Geographic Information Business and Interoperability: The Future of GIS Andrew U. Frank Geoinfo TU...
-
Upload
sybil-turner -
Category
Documents
-
view
220 -
download
0
Transcript of Geographic Information Business and Interoperability: The Future of GIS Andrew U. Frank Geoinfo TU...
Geographic Information Business and Interoperability:The Future of GIS
Andrew U. FrankGeoinfo TU [email protected] available from: http://www.geoinfo.tuwien.ac.at
June 29, 1998
Brno GIS 1998 2
Technical vs. Business Considerations
Technical advance propels GISInstitutional aspects retard GIWe have to pay more attention to the
institutional setting!
I will concentrate here on economic aspects, but other aspects of the institutional setting are very important as well.(legal, business traditions….)
June 29, 1998
Brno GIS 1998 3
Business Viewpoint
Information is useful only if it is used.The value of information is not automatically
equal to the cost of its collection.The GI business exists only if Geographic
Information contributes to a decision.The value of the information is equal to the
improvement of the decision.
June 29, 1998
Brno GIS 1998 4
Example for Business Viewpoint
Information about lunch menus (specials) for people in the TU Vienna area.
I (and many others) go for lunch in one of the neighborhood restaurants for lunch.
I use this example to show you - step by step - an business discussion of the spatial information business.
The considerations are the same for other cases, the outcomes different!
(based on a course at TU Vienna)
June 29, 1998
Brno GIS 1998 5
1. What is the Decision?
To assess a business case, one must have a clear idea what decision the user needs to take.
Here:Which restaurant should I go to have lunch?
June 29, 1998
Brno GIS 1998 6
2. What is the Information Required?
For a decision the user needs several informations.
Here (among others):I decide on the base of
the menu offered today and distance to the restaurant.
June 29, 1998
Brno GIS 1998 7
3. How can the Information be generated?
As a potential GI business unit:Can I produce the information? What are the data and processes required?
June 29, 1998
Brno GIS 1998 8
Information Generation:
Here:I need
a daily updated database with the luncheon specials
a database which permits to calculate distances from users to restaurants
Assume that we get the menus by fax from the restaurantsa background street map from the town
June 29, 1998
Brno GIS 1998 9
4. How is the Information transported to the user?
The information producer must learn about the requests from the user and transport the information produced back to the users.
Here:Use the internet/web,
This restricts the potential users to employees and students of the TU.
June 29, 1998
Brno GIS 1998 10
5. How much Value has the Information to the User?
The price of the information must not be higher than the benefits the user draws from them (the economic utility).
This is difficult to estimate; consider other economic aspects of the decision and estimate the contribution of the piece of information in question.
June 29, 1998
Brno GIS 1998 11
Here:
We pay typically $10 per meal and give less than $1 as tip.
Restaurant prices vary by $1 .. $3
Estimation: a user may pay $0.50 for the menu information.
June 29, 1998
Brno GIS 1998 12
6. Can I make a Business from this?
We have to compare the income with the cost of providing the information:
Here income:3000 potential users,
of which 5% use the service per day: 150 users @$ 0.50-> $75 per day
June 29, 1998
Brno GIS 1998 13
Cost:
Cost of Menus: faxed by restaurant - free to us
Manual Input of menu from faxes: 30 menus @ 3 minutes1.5 hour @ $30 = $45
One time costs:set up of system: $10,000map of town: $100,000
June 29, 1998
Brno GIS 1998 14
Return on investment:
contribution to set up cost per day: $75 - $45 = $30
break even: $110,000/$30 = 3000 days (12 years @ 250 working days)
June 29, 1998
Brno GIS 1998 15
Practical issue:
how to collect the users contribution?E-cash is essential!
June 29, 1998
Brno GIS 1998 16
Value for city map in electronic form
What made this business impossible?The high price for the city map! Reconsider:
what is the value of the city map for this business?
To break even within two years2* 250 days * $ 30 = $15,000- cost of setup: $10,000
The value of the city map for this business is $5,000.
June 29, 1998
Brno GIS 1998 17
The cost of an item and its economic value is not the same!
Cost: total resources necessary to produce an item.
Value: utility for a user
for information: economic contribution to a decision
A high cost does not automatically imply high value!
June 29, 1998
Brno GIS 1998 18
General observation about value of base geographic data:Small scale
Small scale data is often required for backdropprovide framework, allow distance calculation etc.
precision required is low, update level required low
value contributed to business is small,but business is often repeated
1 million times $0.01 = $10,000!
June 29, 1998
Brno GIS 1998 19
Value of Large Scale Geographic data
Large scale, detailed data has different potential user profile:
seldom used (how often do you build a new home?)high precision and update level is requiredValue contributed to decision is high
(and value of decision is very high)
High value for few uses:10 times $1,000 = $10,000
Conclusion:use two very different business models!
June 29, 1998
Brno GIS 1998 20
How can we improve GI Business?Expand uses. But how?Identify more possible uses for GI in decision making -
there is a very large potential:80% of all decisions have a spatial component.
Make a business:reduce cost to produce and distribute informationi.e. transaction cost.
Technological and institutional development should concentrate on reduction of
transaction cost.
June 29, 1998
Brno GIS 1998 21
Transaction Costs reduce Value
The value of information is reduced by the cost to use the information.
Transaction cost are the cost of - finding the data required- gaining access to the data- transferring the data- translating and integrating the data
June 29, 1998
Brno GIS 1998 22
Example:
if the user can deposit a list of menu preferences and his position, walking distance preference for each(this has the format of an SQL query!)
then we could automatically send him his preferred three top choices to his handy (SMS).
Less effort for the client, more value.(here resulting in more sales,
not necessarily a higher price;change of pricing strategy - service paid monthly)
June 29, 1998
Brno GIS 1998 23
Standards increase the value of data
Standards reduce the transaction costs;they make it easier to use existing data.Use of data becomes more likely.Data becomes more valuable.Here:less cost for setting up the system databaseReduction of set-up cost to $7,000.
June 29, 1998
Brno GIS 1998 24
Data Exchange
A copy of the data is sent to the customer and integrated with his data.
The data is frozen - further updates at the source are not propagated.
All data must be transferred.Useful for:
data which changes seldomapplications which can tolerate ‘old’ data
Here:the street network can be re-loaded once per year; menus daily!
June 29, 1998
Brno GIS 1998 25
Open GIS Interoperability
The customer accesses the current data at the source.
The data used is up to date and maintained.Only the data of interest is sent to the user.Here:the user interacts with the updated database!
The Open GIS concept of interoperability reduces transaction cost.Fewer data transferred,
data of more value (updated, in standard format).
June 29, 1998
Brno GIS 1998 26
Value of standards
Standards are of value, as they reduce transaction cost.
They are valuable for- the designers of applications- the data providers,
data use is more likelyless of the value generated
is consumed by
transaction cost- the software vendors:
more applications become economical
June 29, 1998
Brno GIS 1998 27
Business models:
Pay per service (our example)Pay for regular service (monthly payment - in our
example $5)
June 29, 1998
Brno GIS 1998 28
Advertisement business models:
Free service to the users.Who pays?
The provider of the underlying serviceHere:
The restaurants are interested to inform potential clients about their offerings (publicity).
Estimate utility to the restaurant: sells 5 meals more (40% of 5 * $10) = $20total income: 50% of 30 restaurants participate for
$10 per day: $150 income (per day)
June 29, 1998
Brno GIS 1998 29
General publicity model
The service is free to users and providers of the information,
paid by publicity which is coupled to the information.(example: newspaper)
This is the business model for much on the webbecause e-cash does not work yet.
I think that users will be willing to pay for “advertisement free” servicese.g., search engines.
June 29, 1998
Brno GIS 1998 30
Conclusions
Institutional aspects require much more attention:technology pull is strong
butinstitutions hindrance even stronger
June 29, 1998
Brno GIS 1998 31
Conclusions
The economy of the business provides rational argumentswhere such were lacking
e.g., the price for geographic data
The (trivial) example demonstrates the lines along which business arguments must be made.