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Presented to: NSGIC MidYear Conference March 25, 2007 Building a Business Case for Shared Geospatial Data and Services: Financial and Strategic Analysis.

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Presentation on theme: "Presented to: NSGIC MidYear Conference March 25, 2007 Building a Business Case for Shared Geospatial Data and Services: Financial and Strategic Analysis."— Presentation transcript:

1 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

2 Bob Samborski Executive Director, GITA Aurora, Colorado, USA — Mary Ann Stewart Strategic Analysis Lead for ROI Project Bob Samborski Executive Director, GITA Aurora, Colorado, USA — Mary Ann Stewart Strategic Analysis Lead for ROI Project

3 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.

4 GITA Community Who is GITA? Oil/GasElectricWater/wastewaterTelecommunicationsTransportationLocal/Public WorksCounty/RegionalStateFederal (FGDC, etc.)Software/Hardware VendorsSystem IntegratorsConsultants/SME’sPublic OrganizationsPrivate SectorUtilities Infrastructure Government Private International

5 ROI Project Co-Sponsors

6 Project Phases  Project Conception  Literature Review  Workbook and Template Development  Case Study Development  Business Case Development and Return on Investment Methodology

7 Project 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

8 Project 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

9 Project 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

10 Project 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

11 Project Rationale Justification 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

12 Workbook 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

13 Workbook 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

14 Workbook Contents Chapter 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

15 Template 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

16 GIT is a Critical Investment

17 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

18 Protect Interests of Citizens & Investors Understand Financial Impact of Projects Select Best from Many Alternatives Investment Analysis Is a Fiduciary Responsibility and Public Duty

19 Financial Analysis Quantifies Investment Value How long before we see a return? How confident are we in the financial projections? Are there better alternatives for our money? By how much? Do benefits outweigh costs?

20 Shifting 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

21 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

22 Quantitative Measures NPV Subtract Costs from Benefits ROI Divide Benefits by Cost Break Even Cumulative Benefits Equal Cumulative Costs Pay Back Time from Now to Breakeven Point

23 Each 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

24 Investment Analysis Process Define the Investment STEP 1 Calculate Costs STEP 2 Calculate Tangible Benefits STEP 3 Schedule Cash Flows STEP 4 Perform Financial Analysis STEP 5 Prepare Strategic Analysis STEP 6

25 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

26 Typical 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

27 Applications Drive Benefits Increase productivity Add revenue source/enhance collection Reduce fee/fine Eliminate a service, building, or process

28 Strategic Analysis Looks Beyond The Money Can We Stay in Business? Growth Morale Safety Goodwill Regulatory Compliance Clean Environment Competitive Advantage

29 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 Review

30 Case 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

31 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

32 WA-Trans Project Description 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.

33 WA-Trans Total Project Summary WA-Trans Total Project Summary 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

34 WA-Trans Total Project Summary WA-Trans Total Project Summary 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

35 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

36 What Happened to WA DOT? 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 DOT received modest benefits 2007: $35K of $57K 2008: $59K of $1.5M 2009: $114K of $1.6M 2010: $454K of $1.2M

37 WA DOT Breakeven Point

38 Multi-Agency Breakeven Point

39 WA-Trans Tangible Benefits WA-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

40 WA-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

41 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

42 WA-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

43 WA-Trans Strategic Benefits to Large 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

44 WA-Trans Strategic Benefits to Small Counties WA-Trans Strategic Benefits to 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

45 Functional Class Strategic 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

46 Economic Development Strategic 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

47 Homeland Security/Disaster Recovery 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

48 Census Bureau Strategic Benefits A complete and accurate TIGER  database assists the Census Bureau in locating and contacting every household in the United States for the Decennial Census  The quality of TIGER  impacts the quality and accuracy of the census count, which ultimately impacts local representation in congress and funding local governments receive from the federal government and from the states.

49 Census Bureau Strategic Benefits -- 2 WA-TRANS has potential to reduce the overall cost of maintaining the TIGER  database by:  Providing a one-stop-shop for acquiring local data  Providing current key GIS contacts in local governments  Providing metadata on local files  Encouraging counties to maintain data  Reducing time counties spend responding to geographic data requests

50 Comparison of GITA and FGDC Business Case Initiatives 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.

51 Comparison of GITA and FGDC Business Case Initiatives GITA’s ROI Research Project FGDC’s Business Case Initiative Research Approach 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 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

52 Comparison of GITA and FGDC Business Case Initiatives 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

53 Project 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

54 Questions?

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