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C00002 00002	                     COMPUTER SCIENCE DEPARTMENT
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                     COMPUTER SCIENCE DEPARTMENT
                         STANFORD UNIVERSITY
                     Stanford, California 94305













                                                       August 16,1971

Dear President Lyman:

	Early  in  July,  I  read  in  the  Wall  Street Journal that
Stanford had received the very first IBM 370/145 computer and that it
was  to be used for "streamlining administrative computing".    I had
known that the Administrative Computing Facility wanted a 370 but had
imagined   that   in   the   current  budgetary  stringency,  it  was
inconceivable that they would get it.  Reading this  and  remembering
that  I  had  read in Dave Phillips's report that Stanford spent more
than $1,000,000 out of general funds on administrative  computing  in
1969-70  triggered  off a sense of obligation to look into the matter
and to protest if my feeling that an administrative monster had  been
created was justified.

	I  did  look  into  the  matter,  and I came to the following
conclusions:

	1.    Stanford spends more  by  about  a  factor  of  two  on
administrative  computing  than any other university I could find out
about, computing the expense either on a per student or on a  percent
of operating budget basis.

	From  one  source  I obtained a figure of $50 per student per
year, reducible by economy but not halvable.  Another source gave  me
$6  to  $20  per student per year.  Still another source said between
.25% and 1.25% of the operating budget with no  clear  definition  of
what expenditures are included in the operating budget.

	2.  I  don't  think  the expense is justified by the level of
service obtained or even by the level of service  the  administrative
computing  group  is  trying  to  achieve.     The examples they cite
concerning the sought  for  ability  to  give  immediate  statistical
reports  in  answers  to  queries about the large data base they have
just doesn't seem worth its enormous cost with the  present  hardware
and  software.  A large part of the questioning here must be directed
at the administrative offices that consume these  reports  and  which
will  get  the on-line system. Perhaps their budgets are too large or
perhaps the money they spend on all this computation  is  not  really
spendable on other things.

	3.   The  cost-effectiveness  of  this expense has apparently
never been certified by any body capable both of judging  what  these
services  should  cost  and  what is cost-effective from the point of
view of the university as a whole.   In  particular,  the  university
Computer  Facilities  Committee,  although  it  has  heard reports on
administrative computing, did not attempt to arrive at an independent
opinion.  This is true even though consultants have been employed and
there has been much discussion of  details  such  as  which  computer
configuration  is  best  or  what  applications  can  be done on what
machines.

	4.   Project INFO, aimed at providing on-line access  to  the
administrative data base to all levels of administration, is a  cross
between a sponsored research project and an internal development.  To
the extent that it is  the  former,  it  should  be  subject  to  the
conventional peer group evaluation of its scientific or technological
merit and fully paid for by the sponsor.  Project INFO has  not  been
evaluated   for  technical  merit  by  either  the  Computer  Science
Department or the  Business  Schools.      If  strictly  an  internal
development, then it needs to be evaluated for its cost-effectiveness
in terms of the needs of Stanford as a whole.

	5.    I  have heard an allegation that the amount of computer
time spent on Project INFO exceeds the costs allocated to it.  It  is
also  said  that  overhead  costs are not allocated to the project so
that the cost to the university is further understated. This may also
be contrary to government auditing rules.

	6.  In  my  opinion, the goal of the Administrative Computing
Group,  namely  to   make   Stanford's   administrative   information
accessible  in  an on-line way, is worthwhile.  However, it cannot be
achieved at reasonable costs by the methods they are  using,  and  it
may not be achievable at reasonable costs today by any methods. There
are two problems:  the hardware and the software.  Their equipment is
barely  capable  of  doing  the on-line work in addition to the batch
processing, they may have to add more especially  memory  to  realize
the  planned  applications, and the consoles presently being used are
very expensive.  Their software costs are also very high, $50,000  to
$100,000  per  major application, and this is partially a consequence
of the IBM standard method of debugging.  It  may  be  quite  a  time
before  IBM  gets  a  proper  system  for  on-line  applications, and
Stanford cannot afford to develop one for administrative use. Sharing
some  costs  is  possible  with  academic  computing at Stanford, and
sharing development costs with  other  universities  is  conceivable.
This  opinion  on  what  the technical problems are is tentative; the
opinion that the present plan is not cost-effective is firm.

	7.   The opinion that the Administrative Computation Facility
is  not cost-effective is general among faculty members, researchers,
and administrators who have had dealings with  it.   However,  no-one
has  felt  it  his  business to protest.  It is also not precisely my
business to protest; I am not even a user of its potential rival  the
Computation  Center since the Artificial Intelligence Project has its
own (government furnished) facility.  However,  there  are  potential
savings here that may be as large as $500,000.

	Possibly  relevant  in  estimating  the cost-effectiveness of
Stanford's  administrative  computing  is  the  experience   of   the
psychiatric  clinic.   They  received  an  outside bid of $15,000 for
services for which the Clinic Billing Office proposed to charge  them
$78,000.   They  also expected to get better service from the outside
company on the basis of the  experience  of  the  Palo  Alto  Medical
Clinic,  the  Menlo Medical Clinic and various private practitioners.
Stanford met the outside bid  and  retained  the  business.   Medical
billing  is  a  well  defined  operation  and  so a yardstick bid was
readily obtainable; the registrar is perhaps not  so  fortunate.   On
the  other  hand, the low charges of outside medical billing services
are based on a large volume and considerable competition.

	8.     This  situation  apparently  came  about  because  the
administrative  computing  facility  is under the jurisdiction of the
part of Stanford that handles the money.  Therefore, empire  building
with  Stanford  money  is  easier  here  than in the academic part of
Stanford.   Stanford has other little monopolies that are often  more
expensive  to  use  than  outside  services.     I observed a similar
situation in the Palo  Alto  School  District  when  I  served  on  a
committee to look into their computing set-up.

	9.  Stanford badly needs on-line computer facilities, and the
expenditure of general funds for this is justified, but research  and
teaching  need  it  much  more  than administration.   The Artificial
Intelligence Project has good on-line facilities (a visit would  show
you what I mean), and the rest of Stanford should have them too.

	My  sources of information were the following:  conversations
Einar Stefferud, James  Farmer,  and  Benjamin  ...     (all  outside
Stanford)  about  expenditures  by  other  schools  and conversations
within  Stanford  with  Robert  Augsberger,  Hank   Epstein,   Edward
Feigenbaum,  George  Forsythe,  Bill  Miller, Dave Phillips,and Peter
Rosenbaum;  I  shall  not  quote  them  since  they  can  speak   for
themselves.

	I also had a conversation with Mike Roberts and John Gwynn in
which they answered fully all the questions I was able  to  formulate
at  the  time.    I  came away with the impression that they would be
successful in implementing their  system  but  that  there  would  be
substantial  costs  in  addition  to  those  planned for.   I was not
satisfied with their answer to the cost-effectiveness questions.

	It is not reasonable to take action on  the  basis  of  these
conclusions  unsupported  by  further  information.       In order to
establish a basis for action, I suggest that you form an ad hoc group
that   will   determine  the  answers  to  the  following  questions.
Alternatively, the Computer Facilities Committee could be asked to do
the job, but it might be unpleasant for them.

	1. Which if any of the above conclusions are correct?

	2.    What  level  of administrative computing expenditure is
justified at Stanford?

	3.  How can these services be obtained most economically? The
possibility  of  converting  the  370/145  to  a  370/135  should  be
considered and so should  the  possibility  of  doing  administrative
computing  on  the  campus  machine.  However, the main way of saving
money is to decide that some of the proposed new applications  cannot
be afforded.

	4.     The scientific and technological merit of Project INFO
should be evaluated, its true cost  to  Stanford  determined,  and  a
decision made as to whether and how it should be continued.

	5.     Are personnel changes required to implement the policy
recommended?

	The  group  needs  competence  in  university  administrative
computing,  accounting,  the technology of on-line computing, and the
ability to weigh what is best for the University as a  whole.     All
these qualities can be found among the Stanford faculty.

	I would welcome the opportunity to discuss this question with
you in person.


				Sincerely yours,



				John McCarthy
				Professor, Computer Science

cc. R. Augsberger, K. Creighton, G. Forsythe, W. Miller, M. Roberts