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

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

Telecom

munications

Transportation

Local/P

ublic Works

County/R

egional

State

Federal (F

GD

C, etc.)

Softw

are/Hardw

are Vendors

System

Integrators

Consultants/S

ME

’s

Public O

rganizations

Private S

ector

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 Contents

Chapter 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 Analysis

Chapter 6. Strategic Analysis and the Business Case

Interpreting a Business Case Strategic Benefits as Intangibles Chapter 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 4

PerformFinancial 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 ROI

Research 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?