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Cost of a Future Upgrade
Unlike upgrading the GIS Hardware or Software, upgrading the underlying data will be an expensive proposition because the utilities will also be spending resources towards (1) purchasing a high resolution base map, (2) mapping mostly buried utilities to higher precision and (3) matching the old GIS data with the new geometric data.

While this additional investment will certainly increase the quality of the GIS, the inertia, coupled with not having a pressing need, will lead to delays in such upgrade projects, resulting in opportunity loss.

The Decision Making
The chart on the right hand side shows the cost of two different Geographical Information Systems for an area of 100sqkm, one implemented using “coarse” geometric data and the other implemented using “fine” geometric data.

At the indicated prices, the GIS installed with “Fine” map data has provisions for investing in decimeter GPS, comprehensive attribute data collection, extended custom GIS solutions, mobile GIS (hardware and software) for maintenance crew, etc.

Whereas, it is technically inappropriate to add these additional facilities to “Coarse” map data. Hence, the “Coarse Product” prices indicated in this chart does not provide for any of these facilities.

Cost becomes negative, after considering the additional benebfits from "Fine" product


Cost Benefit Analysis
Let us consider two utility companies, installing a new GIS infrastructure for an extent measuring some 100 Sqkm:

• The first utility, “Utility C”, let us say, is basing their GIS on “Coarse” product.
• The second utility, “Utility F”, let us say, is basing their GIS on “Fine” data product

Let us assume that each of these utilities suffer a cost of finance of 14%.

The “Utility C” will be investing Rs 75 Lk on the new GIS and “Utility F” will be investing Rs 160 Lk.

By restricting the investment level to Rs 75 Lk on a GIS database with “Coarse” product, the “Utility C” will have the advantages of

• Conserving the scarce financial resources
• Opportunity to upgrade to “Fine” product at a later date, may be in about four years from now, after the product becomes much cheaper than today.
• Opportunity to gradually include additional features like GPS, mobile GIS, etc., after these technologies mature and become cheaper than they are today

Whereas by Investing Rs 160 Lk, “Utility F” will get:

• A high resolution base map with resale value (with a potential to earn the entire investment)
• A set of decimeter GPS and mobile GIS hardware and software so the fault and maintenance works can be fully automated from the day one.
• Better last mile planning and better cost control of the project execution.

However, on the first year of investment, “Utility F” will achieve a saving of 2% of the cost of last mile infrastructure as against “Utility C”, computed at of 2% of Rs 30 Cr1 , being Rs 0.6 Cr

Also, every year from the date of implementation of the GIS, the “Utility F” will also save 40% on the cost of maintenance of the network as against a non-GIS Utility, computed at 40% of Rs 2 Cr per year, being Rs 0.8 Cr.

With the cost of funds pegged at 14%, the cost/benefit achieved by “Utility F” over the period of five years will be as mentioned in Table 3.

1 Taking that the cost of last mile infrastructure being Rs 30 lk per Sqkm or Rs 2 Lk per km

Whereas, “Utility C” will be spending much less during the first year, yet get a 20% saving on maintenance cost (i.e. Rs 40 Lk).

However, growing needs and technological developments will demand that this company ports its GIS to “Fine” product by the fourth year. This upgrade, as per the discussions we have had earlier, is likely to be in the order of Rs 108 Lk. (Table 4.)

The graph below shows the investments and paybacks of “Fine” and “Course” products.

Conclusion
The following conclusions can be drawn from the analysis above:

• While the “Fine Mapping” is twice as expensive as the “Coarse Mapping”, it pays for the entire investment in a matter of two years and brings in a 2X profit (after fully amortizing the investment) before 5 years of operation.
• This may be reason why utilities operating in countries with abundant resources go for “Fine” product, even though the initial investment is much higher.
• Other than this, if we also consider the commercial benefits that “Utility F” will enjoy due to having a superior GIS (and hence better customer relationship), the balance is further tilted towards building a GIS with the “Fine” product.

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