The Chronicle of Higher Education: Information Technology September 10, 2004 Next Up for Open Source: Financial Systems 2 universities team up to create free software to help colleges manage their money By JEFFREY R. YOUNG Frustrated by the high cost of commercial financial-management software, Indiana University and the University of Hawaii are leading an effort to build a free, open-source alternative. The project's leaders say the effort could save colleges millions of dollars. The institutions plan to devote more than $2.5-million in staff time and resources to the project, called Kuali, which the project's Web site (http://www.kuali.org) says is named for a Malaysian word for "a humble kitchen utensil which plays an important role in a successful kitchen." Other initial partners in the project are the National Association of College and University Business Officers and the R-Smart Group, a company that hopes to sell support services to colleges that install the free software. The Kuali software -- which will be free to all and will allow anyone to look at its source code -- will help manage accounting, billing, e-commerce, budgeting, and other campus functions. Officials said it would take about two years to build, and would be an updated version of homegrown financial software that Indiana now runs on its eight campuses. Financial-information systems are often the most expensive software packages purchased by colleges, with some institutions paying tens of millions to companies like PeopleSoft and Oracle for software and installation. Most colleges buy such software, though about 15 percent handle financial transactions with programs that they have created themselves, according to Gartner Inc., the technology-research company. Colleges that build their own software, however, usually do not collaborate or share it with others. Officials say that financial software must be stable because glitches can cause major problems. A computer error at Indiana this month, for instance, meant a delay in loan payments to students. Indiana officials say that the problem was caused by a mistake in upgrading its student-records software, not in its financial system -- though the two systems must work together. The Kuali project is modeled on Sakai, an effort to build free open-source software to create course Web sites (The Chronicle, July 23). Indiana University is a leader of the Sakai project, and the University of Hawaii is a partner in it. Fewer Companies David J. Lyons, a senior fellow at Nacubo, as the business officers' group is known, said a key motivation for the Kuali project is concern over consolidation in the financial-software industry. "We're losing all of our small vendors that cater to colleges," said Mr. Lyons. And colleges are concerned that Oracle might win its bid to acquire PeopleSoft, resulting in even more consolidation. The Department of Justice has sought to block the merger, arguing that merging the two companies would hurt competition in the business-software market. "These vendors then have a lot of pricing power, and they don't have to pay attention to some of our needs quite as closely as we would like," said Mr. Lyons. In response to questions from a reporter about Kuali, PeopleSoft officials issued a brief statement emphasizing that the company allows customers to mix and match its software with "open-source solutions, third-party applications, and legacy systems." Susan LaCour, senior vice-president for solutions development at SunGard SCT, said her company was also used to colleges' mixing homemade software with its products. "As institutions are doing this, we certainly see a place for Sungard SCT." Officials at Oracle could not be reached for comment. The University of Hawaii decided to join the project after officials reviewed commercial options and decided that none suited their needs, said David K. Lassner, chief information officer at the university. Hawaii now uses a system it bought in the 1990s from SoftwareAG. But the company discontinued support of the product in 1998, and since then the university has had to modify and upgrade the software by itself, said Mr. Lassner. "We're on our own now," he said. "If something goes wrong with our financial system, it is our problem to fix it." Being part of an open-source project will give the university the support of other partners, he said. John G. Robinson, chairman of the R-Smart Group, said that colleges would benefit by having an open-source option tailored to the needs of higher education. He described systems sold by PeopleSoft and Oracle as "big and expensive and complicated," in part because the software is also sold to businesses, which have different needs than colleges. Mr. Robinson said Kuali would be "less complicated." "There's no reason anybody should be paying $5-, $10-, or $20-million to install these financial systems," he added. Mr. Robinson said that an open-source system would still cost money to install, but could be done for about $500,000 "for any sized school." Bradley Wheeler, associate vice president for research and academic computing at Indiana University at Bloomington, said the open-source approach would give colleges more control over how they customize their financial software. "With open source we can all see the behavior of the system and understand it," he said. "With a commercially licensed product you're often impeded from seeing the behavior of the code." Michael Zastrocky, vice president for academic strategies at Gartner, said the project would be difficult to pull off, especially with so few partners. He also said it would be hard to persuade top university administrators to use Kuali, since they might have doubts about an upstart effort and might prefer to buy commercial software instead. "This is one [area] that's mission-critical," he said. "Your institution would be in serious trouble if that thing started to fall apart." But leaders of Kuali say that because their product will be derived from software that has been in use at Indiana for years, it will have a proven track record. A survey of Nacubo members in November demonstrated that there was a demand for open-source financial software, leaders of the project said. In the survey of 257 colleges, 25 percent said they were likely to install a new financial system in the next three years, and 46 percent saw open-source offerings as viable options. Nacubo conducted the survey with the support of a $45,000 grant from the Andrew W. Mellon Foundation. Nacubo is not giving money or staff time to the Kuali project, but will offer its support and advice, said James E. Morley Jr., the association's president. "We got a very clear response back from the membership that this is an option that looks like it makes sense to study," said Mr. Morley. "We've continued to get broad anecdotal support for moving ahead." _________________________________________________________________ THE SHAKE-OUT IN SOFTWARE FOR COLLEGE FINANCES The number of companies that make software to help colleges manage their finances is shrinking. Here's how the shake-out has gone so far: 1998: Software AG, which had supplied financial software to the U. of Hawaii System and other colleges, stops supporting its college product. 1999: Business System Resources, a fund-raising-management system for higher education, is bought by SunGard Public Sector and Non-Profit Group. 2002: Student Information Systems, a Sallie Mae subsidiary that includes a product called Campus Loan Manager, is bought by SCT Corporation for $15.5-million. June 2003: PeopleSoft, faces a hostile takeover bid from Oracle Corporation. Both companies make financial-management software, as well as other records-management software, for colleges and businesses. July 2003: J.D. Edwards & Company is bought by PeopleSoft in a stock deal worth an estimated $1.7-billion. J.D. Edwards had few college clients, but some officials say the merger did affect colleges by focusing PeopleSoft's attention away from the college market. January 2004: SCT Corporation is bought by SunGard Data Systems. March 2004: The U.S. Justice Department files a lawsuit to block the proposed merger of Oracle and PeopleSoft, arguing that the merger would be anticompetitive and result in higher costs for colleges, businesses, and other users of the companies' software. SOURCE: Chronicle reporting _________________________________________________________________ http://chronicle.com Section: Information Technology Volume 51, Issue 3, Page A30 _________________________________________________________________ Copyright © 2004 by The Chronicle of Higher Education