Transcript Document 7335117

Building a Business Case for
Shared Geospatial Data and
Services:
Financial and Strategic Analysis
for a Multi-participant Program
Presented to:
NSGIC MidYear Conference
March 25, 2007
Bob Samborski
Executive Director, GITA
Aurora, Colorado, USA
—
Mary Ann Stewart
Strategic Analysis Lead
for ROI Project
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.
Who is GITA?
GITA Community
International
Private
Government
Infrastructure
Utilities
Private Sector
Public Organizations
Consultants/SME’s
System Integrators
Software/Hardware Vendors
Federal (FGDC, etc.)
State
County/Regional
Local/Public Works
Transportation
Telecommunications
Water/wastewater
Electric
Oil/Gas
ROI Project Co-Sponsors
Project Phases
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Project Conception
Literature Review
Workbook and Template
Development
Case Study Development
Business Case Development and
Return on Investment Methodology
Project Genesis
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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 multiagency projects
Project Principals
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Principal Investigators (PI’s)
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Susan Ancel, EPCOR
Dave DiSera, FICOH
Nancy Lerner, EMA, Inc.
Mary Ann Stewart, MA
Stewart Engineering LLC
Project Advisory Committee
Project Objective
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To develop and document a formal
methodology for preparing a business
case, including ROI, within utilities and
government agencies
To extend this methodology to multiagency projects
To develop a multi-agency case study
Project Benefits
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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 Rationale
Justification for investments comes from
business applications
BUT…
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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 Contents
Chapter 1. Introduction
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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
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Business Uses of GIS
Taking a multiple agency approach
Project Definition
Financial Analysis
Strategic Analysis
Workbook Contents
Chapter 3. GIT Benefits
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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
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Start-up and Operating Costs
Sunk Costs
Internal Labor Costs
Examples of GIT Costs
Workbook Contents
Chapter 5. Financial Analysis
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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 Analysis
Chapter 6. Strategic Analysis and the
Business Case
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Interpreting a Business Case
Strategic Benefits as Intangibles
Chapter 7. Research Findings
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Literature Review Findings
Case Study Findings
Template Components
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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 Investment
Why ROI?
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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
Investment Analysis Is
a Fiduciary Responsibility
and Public Duty
Understand
Financial
Impact
of Projects
Select Best
from Many
Alternatives
Protect
Interests of
Citizens &
Investors
Financial Analysis
Quantifies Investment Value
Do
benefits
outweigh
costs?
By how
much?
How long
before we see
a return?
How confident
are we in the
financial
projections?
Are there
better
alternatives
for our money?
Shifting ROI Landscape
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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”
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Lean Operations (eliminate waste/shorten cycle times)
Compliance Tracking
Reliability Centered maintenance
Asset Management
Optimization of Material
When Should You Do ROI?
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Strategy Development
Project Initiation
Project Detailed Design
completion
Project completion
When in operation for some time
When assessing replacement of
the tool
Quantitative Measures
Subtract
Costs from
Benefits
Cumulative
Benefits Equal
Cumulative
Costs
NPV
Break
Even
ROI
Divide
Benefits
by Cost
Pay
Back
Time from Now
to Breakeven
Point
Each Measure Has a Best Use
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NPV
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ROI
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Best overall measure of financial value
Higher NPV always identifies better investment
Shows whether benefits outweigh costs
Inappropriate for comparing investments (can
have high ROI with low NPV, etc.)
Breakeven Point and Payback Period
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Shows whether benefits outweigh costs
Important political measure
Inappropriate for comparing investments
Investment Analysis Process
STEP 6
Prepare
STEP 5 Strategic Analysis
Perform
STEP 4 Financial Analysis
Schedule
STEP 3 Cash Flows
Calculate
STEP 2 Tangible Benefits
Calculate
STEP 1 Costs
Define the
Investment
Describe & Quantify
All Costs
 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 Costs
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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
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Business case analysis
Project management
Delivery and installation
Business process reengineering
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 Benefits
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Increase productivity
Add revenue source/enhance
collection
Reduce fee/fine
Eliminate a service, building, or
process
Strategic Analysis
Looks Beyond The Money
Competitive
Advantage
Goodwill
Safety
Can We
Stay in
Business?
Morale
Regulatory
Compliance
Clean
Environment
Growth
Literature Review
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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
Case Study Development
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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
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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
Description
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
Summary
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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
Summary
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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.
DOT 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?
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DOT assumed majority of cost
2007: $582K of $593K
2008: $1.2M of $1.51M
2009: $1.37 M of $1.64M
2010: $1.02M of $1.02M
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DOT received modest benefits
2007: $35K of $57K
2008: $59K of $1.5M
2009: $114K of $1.6M
2010: $454K of $1.2M
WA DOT Breakeven Point
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2006
2008
2010
2012
2014
2016
Cost
2018
2020
Benef it
2022
2024
2026
2028
Multi-Agency Breakeven Point
30000
25000
20000
15000
10000
5000
0
2006
2008
2010
2012
2014
2016
Cost
2018
2020
Benef it
2022
2024
2026
2028
WA-Trans Tangible Benefits
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Examples of DOT Benefits
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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 Benefits
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Examples of other agency benefits
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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 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 Benefits
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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 Large Counties
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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 to Small Counties
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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
Strategic Benefits
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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
Strategic Benefits
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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
Recovery Strategic Benefits
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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
Strategic Benefits
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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
Business Case Initiatives
GITA’s ROI
Research Project
GITA
 AWWA Research
Foundation
 FGDC
 GeoConnections
Project Sponsors
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Objectives
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To develop and
document a formal
methodology for
preparing a business
case including ROI for
GIS initiatives in
government and utility
organizations.
FGDC’s Business
Case Initiative
Steering Committee
 Secretariat Staff
Director
 Members of FGDC
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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.
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Comparison of GITA and FGDC
Business Case Initiatives
GITA’s ROI
Research Project
Research
Approach
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Project
Phases
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Develop a methodology for
estimating the financial value
and ROI
Tailor the methodology to match
the typical application areas and
expected costs and benefits of
GIS
Perform Literature Review
 Conduct Users Survey
 Create Workbook, Templates,
and Instructions
 Conduct 5 Case Studies
 Publish ROI Workbook
FGDC’s Business
Case Initiative
Review literature and select
current practices
 Document and publish
selected business cases of
collaborate development /
access to geographic data
and services
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Perform Literature Review
 Compile results
 Participate in GITA’s Case
Study Phase
 Publish Results
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Comparison of GITA and FGDC
Business Case Initiatives
GITA’s ROI
Research Project
Project
Benefits
Current
Status
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
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Six Case Studies completed
 Workbook published in March 2007
 Case Study updates planned for
distribution via ROI Community of
Practice
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FGDC’s Business
Case Initiative
Supporting
documentation for better
GIS investment decisions
involving collaborative
development and access
to geographic data and
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services
WA-Trans Case Study
completed
 Multi-agency version
published March 2007
 Seminars, webcasts
planned to raise
awareness
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Project Status
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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?