1. 6/3/2015Andrew Frank1 Second Part: HOW TO PREPARE A FEASIBILITY STUDY FOR A PROJECT FOR NEW USE OF GEOGRAPHIC INFORMATION Ljubljana, training course, 31.1-3.2.2000 Andrew U. Frank Geoinformation TU Vienna frank@geoinfo.tuwien.ac.at

2. 6/3/2015Andrew Frank2 Overview Program Review of yesterdays lectures; questions? The second part of the feasibility study: Cost Benefits Comparison Complex business models: Value chain

3. 6/3/2015Andrew Frank3 Overview of the Program Yesterday, January 31 st – Lecture (Andrew U. Frank) concept and goals of the feasibility study for the project selection of your own Geoinformation Product

4. 6/3/2015Andrew Frank4 Basic content of the lectures: –Introduction, standard approaches, analysis of failures –The decision situation and the Geoinformation Product centred approach –Aims, goals, and the structure of the feasibility study –Identification of Geoinformation Product and format to support the user’s decisions –Project selection

5. 6/3/2015Andrew Frank5 Today - February 1 st - Lecture (Andrew U. Frank) –Organization of the project –Resources needed for the project –Technical solution –Fundamentals of information market economy –Estimation of the costs and evaluation of benefits –Cost-benefit analysis

6. 6/3/2015Andrew Frank6 February 2 nd and 3 rd – Workshop/Lecture (Andrew U. Frank, Massimo Rumor, Kurt Fedra) participants are divided according to their interest into three groups: real estate management, physical planning, and environmental planning

7. 6/3/2015Andrew Frank7 February 2 nd -Lecture (Andrew U. Frank) 15.00-15.40 - Presentation skills – for all participants together

8. 6/3/2015Andrew Frank8 February 3 rd –Presenting the Projects (Andrew U. Frank) 13:50 – 16:50 - Presentation of selected projects (10 min. each)

9. 6/3/2015Andrew Frank9 Review of yesterdays presentation Goal to foster the use of the information collected and maintained within the organisation Motivation to create economically beneficial new uses of the data New Technology, New Uses, New Business Models Product marketing applied to Geoinformation

10. 6/3/2015Andrew Frank10 New Technology There are a large number of new uses for Geographic Information possible with new technology: –With GPS we know where –With GSM we can communicate –The WWW gives access to data independent of the location of storage –Open GIS interfaces build bridges –Hard- and Software is inexpensive and ubiquous

11. 6/3/2015Andrew Frank11 New Uses Information for travellers: tourists, public transportation users, Logistics, Transportation, Dispatch: Emergency services Navigation: Taxi drivers

12. 6/3/2015Andrew Frank12 New Business Model: Big GIS: a public administration builds and maintains a GIS for its own use. Small GI: a company maintains GI and distributes it against a fee to many others. Pay-per-use GI utility Private enterprises

13. 6/3/2015Andrew Frank13 Methodology for the Design of Geoinformation Product The Methodology is USER CENTERED. We start with the user and its use of the information. We do not start with the GIS or the data.

14. 6/3/2015Andrew Frank14 Methodology for the Design of Geoinformation Product Geoinformation is a product. It has users to whom it provides a benefit. One can apply regular methods of product management and marketing. The decision about GIS should be a decision about the Geoinformation Product it can produce. The Feasibility Study for a GIS is a market study for a Geoinformation Product.

15. 6/3/2015Andrew Frank15 Two Steps in a Feasibility Study for Geoinformation Products Part 1: User oriented What Information for what decision of the user? Written in the user’s language Part 2: Technology related How to produce the information? Written in a technical language

16. 6/3/2015Andrew Frank16 Feasibility study contents The feasibility study consists of the following parts: Part 1: Description of the problem, identification of the decision to be made, identification of the user Design of the Geoinformation product that optimally supports the decision Include pictures, examples; must be very specific.

17. 6/3/2015Andrew Frank17 Feasibility study contents Part 2: Resources required, especially data Technical solution Time and Personnel plan Estimation of the costs and benefits Cost-benefit analysis

18. 6/3/2015Andrew Frank18 Project oriented teaching How to make a good feasibility studies requires to know how to apply a methodology. This requires knowledge and skills. The lectures will present the knowledge. The skills you will acquire during the project work. The two form a unit!

19. 6/3/2015Andrew Frank19 Student project – A feasibility study: In parallel to the lectures, you should prepare a feasibility study of some GI Product. The lectures show the theory, the project fills it with reality. The lectures are abstract and general. Each project is concrete and specific. VERY concrete and VERY specific.

20. 6/3/2015Andrew Frank20 Examples of uses of Geoinformation Products: Dispatch of Taxi’s Information to drivers about traffic congestion Scheduling in out-patient care in correspondence with schedule of public transportation. Tourist information Management of nature reserve

21. 6/3/2015Andrew Frank21 A Project A project is a one–time job that has definite starting and ending points, clearly defined objectives, scope, and (usually) budget. The project is the creation of a new Geoinformation Product. The project starts with the idea. It ends when the new system is introduced into operation. Projects are very different from recurring administrative tasks.

22. 6/3/2015Andrew Frank22 The Concept of Geoinformation Product A Geoinformation product is a specific piece of information packaged as a product, which serves a particular information need in a specific situation. We discuss here the design of the GIP before we discuss how it is produced: The product is designed before we build the factory! This is a general rule of product marketing.

23. 6/3/2015Andrew Frank23 Geoinformation Product Example : Restaurant Info TU Vienna Users: TU employees eating lunch in a nearby restaurant. (can be opened to other professionals in the area) Decision: Which restaurant to go. Geographic Information Product: Advice on the restaurant.

24. 6/3/2015Andrew Frank24 Geoinformation Product Example : Restaurant Info TU Vienna Technology: A small database with today’s menus for the participating restaurants. Can be searched by price, type of food etc. Delivered as Web page. Data received from restaurants (by fax or internet)

25. 6/3/2015Andrew Frank25 A Geoinformation Product vs. Geographic Data Datasets are used as a raw material for a Geoinformation product. Datasets differ according to the: Content Format The way they are packaged, depending on the media Geoinformation Product differ in the decision they are designed to support.

26. 6/3/2015Andrew Frank26 Geographic Information Sources Geographic datasets are an important source of geographic information; which datasets are necessary to acquire what are the technical characteristics of those data; scale, data quality, etc. can one get them from the existing sources

27. 6/3/2015Andrew Frank27 Feasibility study contents The feasibility study consists of the following parts: Part 1: Description of the problem, identification of the decision to be made, identification of the user Design of the Geoinformation product that optimally supports the decision Include pictures, examples; must be very specific.

28. 6/3/2015Andrew Frank28 Description of the problem: Employees of the TU Vienna (and others in the area), who desire to eat in a restaurant have to select one They need information about menus offered today.

29. 6/3/2015Andrew Frank29 Feasibility study contents Part 2: Resources required, especially data Technical solution Time and Personnel plan Estimation of the costs and benefits Cost-benefit analysis

30. 6/3/2015Andrew Frank30 Data Resources Required: Geographic Data: Location of restaurants, Location of buildings of TU Street network to calculate shortest foot path distance.

31. 6/3/2015Andrew Frank31 Data Resources Required (2) Data about the daily special menu in the restaurant with price -- must be updated daily Standard menus of the restaurants (with prices) Classification of dishes

32. 6/3/2015Andrew Frank32 Data Resources Required (3) Information about users (profiles) Location of employees in buildings Preference for food types (and exclusion list) Other preferences (short walks) Weather today (to avoid advice which requires walking in the rain) Administrative data about users and restaurants payment system

33. 6/3/2015Andrew Frank33 Technical Solution: A simple GIS is used to calculate the distances between building and restaurant Database to store all listed data resources Design of user interface using WEB technology. Database with query language. The data are mostly entered by the restaurants

34. 6/3/2015Andrew Frank34 Technical Resources: Large PC Link to the internet, GIS Software Database software

35. 6/3/2015Andrew Frank35 Personnel Resources – operating Daily administration: Check inputs of menus, check classification etc. 1 hour/day – low skill level Accounting: Sell participation to restaurants, bill 5 days/month – medium skill level Technical maintenance: 5 days/month Medium skill level (technical)

36. 6/3/2015Andrew Frank36 Personnel Resources – initial: Design System 3 month of software engineer Software: Design and programming of system

37. 6/3/2015Andrew Frank37 Overheads: Cost for Space and others The personnel requires space, power, office equipment, personnel administration All these cost are best included in ‘overhead’ cost which is expressed as a percentage of labor cost. Simply: salary for a an employee is multiplied by a factor (net salary times 4 for Austria)

38. 6/3/2015Andrew Frank38 Summary of Cost of Resources Arrange cost in two categories: One-time cost Recurring cost Per month or per use of the system maintenance is a cost per month Human operator time dealing with call- in users is a cost per use.

39. 6/3/2015Andrew Frank39 Summary of cost, initial cost: System design and implementation: 2 month -> 180,000 ATS Business development: 1.5 month -> 120,000 ATS Hardware: 40,000 ATS Software: 20,000 ATS Total: 360,000 ATS Per month (over 24 month) -> 15,000 ATS

40. 6/3/2015Andrew Frank40 Summary of Cost: Per month: Data entry: 1 hour/day – 600 ATS/day -> 12,000 ATS/month Administration: 3 days -> 15,000 ATS/month System: 3 days -> 20,000 ATS/month Technical fees: 3,000 ATS/month Total : 50,000 ATS/month Initial cost (amortization): 15,000 ATS/month Grand total of cost: 65,000 ATS/month

41. 6/3/2015Andrew Frank41 Benefits: Who can benefit from the system: -The direct user -The restaurant -The employer Only the benefits for user and restaurant are considered here.

42. 6/3/2015Andrew Frank42 Method for estimation of benefits: Estimate benefit for one use Multiply with the number of users Assess total population of potential users (market) Estimate the percentage of users actually use the product (market penetration).

43. 6/3/2015Andrew Frank43 Estimate benefit of one use: Estimate benefit for the user of a single Geoinformation Product. Estimate the cost for the user to acquire the Geoinformation Product Difference gives the maximum value of the Geoinformation Product Not all the benefits can be transferred from the user to the producer through price.

44. 6/3/2015Andrew Frank44 Restaurant Information System for TU Vienna: Benefits to a user: 10 ATS per use Cost of acquiring the information : 1 minutes (5 ATS) Total benefit: 5 ATS Difficult to find a method to collect a few (part of technical solution) Hint: make it simple for the user to use the system, otherwise the benefits become negative:

45. 6/3/2015Andrew Frank45 Restaurant Information System for TU Vienna: Benefit to users Number of potential users: 1000 persons Actually interested people: 500 persons Market penetration 10% -> 50 persons 250 ATS/day -> 5,000 ATS/month

46. 6/3/2015Andrew Frank46 Restaurant Information System for TU Vienna: Benefit to restaurants Benefit is selling more luncheons: 4 additional meals are sold. Income 500 ATS/day. Benefit: 250 ATS/day 5,000 ATS/month

47. 6/3/2015Andrew Frank47 Restaurant Information System for TU Vienna: Number of potential users: 20 restaurants Actually interested people: 17 restaurants Market penetration 70% -> 15 restaurants 75,000 ATS/month

48. 6/3/2015Andrew Frank48 Comparing Cost with Benefits: Cost (including amortization of initial costs) 65,000 ATS/month Benefits: 75,000 ATS/month Conclusion: The project to design and implement this system should be continued To the next level of detail

49. 6/3/2015Andrew Frank49 Return on Investment

50. 6/3/2015Andrew Frank50 Graphical Presentation of Return on Investment

51. 6/3/2015Andrew Frank51 Interpretation Consider the precision of the inputs: The result is: this application has a return on investment of 3 years. This is barely acceptable. Continue the project and produce better estimates. Refine estimates of cost. Check with restaurants, if they are willing to pay that much.