Modeling ROI for GIS, IT and Telecom Investments The City and County of Geopolis State of Locahoma,

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Modeling ROI for GIS, IT and Telecom Investments
The City and County of Geopolis State of
Locahoma,

• North Carolina GIS Conference
• Public Technology Incorporated
• GIS Forum
• Alan Leidner, Senior Associate, Booz Allen
  Hamilton March 1, 2007

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Why Enterprise GIS (E-GIS) is essential?

• Create once, use many Initial investment in
  framework data, infrastructure and staff
  maximizes reusable elements, creates synergies
  and reduces the costs of applications and data
  for any one agency
• Because all location enabled data within agencies
  is created upon a common geospatial base, data
  can be shared across agencies with minimal
  concerns about compatibility and accuracy.
  Equally so applications where components can be
  shared.
• Enterprise standards for data quality and
  application modules can increase sharing and keep
  development and operating costs down.
• Enterprise approach eliminates duplication of
  efforts. Also creates a large staff on common
  data, infrastructure and software supporting
  collaboration and sharing.
• Starting GIS applications in many agencies
  spreads the load for achieving the ROI that no
  one agency or application could provide - to
  justify the initial investment to build a
  comprehensive spatial data infrastructure.

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GIS data and applications Build once to create
many revenue streams
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Why is assessing ROI important

• E-GIS with significant up front investment is
  most effective in producing benefits but requires
  a leap of faith that a good ROI analysis can
  support. E-GIS is a spiritual concept but we live
  in a material world.
• Knowing where benefits are possible can help to
  guide investment priorities and amounts. Policy
  makers often totally misjudge the value of GIS
  seeing it as an exotic system, separate from IT
  and Telecom.
• Being able to convincingly document the potential
  of benefits can raise the profile and priority of
  GIS investments.
• A clear articulation of benefits can help win
  advocates and champions for GIS implementation
  across the government.
• A focus on documenting ROI can protect GIS
  efforts should there be a budget crunch.
• Overcome institutional resistance to
  collaboration Assessing benefits can identify
  implementation and collaboration strategies that
  will yield the greatest benefits.
• Even if you have an existing E-GIS system, an ROI
  assessment can document currently levels of
  benefits to support requests for new investments

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How to keep GIS investment and operating costs as
low as possible

• Acquire data regionally, state-wide or nationally
  to capitalize on economies of scale (Imagery for
  the Nation Transportation features for the
  nation) and reduce or eliminate duplication.
• Reduce per unit costs of buying hardware,
  software and services by aggregating procurement
  regionally and state-wide.
• Eliminate the duplicate creation of data layers
  build one, build best.
• Make sure data and applications comply with all
  standards to maximize opportunities for re-using
  components, and sharing across agencies.
• Barter municipal and county data for important
  private and institutional data sets.
• Share applications with other jurisdictions.
• Win grants from federal and state agencies by
  showing them the advantages of municipal data and
  application builds.
• Collaborate with professors and students at local
  university (UCGIS member?)

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E-GIS benefit tiers

• Direct financial collect more taxes, reduce law
  suit payouts, increased federal funding, collect
  more fines and fees
• Direct safety gains taken as saved lives, reduced
  injury and reduced property damage For example,
  a reduction in murders due to pattern
  identification, or reduced cardiac arrest deaths
  due to faster 911 response times. The unnecessary
  loss of life has a value to society. Lower crime
  can lead to direct financial benefits by reducing
  court courts.
• Productivity gains Enables a greater output per
  worker. Often results in better service to the
  public or the shift of employees to areas of
  greater need. Can lead to direct financial
  benefits if revenue collection processes are
  involve. Also, if reduction in workforce is made
  possible.
• Indirect safety, social, operational and
  strategic benefits Where improvements lead to
  acknowledged increases in effectiveness that
  cannot be measured but can be estimated.
• Economic benefits Increased business activity,
  new construction, more jobs, etc.
• (Most GIS applications can produce ROI in several
  or all benefit categories)

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Examples of multi tier benefits when a police
department implements modern crime management
systems that help reduce violent crime

• Direct financial Reduced overtime, lower
  liability, reduced court and prison costs,
  reduced probation and parole costs
• Direct safety Reduced murder rate reduction
  in major crimes, lives saved, faster response
  time
• Productivity gains Less time lost to manual
  record keeping, faster information look-ups
• Indirect social benefits Better community
  relations, higher police morale
• Economic development Improved investment
  climate, more tourists and visitors downtown,
  increased jobs
• focus of this analysis

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Some methods and assumptions

• Convert all benefits into dollars because thats
  what decision makers understand.
• Assume that financial managers find investments
  acceptable if there can be a full return in
  benefits from that investment within 5 years.
• Underestimate benefits and overestimate costs.
• Whenever possible have agency managers set cost
  and benefit estimations themselves with the
  guidance of examples from other jurisdictions
  (expert choice exercise)
• Take only a percentage of benefits Not all
  benefits from applications involving GIS can be
  attributed to GIS
• Let benefits build as in real life Full benefits
  are achieved only after a number of years.

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NYC Killer Apps

• School bus routing In late 1970s Federal
  Education mandated NYC calculate distance from
  student residence to school in order to qualify
  for 30M in school bus funding. Mainframe
  application using TIGER file. Benefit 30M
  direct financial
• Complaint system geocoding Validate and
  normalize address in mainframe applications and
  allow complaint information from public (street
  lights, catch basins, potholes, etc.) to be
  routed to the correct service yard. Now used in
  311 system. Benefit uncalculated but in the Ms
  in productivity/efficiency
• Watershed filtration avoidance EPA required NYC
  to comply with a large number of mandates to
  avoid building a 10 billion filtration system
  for its Catskill reservoir system. GIS mandated.
  Benefit Avoids 500M to 1B in capital interest
  payments
• CompStat Crime mapping using centerline file,
  addressing and geocoding helps reduce murders and
  other violent crime 70 over last twelve years.
  Benefit Value of 1,400 less murders annually.
• West Nile Virus Aided efforts to control the
  disease through a predictive model that targeted
  spraying and supported mitigation efforts.
  Benefit Deadly disease now under control
• September 11th Emergency Mapping and Data Center
  (EMDC) and satellites provided information and
  analysis support to response and recovery.
  Benefit Incalculable

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Characteristics City and County of Geopolis in
the State of Locahoma

• City and County of Geopolis are coterminous and
  under one government
• Population 1,000,000 exactly 1/300th the
  population of the U.S.
• State of Locahoma, population 6,000,000 or 1/50th
  the population of the U.S.
• Total cost of developing GIS framework data and
  infrastructure before 2007 7,500,000
• Annual maintenance of framework data and
  infrastructure 300,000
• GIS central staff 6 employees, annual cost of
  employees 600,000 _at_100,000. Total GIS staff in
  Geopolis for agencies covered by this analysis
  45 FTE
• Within Geopolis 120 murders were committed last
  year
• Area 30 miles by 33.3 miles 1,000 square miles
• 5,000 miles of roads, sewers pipes and water mains

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More characteristics City and County of Geopolis
in the State of Locahoma

• Geopolis Gross Municipal Product 40 Billion
  annually
• 12Trillion annual national GDP / 300M
  population 40,000 per person x 1M population
• Expected cost of disaster events 100M
  annually, 1B over 10 years
• 300 billion in damage over 10 years from major
  US events / 300 1B/10 100M annually
• Geopolis payouts for liability annually 50M
• Total budget from taxes and revenue sharing 5
  billion annually
• Total expenditures 5 billion annually
• 10,000 County and City employees excluding
  teachers
• Geopolis contains a significant port and
  airport, and major mass transit and freight hubs.
  Geopolis is 25 on the HSIP ranking, and is a
  UASI urban area eligible for HLS funds.

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Core investment in GIS data, computers,
telecommunications, applications and central staff

• Cost for aerial photography, feature extraction,
  address ranges and point addresses, parcel layer,
  structure layer, hydro, transportation, topo,
  etc. 3,000,000
• Cost for improved existing computer
  infrastructure, architecture and internet
  capabilities
• 
  
  2,000,000
• Cost for improved cable, fiber and wireless
  communications 2,000,000
• Cost for comprehensive geocoding application
  500,000
• 10 percent annual maintenance on all
  investments 750,000
• Annual cost for 6 full time technical staff
  _at_100,000 600,000
• ROI model assumes a total of 45 GIS staff hired

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Chart of cost of E-GIS versus benefits
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Benefit type Direct Financial - Census Count

• Background Data
• 1) Phoenix, Arizona estimates increase federal
  and state funds per person is 432
• 2) NYC estimates use of GIS lead to 5 increase
  in census count. Benefits could range up from
  100 per person.
• 3) Delaware County, Ohio estimates that use of
  GIS led to a 37.5 increase in census count and
  estimates that each person counted represented
  375 in federal and state assistance
• Assumptions for the City and County of Geopolis,
  in the State of Locahoma
• Current population 1,000,000
• Value of each person counted in state and federal
  assistance 200
• Additional headcount due to GIS in 2010 census
  5 or 50,000
• Benefits
• Annual additional benefit 10,000,000
• 2007 0 2008 0 2009 0 2010 5,000,000 2011
  2016 10,000,000
• Cumulative benefits over ten years 65,000,000
• Costs Prior to 2007 Data, applications,
  infrastructure 1M 2007 2016 annual costs
  for maintenance and 3 FTE _at_100K 400,000
• Cumulative costs over 10 years 5,000,000

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Benefit type Direct financial Parcel based
taxes and fees

• Background Data
• Washenaw County, Michigan found 10,000 parcels
  missing from tax rolls
• Oblique angle photo vendors report 3 increase in
  assessments due to photo ID of improvements
• Assumptions
• Current property based taxes take in 1B annually
• Through GIS photo ID and improved parcel
  processes 1 annual increase in revenue is
  possible.
• Benefits realized in 20 increments over five
  years
• Benefits
• Total potential benefit 10,000,000 annually
• 2007 2M, 2008 4M, 2009 6M, 2010 8M, 2011
  10M 2012 2016 10M
• Cumulative benefits over 10 years 80M
• Costs
• Investment prior to 2007 in data, applications,
  process change and infrastructure 2M. Annual
  maintenance including 3 FTE 500K

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Benefit type Safety Saving Lives and Preserving
Property Crime analysis

• Background Data
• http//www.fbi.gov/ucr/05cius/data/table_16.html
  shows homicide rates in urban areas.
• NYC murders have dropped from 2,200 in the early
  90s to under 600, a reduction of 1,400 annually
• Assumptions
• The Geopolis murder rate is 12/100,000 annually
  for a total of 120 annually.
• Using geospatially improved dispatch and crime
  analysis along with better policing techniques, a
  12.5 reduction in the murder rate over a five
  year period is possible.
• Every murder can be valued at 1M in police,
  medical, court costs, and in victim costs.
• Assume murder rate is reduced by three each year
  starting in 2007 and levels out after 2011
• Assume 20 of benefits can be attributed to GIS
• Benefits
• 2007 600K 2008 1.2M 2009 1.8 2010
  2.4M 2011 - 2016 3.0M 10 Year Total 24.0M
• Benefits dont yet take into account reduced
  costs of less crime less trials, less prisoners,
  improved business climate, etc.
• (Does not take into account reductions in 8740
  violent crimes annually)
• Costs
• GIS data, applications and infrastructure 1.5M
  Maintenance including 8 FTE 950K

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Benefit type Safety 911 emergency response

• Background Data
• USA Todays Robert David noted in a series of
  articles that more than 1,000 savable lives are
  lost annually because of slow response time to
  sudden cardiac arrest.
• Calculations show about 1 cardiac arrest death
  per 5,000 people annually
• Dr. Robert J. Myerburg estimates that every
  reduction of 1 minute in response time reduces
  fatalities by 10.
• Improved dispatch technology and systems, street
  address data, routing and AVL capabilities, can
  easily lead to a 1 minute or more improvement in
  dispatch time from initial call to arrival on the
  scene.
• Assumptions
• Geopolis suffers 200 annual deaths through sudden
  cardiac arrest annually and can reduce fatalities
  by 20 annually through faster response times and
  equipping emergency responders with
  defibrillation devices.
• Four lives will be saved in 2007 increasing by
  four until 2011 when benefits level off.
• Assume each life is worth 1M in lost taxation
  and benefit payments to family.
• Assume 50 of benefit can be attributed to GIS.
• Benefits
• 2007 2M 2008 4M 2009 6M 2010 8M
  2011-2016 10M Total 10 years 80M
• (Does not take into account deaths from heart
  attack, respiratory failure, bleeding, etc. where
  time is of the essence.)
• Costs
• Data, application and infrastructure 2.5M
  annual maintenance including 4 FTE 650K

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Benefit type Productivity gain Field force
automation

• Background Data
• GITA assessment of field force productivity gains
  through the use of location aware technologies is
  greater than 25.
• Many utility companies have, for years, reported
  remarkable increases in field force productivity
  through the use of improved address data,
  accurate utility maps, routing and AVL.
• Assumptions
• Geopolis, with a total municipal and county
  workforce of 10,000 has 1,000 field workers who
  can directly benefit from field force automation
  including AVL, routing, wireless communications,
  accurate location data and maps, etc. Workers
  include sanitation and street cleaning workers,
  social workers making home visits, highway work
  crews, health inspectors, building and other
  inspectors, etc.
• Assume annual salary of workers is 50,000
  annually for a total annual salary of 50M.
  Potential field automation benefits equal 50M x
  25 12.5M
• Assume potential of 20 of benefits can be
  attributed to E-GIS and location technologies or
  2.5M annually. Assume benefits can be captured
  at 10 increments over the course of 10years.
• Benefits
• 2007 250K2008 500K2009 750K.2016 2.5M
• Costs
• Assume 2M for data, applications and
  infrastructure Annual maintenance including 3
  FTE 500K

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Chart of cost of E-GIS versus benefits
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Some observations

• Based on total benefits Geopolis E-GIS pays back
  in its third year even as it supports continuing
  maintenance and staff support.
• Based only on direct financial benefits Geopolis
  E-GIS fully pays back investment in its fifth
  year.
• Given a full 5 year payback standard for capital
  investment Geopolis could have justified an
  additional 7M 81M in GIS/IT/Telecom
  investments.
• After 10 years ROI calculations, depending on
  benefit type, range from 110M 308M.
• Multiply by 300 to assess the scale of benefits
  if done nationally at the county and municipal
  level.

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References

• Sabety, Pari Reamer, Andrew and Clark, Lindsay
  November 30, 2004. Understanding Our Communities
  Funding the American Community Survey. The
  Brookings Institution, Cities and Suburbs.
  http//www.brookings.edu/views/op-ed/reamer/200411
  30.htm (Census)
• McKeefry, Hailey Lynne, Louisiana Stamps out
  Food-Stamp Fraud, eWEEK.com, published June 8,
  2006 http//www.eweek.com/article2/0,1895,1972079,
  00.asp (Fraud)
• Davis, Robert 2006 Six Minutes to Live or Die.
  USA Today, May 20,2006, http//www.usatoday.com/ne
  ws/nation/ems-day2-cover.htm (911 emergency
  response)
• Fenster, Jeffrey MD, etal. Armed with AEDs,
  Police Save Lives by Cutting Response Time,
  Journal Report August 7, 2002, American Heart
  Association http//www.americanheart.org/presenter
  .jhtml?identifier3004253 (911 emergency
  response)
• Werschuler, Tim Rancourt, Julie The
  Dissemination of Government Geographic Data In
  Canada Guide To Best Practices, Page 11.
  GeoConnections, Winter 2005, Version 1.2
  (Economic development)
• Lipton, Eric, Breathtaking Waste and Fraud in
  Hurricane Aid, New York Times, published June 27,
  2006 http//www.nytimes.com/2006/06/27/washington/
  27katrina.html?ex1309060800en1683e5fa71ecfb90e
  i5090partnerrssemcrss (Fraud)
• Multihazard Mitigation Council (MMC) of the
  National Institute of Building Sciences (NIBS),
  Natural Hazard Mitigation Saves, 2005
  http//www.nibs.org/MMC/MitigationSavingsReport/Pa
  rt1_final.pdf (Disaster prep.)
• Nebert, Douglas U.S. FGDC and Geospatial
  One-Stop Activities Related to Return on
  Investment, Report to ROI Workshop, Ispra,
  January 2006 http//sdi.jrc.it/ws/costbenefit2006
  /presentations/nebert.pdf