Rates and Capitalism
ITS is faced with a unique challenge. We are what is called an Internal Service Fund (ISF) agency which means that, generally speaking, we do not receive appropriations from the legislature. Instead, we bill our customer agencies for the services they receive from us to cover the cost of those services.
You may say, "well, that doesn't sound too bad, ITS is just a regular business that has to sell its wares to its customers, the agencies." Would that it were that simple. We are still handcuffed to legislative appropriations, because that is how our customers get their money.
Additionally, we are bound by a set of rules regarding the pricing of our products. Every year we present rate proposals to the "rate committee" for review and debate. A part of the work that we have to do to prepare for the rate proposal process is to evaluate how the new rate or the changed rate will impact our customers in terms of expenditures. This gets very complicated. Not only that, but we supposed to make any changes "revenue neutral" to ITS, which means that if we raise one rate, we have to lower another rate proportionately. Sheesh.
Then after we go through the rate proposal process, the rate doesn't become effective until the next fiscal year. So the rates that we are working on this year are actually for FY '05.
As you can see, this is a convoluted process.It is impossible to price IT services appropriately under this model. It just takes too long. Now, if there was a standing rate committee and we could bring new rates before the committee throughout the year, maybe things would be different. I guess we would still have the problem that our customers are tied to an annual budgeting process.
It is interesting to me that capitalism prevails where ever there are people or organizations that need goods or services. Even in the realm of appropriated State agencies managers are looking for the most value for the least money. This puts ITS at a disadvantage because it is impossible for us to be as responsive to agencies' needs as private vendors can be.
I will go ahead and say it: I think ITS' future would be in question if we weren't the provider of "utility" type services such as voice and WAN. We have tremendous capabilities to develop and provide new products and services, and we are getting better by the day, but the advantage that we have of not having to produce a profit for shareholders is nullified by the way we are forced to do business. It's really a shame. But again, I don't know how the system could be fixed to make it work better.
7:43:29 AM 
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