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Business Case Development and Return on Investment Research Project for Geospatial Information Technology

Quantitative Measures
Most financial analyses employ standard quantitative measures, including “Net Present Value” (where project costs are subtracted from benefits), “Return on Investment” (dividing benefits by costs), “Break Even” (when cumulative benefits equal cumulative costs), and “Payback” (the time from the present state to the breakeven point). All are financial analytical tools being used in the process to analyze geospatial investments.



These tools are used to define the investment, calculate costs, calculate tangible benefits, schedule cash flows, perform financial analysis, and prepare strategic analysis. This latter step is quite important. A strategic analysis looks beyond the money to make assessments of things like competitive advantage, workplace safety, employee morale, organizational growth, environmental impacts and considerations, regulatory compliance, and goodwill of the general public. Some of these characteristics are difficult if not impossible to quantify.

With these factors as a backdrop, GITA’s research project was initiated in late 2003. Based on a highly positive response to a GITA Conference seminar on, “Using Business Case and ROI to Justify GIT Spending”, the project was intended to address a general lack of relevant information in the field on how to determine ROI for GIT applications.

The ROI Research Project is a culmination of several years of ongoing research by the association. It presents a rational methodology that is focused on ways for developing benefit estimates that should instill a sufficient level of management confidence for ultimately determining a credible business case and return on investment.

Research Objectives
The Awwa Research Foundation (AwwaRF), GeoConnections Canada, and the U.S. Federal Geospatial Data Committee (FGDC) joined with GITA to fund this study to develop and document a formal methodology for the preparation of business cases for GIT within government agencies and utilities. The research includes a literature search, a survey with over 200 utility and government agency participants and the development of a workbook and digital templates to assist other organizations in building their business cases for GIT projects. The workbook includes case studies from several participating utilities. These case studies provide real-life examples of ROI analysis that apply the workbook's methodology and templates. Two of the case studies were performed at EPCOR Water Services Inc., which is also the primary sponsoring utility for the project. Located in Edmonton, Alberta, Canada, EPCOR has been using GIT since the late 1970s and is currently in the midst of a major enhancement to their existing GIT. Other case study sites include the City of Cleveland, Ohio, the Honolulu (Hawaii) Bureau of Water Supply, Telus, Edmonton, Alberta, and the Washington State Department of Transportation.

This project also ties in to the GeoSkills program goal to foster and promote the growth of the geomatics industry. GeoSkills is part of the GeoConnections initiative to develop the Canadian Geospatial Data Infrastructure (CGDI), making Canada’s geographic information available on the Internet. It also ties in with GeoConnections’ communities of practice.

Key objectives of this study include the following:

1. To evaluate current literature and information related to return on investment analyses for geospatial technology implementation;
2. To develop a questionnaire to be used in a web-distributed survey of a significant number of North American and international utilities and government agencies regarding benefits received from geospatial applications in their organizations;
3. To further develop return on investment methodology as presented in the GITA seminars, enhancing and refining the techniques and documentation;
4. To develop a set of spreadsheet templates, examples and directions that organizations can use for financial analysis of their own projects; and
5. To visit a selected number of utility sites to perform individual case studies of the financial performance and strategic impact of proposed or completed geospatial projects, to perform investment analysis on these projects and to thoroughly document each case study as an example for the workbook, including detailed spreadsheet analysis available for study as Excel files.

In support of the ultimate goal of developing a methodology for building business cases for GIT, information was gathered by literature review and comprehensive survey activities. The literature review provides information on the status of research on return on investment analysis and business case preparation in both the geospatial and general information technology fields of practice. Information from participating organizations was collected primarily as part of a web-based survey of organizational benefits derived from geospatial projects, and by conducting on-site interviews during case study interviews at each utility.

Information collected in the literature review and user organization survey was used to determine the variables to be included in the development of spreadsheet templates and financial analysis methodology. An assessment of the availability of case study sites from the participating organizations was completed prior to development of the spreadsheet templates and financial analysis methodology. Case studies were begun in August 2005 and completed in April 2006.

The resulting document, a workbook for practitioners, is intended to be a combined guide for GIT business case development and Return on Investment (ROI) methodology. This workbook includes sections on: Introduction and Business Uses of GIT, Basics of Return on Investment (ROI) Analysis and Business Case Development, GIT Benefits, GIT Costs, Financial Analysis, Strategic Analysis and Business Case, and Research Findings.

Project Conclusions and Recommendations
The GITA ROI Project Team made some general observations based upon its work to complete this project. These can be summarized in the following conclusions.

• Although there is a substantial body of literature on return on investment for general information technology projects, documentation of geospatial business cases and return on investment studies is limited given that this technology has in many cases only recently been adopted by utilities.
• A common and valuable organizational benefit from geospatial projects is access to information that was previously inaccessible due to time constraints or political boundaries. Capability is provided for ad hoc presentation of maps, map production by non-technical staff, and communication of decisions using maps.
  Further, data accuracy and completeness are improved.
• Other tangible organizational benefits include making workflow management more efficient by having seamless end-to-end business processes, better public service through remote access to property information, tax information, and tax payments, and (for certain utilities) improved outage reporting and statistics.
• The most common examples of intangible or broad categories of strategic benefits identified include: provision of better information for improved decision making, shared data and services, more consistent access to data, improved services to citizens and/or customers, ability to integrate data among other systems, the ability to generate new ‘understandings’ from the data, and overall easier access to data.
• Yet another benefit to utilities and government agencies is enhanced provision of capabilities for emergency preparedness and preplanning, for training scenarios, and for reporting to the state or province.
• Large geospatial projects, such as enterprise-wide efforts throughout a metropolitan area, have large costs and accompanying large benefits. In many cases, productivity benefits are dominant.
• Mature geospatial implementations enable the return of substantial benefits from the development of new applications based on the existing technology at marginal additional cost.
• Complex projects involving multiple agencies can provide substantial quantifiable and strategic benefits, but it may be difficult to collect thorough and consistent benefit data from all affected agencies.