Presented to: NSGIC MidYear Conference
March 25, 2007
Building a Business Case for Shared Geospatial Data and
Services:
Financial and Strategic Analysis for a Multi-participant Program
Bob SamborskiExecutive Director, GITAAurora, Colorado, USA
—Mary Ann Stewart
Strategic Analysis Lead for ROI Project
Who is GITA?Who is GITA?
The Geospatial Information & Technology Association (GITA) is a non-profit association focused on providing education and information exchange on the use and benefits of geospatial information and technology worldwide.
GITA Community
Who is GITA?Who is GITA?
Oil/G
as
Electric
Water/w
astewater
Telecomm
unications
Transportation
Local/Public Works
County/R
egional
State
Federal (FGD
C, etc.)
Software/H
ardware V
endors
System Integrators
Consultants/SM
E’s
Public Organizations
Private Sector
Utilities
Infrastructure Government Private International
ROI Project Co-SponsorsROI Project Co-Sponsors
Project PhasesProject Phases Project Conception Literature Review Workbook and Template
Development Case Study Development Business Case Development and
Return on Investment Methodology
Project GenesisProject Genesis
Highly positive response to 2003 GITA Conference Seminar, “Using Business Case and ROI to Justify GIT Spending”
Lack of relevant information on determining ROI for GIT
Request from FGDC to extend methodology and templates for multi-agency projects
Project PrincipalsProject Principals Principal Investigators (PI’s)
Susan Ancel, EPCOR Dave DiSera, FICOH Nancy Lerner, EMA, Inc. Mary Ann Stewart, MA
Stewart Engineering LLC Project Advisory Committee
Project ObjectiveProject Objective To develop and document a formal
methodology for preparing a business case, including ROI, within utilities and government agencies
To extend this methodology to multi-agency projects
To develop a multi-agency case study
Project BenefitsProject Benefits
Standardized and documented methodology for developing GIT business cases
Workbook with templates to assist multi-agency projects in applying the standards
Resource for supporting better GIT investment decisions by agencies engaged in complex projects
Project RationaleProject RationaleJustification for investments comes from business applications
BUT… GIT benefits are difficult to predict GIT applications are complex and may require
significant upfront investment Multi-agency projects require a different
approach to analysis Managers often make decisions with
incomplete understanding
Workbook ContentsWorkbook ContentsChapter 1. Introduction Why read this book? Why read about agencies outside my sector? Who should use this workbook? How to use the workbook and accompanying CD Why build shared data and services business case?Chapter 2. Overview of Business Case Business Uses of GIS Taking a multiple agency approach Project Definition Financial Analysis Strategic Analysis
Workbook ContentsWorkbook Contents
Chapter 3. GIT Benefits Tangible and Intangible Benefits Capturing Productivity Benefits Calculating Other Tangible Benefits Internal and External Benefits Dealing with Uncertainty Examples of Benefits for GIT Business Uses Chapter 4. GIT Costs Start-up and Operating Costs Sunk Costs Internal Labor Costs Examples of GIT Costs
Workbook ContentsWorkbook ContentsChapter 5. Financial Analysis Project Life and Cash Flow Schedule Time Value of Money (Opportunity Costs) Dealing with Inflation Common Financial Metrics Impact of Recasting Internal Labor Costs Sensitivity AnalysisChapter 6. Strategic Analysis and the
Business Case Interpreting a Business Case Strategic Benefits as IntangiblesChapter 7. Research Findings Literature Review Findings Case Study Findings
Template ComponentsTemplate Components Project Set-up Sheet Current Labor Rates Sheet Labor Cost Multiplier Sheet Internal Labor Usage Sheet Internal Labor Cost Sheet Contract and Procurement Cost Sheet Productivity Benefits Sheet Other Benefits Sheet Financial Analysis Sheet Productivity Benefit Detail Sheets
GIT is a Critical InvestmentGIT is a Critical InvestmentGIT is a Critical InvestmentGIT is a Critical Investment
Why ROI?Why ROI? Large amounts of money involved Competition with other investment
opportunities Ensure full validation of project prior to
initiation Identification of opportunities to structure
project to achieve interim benefits quicker Detailed documentation to improve
milestone and post implementation reviews
ProtectInterests of Citizens & Investors
Understand Financial Impact
of ProjectsSelect Best from Many Alternatives
Investment Analysis Is Investment Analysis Is a Fiduciary Responsibilitya Fiduciary Responsibility
and Public Dutyand Public Duty
Financial Analysis Quantifies Financial Analysis Quantifies Investment ValueInvestment Value
How long before we see
a return?
How confidentare we in the
financial projections?
Are there better
alternativesfor our money?
By howmuch?
Dobenefitsoutweighcosts?
Shifting ROI LandscapeShifting ROI Landscape Traditional models were based on labor savings by
implementing technology Organizations are much leaner now and often have
existing systems, resulting in less incremental benefits available
ROI should now focus on the financial statement drivers and corporate strategies
Current “hot buttons” Lean Operations (eliminate waste/shorten cycle times) Compliance Tracking Reliability Centered maintenance Asset Management Optimization of Material
When Should You Do ROI?When Should You Do ROI?
Strategy Development Project Initiation Project Detailed Design
completion Project completion When in operation for some time When assessing replacement of
the tool
Quantitative MeasuresQuantitative Measures
NPV
Subtract Costs from
Benefits
ROI
Divide Benefits by Cost
BreakEven
Cumulative Benefits Equal
Cumulative Costs
PayBack
Time from Now to Breakeven
Point
Each Measure Has a Best UseEach Measure Has a Best Use
NPV Best overall measure of financial value Higher NPV always identifies better investment
ROI Shows whether benefits outweigh costs Inappropriate for comparing investments (can
have high ROI with low NPV, etc.) Breakeven Point and Payback Period
Shows whether benefits outweigh costs Important political measure Inappropriate for comparing investments
Investment Analysis ProcessInvestment Analysis Process
Define theInvestment
STEP 1CalculateCosts
STEP 2CalculateTangible Benefits
STEP 3ScheduleCash Flows
STEP 4PerformFinancial Analysis
STEP 5PrepareStrategic Analysis
STEP 6
Describe & Quantify All Describe & Quantify All CostsCosts
Capital/One-time Costs Hardware & Software Data Acquisition & Conversion Start-up Services
Operating/Ongoing Costs New Hires Salary Adjustments Hardware & Software Maintenance Training Support Services Data License Fees
Typical GIS CostsTypical GIS Costs Hardware integration with
pre-existing computing infrastructure
Evaluation, selection, acquisition and installation of software
Undertaking requirements/needs analysis
Contractual aspects systems customization Applications portfolio
development Interfacing to other ‘data
servers’ and operational systems
Business case analysis Project management Delivery and installation Business process re-
engineering Transitional costs (i.e. parallel
running of old and new systems)
On-going cost implications (i.e. staff costs and consumables)
Data purchase Data capture, data conversion Data re-survey and validation Training, human resources
planning, skills development and re-skilling
Applications Drive BenefitsApplications Drive Benefits
Increase productivity Add revenue source/enhance
collection Reduce fee/fine Eliminate a service, building, or
process
Strategic Analysis Strategic Analysis Looks Beyond The MoneyLooks Beyond The Money
Can WeStay in
Business?
Growth
Morale
Safety
Goodwill
Regulatory Compliance
Clean Environment
Competitive Advantage
Focused on FGDC sources Qualitative information more common
than quantitative Clarified the need for common
methodology for financial analysis of multi-agency projects
Clarified the need for common approach to strategic analysis for multi-agency project
Literature ReviewLiterature Review
Case Study DevelopmentCase Study Development
Case study selected from pool of original studies
WA-Trans chosen to cover a range of applications, benefits and costs
Refined templates and approach In-depth interviews with participating
agencies Financial analysis based on individual
and combined business cases
WA-Trans WA-Trans Washington Transportation Framework for GIS
(WA-Trans) Project evaluates a proposed future investment Complex case study involving 19 participants
WSDOT in cooperation with Puget Sound Regional Council, Sound Transit, King County Metro, Lincoln County, Spokane County, Walla Walla County, Yakima Valley Conference of Governments, U.S. Bureau of Census Seattle Regional Office, Washington State Department of Fish and Wildlife, Washington Department of Natural Resources, and Washington Utilities and Transportation Commission
WA-Trans Project WA-Trans Project DescriptionDescription
WA-Trans will provide a seamless, statewide transportation location-based data set that includes the best information available about roads, railroads, airports, ferry terminals and routes, port facilities, and non-motorized transportation routes such as bike paths and horse trails.
The data will be used to improve transportation
planning, analysis and design capabilities not only for WSDOT but also for local and regional organizations across the state. Better transportation planning will ultimately lead to better transportation infrastructure and more effectively utilize existing resources.
WA-Trans Total Project WA-Trans Total Project SummarySummary
Net Present Value: $17.87 M Annualized Return on Investment: 10.9% Breakeven Point: 2011 Payback Period: 4 years Inflation Rate: 2.50% Opportunity Cost of Capital: 5.0% Project Life: 20 Years
WA-Trans Total Project WA-Trans Total Project SummarySummary
Method for Determining Future Years Cost of Labor, Derived by Applying Average Annual Cost of Living Adjustment to Current Costs: 1.50%
Total Costs (internal and external): $8.2M for life of project, ranging from $203K to $1.6M per year
Benefits: $26M for life of project, ranging from $67K to $1.6M per year
WA-Trans Total Project vs. WA-Trans Total Project vs. DOT Standalone ProjectDOT Standalone Project
DOT alone NPV: $255K ROI: 0.17% Breakeven point:
2025 Payback period:
18 years
All agencies NPV: $17.87M ROI: 10.9% Breakeven point:
2011 Payback period:
4 years
What Happened to WA DOT?What Happened to WA DOT?
DOT assumed majority of cost2007: $582K of $593K2008: $1.2M of $1.51M2009: $1.37 M of $1.64M2010: $1.02M of $1.02M DOT received modest benefits2007: $35K of $57K2008: $59K of $1.5M2009: $114K of $1.6M2010: $454K of $1.2M
WA DOT Breakeven PointWA DOT Breakeven Point
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028
Cost Benefit
Multi-Agency Breakeven PointMulti-Agency Breakeven Point
0
5000
10000
15000
20000
25000
30000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028
Cost Benefit
WA-Trans Tangible BenefitsWA-Trans Tangible Benefits
Examples of DOT Benefits Reduce amount of time to gather data to scope a
project in Planning Department = 1260 hours/yr Eliminate need for Collision Data and Analysis
Branch of TDO to review each accident report to determine jurisdiction = 5240 hours/yr
Eliminate research/data acquisition time for Highway Usage Branch of Transportation Data Office to acquire usage data on non-state routes = 80 hours/yr
Cost avoidance on purchase of commercial centerline data = $30K/yr
WA-Trans Tangible BenefitsWA-Trans Tangible Benefits
Examples of other agency benefits Utility and Transportation Commission:
eliminate time resolving address and geocoding errors = 240 hours/yr
Sound Transit: reduce customer service rep responses = 208 hours/yr
Dept. of Natural Resources: reduce time compiling trail and forest data for public lands quad map series = 1000 hours/yr
Five largest counties: eliminate edge matching efforts = 1700 hours/yr
GIS Strategic BenefitsGIS Strategic Benefits
Typical strategic benefits from GIS projects include:
Shared data and services Improved accuracy, consistency, timeliness of
data Better access to data Improved services to citizens Ability to integrate data among other systems Information for improved decision making Ability to generate new meaning from the data
WA-TRANS Strategic BenefitsWA-TRANS Strategic Benefits
Data sharing across county boundaries Eliminates need for edge matching One source for data eliminates searches
and redundant data collection Provides means for tracking and
communicating progress of projects Venue for counties and local government to
maintain data Reduced liability due to improved accuracy
WA-Trans Strategic Benefits to WA-Trans Strategic Benefits to Large CountiesLarge Counties
Have a well-established GIS No significant change to data
maintenance program Improved data sharing with other
counties Conflation of disparate data for use in
analysis and decision making Streamlined process for planners,
replacing manual data review
WA-Trans Strategic Benefits WA-Trans Strategic Benefits to Small Countiesto Small Counties
New to GIS, may have nothing in place
Benefit from common data standards Benefit from geodatabase design
available for their use Use of better control points from
counties for other agency flyovers improves accuracy
Functional Class Functional Class Strategic BenefitsStrategic Benefits
WA-TRANS sponsors development of accurate functional class network
Provides accurate tracking of functional class change process
Relates to lost opportunities for Federal funding
Helps resolve disagreements regarding existing classification
Assists in correct determination of urban vs. rural miles
Economic Development Economic Development Strategic BenefitsStrategic Benefits
FAST Corridor and international freight development
Need consolidated intermodal data access
Port development dollars not being spent for WA ($10B for LA)
Provide regional context for decision making for huge freight projects
Homeland Security/Disaster Homeland Security/Disaster Recovery Strategic BenefitsRecovery Strategic Benefits
WA experiences significant flooding and wildfires
Constrained transportation corridors Faster and better recovery efforts with
seamless road network WA-TRANS makes difference
between data and missing/outdated data for E911
FEMA Region 9 address range issues for rural counties
Census Bureau Census Bureau Strategic BenefitsStrategic Benefits
Census does not have mandate to be a data provider
Does not plan to continue to update road network
Access to maintained data essential WA-TRANS means counties won’t
have to interface with Census as supplier or consumer of data
Comparison of GITA and FGDC Comparison of GITA and FGDC Business Case Business Case InitiativesInitiatives
GITA’s ROI Research Project
FGDC’s Business Case Initiative
Project Sponsors GITA AWWA Research Foundation FGDC GeoConnections
Steering Committee Secretariat Staff Director Members of FGDC
Objectives To develop and document a formal methodology for preparing a business case including ROI for GIS initiatives in government and utility organizations.
Compile a series of business cases documenting the value of collaborative/shared development and access to geographic data and services by government, business, and academia.
Comparison of GITA and FGDC Comparison of GITA and FGDC Business Case Business Case InitiativesInitiatives
GITA’s ROIResearch Project
FGDC’s Business Case Initiative
Research Approach
Develop a methodology for estimating the financial value and ROITailor the methodology to match the typical application areas and expected costs and benefits of GIS
Review literature and select current practices Document and publish selected business cases of collaborate development / access to geographic data and services
Project Phases
Perform Literature Review Conduct Users Survey Create Workbook, Templates, and Instructions Conduct 5 Case Studies Publish ROI Workbook
Perform Literature Review Compile results Participate in GITA’s Case Study Phase Publish Results
Comparison of GITA and FGDC Comparison of GITA and FGDC Business Case Business Case InitiativesInitiatives
GITA’s ROI Research Project
FGDC’s Business Case Initiative
Project Benefits
Resource(s) for supporting better GIS investment decisions Standardized and documented methodology for developing GIS business cases Workbook with templates to assist organizations in applying the standards
Supporting documentation for better GIS investment decisions involving collaborative development and access to geographic data and services
Current Status
Six Case Studies completed Workbook published in March 2007 Case Study updates planned for distribution via ROI Community of Practice
WA-Trans Case Study completed Multi-agency version published March 2007 Seminars, webcasts planned to raise awareness
Project StatusProject Status AWWARF publication in process GITA publication released at GITA
Conference March 2007 FGDC publication released at NSGIC
March 2007 Planning next phase of ROI research
with current and new partners
Questions?
Top Related