead of there being more funds for teaching and research, there will be less funds for everything. That is why some airlines did not replace their flight information systems. 

Kevin Hegarty has kindly met with many groups on campus to discuss Shared Services. He explains that in order to eliminate 500 jobs he will need the voluntary cooperation of many units and departments. Unfortunately, there was no such discussion for the ERP, the bigger problem. Instead, it was approved from above. Before the UT campus had any chance to consider eliminating 500 jobs, the administrators decided how to spend the multi-million dollar “savings.” 

If the aim of Shared Services is really to help UT’s core missions: teaching and research, then its benefits should be used for teaching and research. Not spent on a ridiculously expensive way to make administrators’ jobs easier. It’s just not that important for them to make three keystrokes instead of ten. 

Martínez is an Associate Professor in the Department of History.