Imagine you just received a new information technology planning policy that now requires a return on investment (ROI) calculation with all geospatial project proposals. Do you:
(a) panic, (b) immediately hire an accountant, (c) tell the manager that spatial projects never use an ROI, or (d) actually try to figure out an ROI for your project?
In the past, the answer often has been (c). That response has been common throughout the IT industry, not just for spatial systems. Because public sector leaders have begun to employ ROI calculations as a part of their decision-making processes, IT managers now must come to grips with how to justify and quantify geospatial project benefits. Fortunately, local government IT managers can find significant ROI for geospatial projects if they look in the right places.
What is an ROI?
Traditionally, ROI calculations and justifications have referred to measurable financial results of an investment. Generally, the ROI is how much profit or cost saving results from a given use of money or resources. Financially based ROI calculations depend totally on factual metrics — usually dollars spent and dollars saved or gained.
Different techniques can be used to calculate purely financial ROIs, including present value, net present value and internal rate of return. For spatial projects that have defined costs and well-defined financial benefits, all of those techniques can justify and quantify project benefits.
More recently, however, organizations have begun to take non-financial benefits — including improved customer service, reduced wait times, increased public safety, decreased operational errors and attention to public health issues — into account. In some cases, models or assumptions help translate the non-financial benefits into financial metrics so that traditional ROI calculations still can be used. Those models can be very complex, however, and analyses depend on the validity of the assumptions used to make them.
Public sector vs. private sector
Government is not driven by bottom-line profitability like the private sector; therefore, some types of private-sector ROI justifications can be difficult to apply to local government. For example, when implementing a new geospatial-based system that requires fewer employees to complete a task, local government may not directly reduce staffing and related overhead costs. Redundant staff are usually dedicated to other tasks and activities.
Those situations make the government ROI case more difficult to state. Instead of decreasing costs, other services improve as personnel are reassigned. As a result, to find ROI, the government has to quantify the benefits of reassigning those resources.
Because many local government functions support community health and safety or infrastructure, intangible benefits can be difficult to quantify. For example, if a geospatial-based asset management system supports a city’s water system maintenance, determining that system’s contribution to the water network’s safe operation can be difficult.
To determine ROI for those types of projects, local governments can focus on discrete tasks. The use of a geospatial system in the field may allow an agency to eliminate printing costs or reduce downtime caused by outdated or inaccurate information.
Examining the possible costs of a mistake from not using spatial technology is another way to quantify softer benefits. If a maintenance crew breaks a cable by using outdated information in the field, what will be the cost for the mistake?
A baseline of the current system or business process should be calculated to help justify ROI. A proper baseline measures the performance of the existing system and calculates the number of requests currently processed in an hour or the time needed to approve a development application without geospatial support. Many times, the focus is on what the new system will do, overlooking the performance of the existing system. Without that step, quantifying the benefits of the new system often is impossible once it has been implemented.
Finding ROI in local government
While the potential for ROI in local government projects exists, that is especially true in streamlining operations, enterprise systems, resident self-service and application consolidation.
Streamlining and modernizing operations
Often, geospatial-based applications can consolidate the number of steps required to complete a task, which saves time and allows employees to focus on other work. The Cobb County Water System, which serves more than 160,000 customer accounts in Georgia, implemented a basic work planning system using GIS in July 2004 that reduced its crews’ planning time by 40 minutes each morning. Previously, job planning required manually locating each job and prioritizing the work. Now, the geospatial work management system plots the work of each crew on a computerized map and automatically suggests the most efficient order in which to execute the jobs, as well as a driving route. The reduction in planning time has improved customer service because more time is spent completing jobs and less time planning them.
Many organizations have not implemented centralized geospatial systems because of internal politics, incompatible systems or business processes. That often means several agencies maintain the same data or spend much effort moving data between systems and platforms.
By creating an enterprise-wide system accessible to all agencies, information needs to be maintained only once and then can be reused throughout all agencies. In local government, once the parcel layer is updated, other divisions and departments can use that information. An enterprise system creates direct cost savings by reducing data maintenance expenses, which can be used to calculate an ROI. The enterprise approach also typically results in the more intangible benefit of ensuring that all departments are working with current data — a key component for better decision making and fewer errors.
By creating online applications for residents to find answers to questions, local governments can save money and improve customer service. A city that publishes property assessment information online can eliminate a large number of telephone or face-to-face queries, which tie up valuable staff time, particularly when the year’s assessments are released. That allows personnel to remain focused on other tasks, and it provides faster turnaround for requests coming in by traditional means. Additionally, the individual’s online query is answered quickly, including a visual map instead of a verbal list of addresses and property values.
Although geospatial technology now is used throughout many local governments, sometimes agencies in the same city use different systems on various technology platforms with multiple databases. That can pose significant challenges for system support and development staff as well as for training and staff portability.
By consolidating spatial systems on a minimum number of platforms and databases, support, development and maintenance costs can be reduced substantially. That often yields directly quantifiable costs and can help create an ROI justification for a consolidation.
Using ROI to prioritize and justify spatial projects is becoming more commonplace as local governments attempt to allocate scarce financial and human resources. Many spatial projects within local government can be justified based on measurable cost savings, but just as many require evaluating the intangible benefits, such as productivity gains and the delivery of new services. Whatever the case, many areas exist where properly applied spatial investments will result in significant returns.
Mark Doherty is executive director, global government solutions, for Huntsville, Ala.-based Intergraph Mapping and Geospatial Solutions.
This article is based on a paper presentation from the Geospatial Information & Technology Association’s Annual Conference 28, which will be held March 6-9, 2005, in Denver.