GeoSpatial: Return on Investmentinspire.ec.europa.eu/.../272/Geospatial_-_Return_On_Investment.pdf · RoI would aim to identify benefits and costs for some wider social entity (eg

European Umbrella Organisation for Geographic Information

GeoSpatial:

Return on Investment

Bruce McCormack (EUROGI President)

Gunther Pichler (EUROGI Excom member)

Workshop at the

the INSPIRE Conference,

Aalborg, 16 June 2014


WORKSHOP OUTLINE

EUROGI

Introductory comments

Basic types of RoI

Types of investment which generate need for RoI

Benefits & costs of geospatial investments

RoI process

Some guiding principles

Some general difficulties

Some RoI examples

Wrap up


EUROGI

AIM

Promote the widespread and effective use of Geographic Information

and Geotechnologies in Europe

Membership

National GI Associations, GI companies, other types of organisations

23 members; thousands of ‘member’s members’

Activities

Liaison/influencing EU Commission DGs

Participation in GI related Commission funded projects

Information sharing

Networking

imaGIne conference in Berlin, 8 & 9 October 2014

F


INTRODUCTORY COMMENTS

Participants introduce themselves

Who has had direct experience of RoI

Workshop aim

Participatory approach

Recording main comments/points and EUROGI

produce succinct post-workshop write up


BASIC TYPES OF RoI (1)

Various ways of classifyingMethodology - complex > simple

Investment amount – large (millions) > small

Thoroughness – very > less

Focus - individual organisation > societal

Time frame - short > medium > long term

Measurables - only quantifyables > quantifyables and non-

quantifyables

Participation – high > low

Example later

Simple / not too thorough / organisation & societal foci / medium time

frame / only quantifyables / low participation


BASIC TYPE – INDIVIDUAL

ORGANISATION FOCUS

Benefits (returns) and costs within/for a single organisation (the

organisation doing the RoI) are measured and inputted into the RoI

Generally this type of RoI is more straightforward and likely to give

more accurate results than a societal RoI

The focus could be on:

Altering internal business processes with an aim to improve

efficiencies

Developing new products/services to service existing or new

customers

Companies generally not willing to divulge results of the RoIs which

they undertake or have had undertaken for them


BASIC TYPE – SOCIETAL FOCUS

RoI would aim to identify benefits and costs for

some wider social entity (eg country, region,

municipality, etc)

There may be multiple cost centres and multiple

benefit centres (possibly many thousands)

This type of RoI is more difficult/problematic for a

variety of reasons

Example – Spatial Data Infrastructure


TYPES OF INVESTMENT WHICH GENERATE

NEED FOR RoI (1)

Internal focus - Examples

Investing in GIS – software, staff, reference data etc. to

capacitate itself.

Purchasing a new dataset

External focus; developing a new product/service

offering - Examples

New offering in addition/as complement to existing GI

related offerings

Open up a whole new/relatively new market … break into

a new market segment

Provide a public service eg eGovernment


BENEFITS OF GEOSPATIAL

INVESTMENTS

Better policy making, monitoring and review

Create new business opportunities

Retain existing clients

Efficiency improvements – resource (eg money) savings, time savings

Effectiveness improvements – better targeting of investments, minimising risks

Improved cooperation between different agencies

More open data > job creation

Deepening/expanding democracy … greater transparency

Human capacity building

Data quality improvement cycle (accuracy, currency, more harmonised)

Making life easier, more comfortable

Expanding what is possible


COSTS ASSOCIATED WITH GEOSPATIAL

INVESTMENTS

SoftwareUpgrade/purchase new software

Create new GIS capacity

StaffGet new; maybe quite skilled and hence relatively expensive

Upgrade skills of existing / training costs

Staff time

DataPurchase new data / upgrade quality of existing

Revising work flows / mindsetsCan be disruptive

HardwareBroadband

Maybe move into cloud


PROCESS – GENERIC EXAMPLE

Step 1 – Confirm the need and decide in principle to go ahead

with an RoI

Step 2 - Establish more clearly/thoroughly the basis for

undertaking/carrying out the RoI study

Confirm the need, secure organisational legitimacy (eg get agreement

from management to undertake a RoI), obtain finances needed, make

sure right staff available, ensure oversight/management arrangements

in place, secure buy-in/support from key stakeholders, etc)

Different if CEO wants RoI or someone lower down or in a section of a

larger organisation



Step 3 – Establish/clarify basic parameters

Aims/goals for the RoI exercise

The nature of the proposed expansion/investment; ‘what

exactly is being proposed’

How many and what alternatives should be tested

Time frame for estimating benefits and costs

Scope; particularly important in the case of

societal/community RoI (eg are all or only some levels of

government included, all types of business or just one or

two sectors, what geographical area is involved, etc)



Step 4 – Identify and estimate the benefits/income over

the time frame determined in Step 3

Up front/initial

Ongoing

Step 5 – Identify and estimate the costs/investment over

the time frame determined in Step 3

Up front/initial

Ongoing



Step 6 – Discount the benefits and costs to

the present time (if necessary)

Step 7 – Write up and communicate

Step 8 – Follow up / implement if RoI shows

sufficiently positively

Step 9 – Monitor and review


SOME GUIDING PRINCIPLES

Approach/methodology fit for purpose

Try to involve key decision-makers and

stakeholders in the process as much as possible

from as early as possible; try to get them to have

some level of ownership

Set the exercise clearly within overall

business/governmental goals/objectives/mission

Ensure that there is a reasonable and common level

of understanding of what is geospatial amongst the

persons involved; reduces possibilities of

misunderstanding or unrealistic expectations



Set out assumptions clearly and succinctly;

explore them reasonably thoroughly

Find equivalent (or approximately equivalent)

RoIs studies (if any exist) and use them as a

general guide and/or test of the results being

generated

Where reasonable/feasible include one or more

alternative expansion/investment options. One

alternative could be ‘do nothing’ which would set

out a baseline



Err somewhat on the conservative side, but

not excessively conservative

Be sensitive to needing to decide when to draw

the line regarding collecting further

information/exploring more deeply; be sensitive

to diminishing returns and ‘mission creep’


SOME GENERAL DIFFICULTIES

Predicting the future

An issue of greater relevance the longer into the future the RoI

intends to estimate benefits and costs

Quantifying the intangibles

Most usually intangible benefits. Alternative approaches possible

Multiple cost and benefit centres

Particularly in the case of societal/community RoIs, multiple cost and

benefit centres gives rise to high levels of complexity and difficulties

in obtaining necessary information and deciding where to draw the

line

Missing/lacking information

Alternative ways of dealing with this


EXAMPLES

No 1

National public GI based information service

Simple / not too thorough / organisation & societal foci / medium time

frame / only quantifyables / low participation

No 2 INSPIRE

2003 overall benefit/cost assessment

Netherlands 2009 INSPIRE options evaluation

Other Member States benefit/costs

No 3

A small data supplier business






INSPIRE IMPACT ASSESSMENT 2003

Impact Assessment required before a Directive

(European law) can be adopted

Time period 2004/6 > 2014/15

Costs

€200-300m (rounded up) per annum

Benefits

€1.19b - €1.80b per annum

Overall benefit/cost ratio

4:1 to 9:1


INSPIRE: ANNUAL COST (€m)


INSPIRE: ANNUAL BENEFITS (€m)


INSPIRE - NETHERLANDS

Comprehensive 2009 RoI study (findings generally confirmed)

Two INSPIRE implementation models evaluatedBasic (do minimum) vs ‘collective’ (do more than minimum)

Basic approach adopted the approach adopted … RoI used to make this decision

Basic model Costs = abt €4m per annum (Net Present Value)

Benefits = abt €8.2m per annum (NPV) excluding wider strategic benefits

Benefit/Cost ratio = 2.1 : 1

Costs equal Benefits after 3 years after which Benefits > Costs

Full cost recovery after 8 years

Benefits very substantially outweigh costs into future


INSPIRE C/B – SELECTED COUNTRIES

UK

UK Location Strategy (wider than INSPIRE) costs 2010-13 = £4.04m

Estimate of benefits of INSPIRE for producing environment reports

(SEA & EIA) = £7.5m pa

Not yet developed a robust system for accounting for INSPIRE costs

& benefits, but working on it for reporting in 2016

Denmark

Cant distinguish INSPIRE costs and benefits from general SDI

development work

France

Costs - €14.2m annual average 2010-14

Hard to distinguish INSPIRE costs from overall

Benefits - No estimate made


WRAP UP

DISCUSSION


Thank you for your participation

Documents

GeoSpatial: Return on Investmentinspire.ec.europa.eu/.../272/Geospatial_-_Return_On_Investment.pdf · RoI would aim to identify benefits and costs for some wider social entity (eg