Post on 19-Dec-2015
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Second Part: HOW TO PREPARE A FEASIBILITY STUDY FOR A PROJECT FOR NEW USE OF GEOGRAPHIC INFORMATIONLjubljana, training course, 31.1-3.2.2000
Andrew U. FrankGeoinformationTU Viennafrank@geoinfo.tuwien.ac.at
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Overview
ProgramReview of yesterdays lectures; questions?The second part of the feasibility study:
CostBenefitsComparison
Complex business models:Value chain
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Overview of the Program
Yesterday, January 31st – Lecture (Andrew U. Frank)
• concept and goals of the feasibility study for the project
• selection of your own Geoinformation Product
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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
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Today - February 1st - 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
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February 2nd and 3rd – 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
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February 2nd -Lecture (Andrew U. Frank)15.00-15.40 - Presentation skills – for all
participants together
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February 3rd –Presenting the Projects (Andrew U. Frank)13:50 – 16:50 - Presentation of selected
projects (10 min. each)
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Review of yesterdays presentationGoal• 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
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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
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New Uses
Information for travellers: tourists, public transportation users,
Logistics, Transportation, Dispatch: Emergency servicesNavigation: Taxi drivers
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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-useGI utilityPrivate enterprises
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Methodology for the Design of Geoinformation ProductThe 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.
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Methodology for the Design of Geoinformation ProductGeoinformation 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.
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Two Steps in a Feasibility Study for Geoinformation ProductsPart 1: User oriented
What Information for what decision of the user?
Written in the user’s language
Part 2: Technology relatedHow to produce the information?Written in a technical language
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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.
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Feasibility study contents
Part 2:• Resources required, especially data• Technical solution• Time and Personnel plan• Estimation of the costs and benefits• Cost-benefit analysis
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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!
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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.
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Examples of uses of Geoinformation Products:Dispatch of Taxi’sInformation to drivers about traffic
congestionScheduling in out-patient care in
correspondence with schedule of public transportation.
Tourist informationManagement of nature reserve
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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.
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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.
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Geoinformation Product Example : Restaurant Info TU ViennaUsers: 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.
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Geoinformation Product Example : Restaurant Info TU ViennaTechnology: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)
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A Geoinformation Product vs. Geographic Data
Datasets are used as a raw material for a Geoinformation product.
Datasets differ according to the:ContentFormatThe way they are packaged, depending on the media
Geoinformation Product differ in the decision they are designed to support.
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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
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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.
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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.
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Feasibility study contents
Part 2:• Resources required, especially data• Technical solution• Time and Personnel plan• Estimation of the costs and benefits• Cost-benefit analysis
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Data Resources Required:
Geographic Data: Location of restaurants,Location of buildings of TUStreet network to calculate shortest foot path distance.
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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
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Data Resources Required (3)
Information about users (profiles)Location of employees in buildingsPreference 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
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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
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Technical Resources:
Large PCLink to the internet, GIS SoftwareDatabase software
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Personnel Resources – operatingDaily administration:
Check inputs of menus, check classification etc.
1 hour/day – low skill level
Accounting:Sell participation to restaurants, bill5 days/month – medium skill level
Technical maintenance: 5 days/monthMedium skill level (technical)
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Personnel Resources – initial:
Design System3 month of software engineer
Software:Design and programming of system
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Overheads: Cost for Space and othersThe 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)
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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.
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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 ATSSoftware: 20,000 ATS
Total: 360,000 ATS
Per month (over 24 month) -> 15,000 ATS
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Summary of Cost:
Per month:Data entry: 1 hour/day – 600 ATS/day -> 12,000 ATS/month
Administration: 3 days -> 15,000 ATS/monthSystem: 3 days -> 20,000 ATS/monthTechnical fees: 3,000 ATS/month
Total : 50,000 ATS/monthInitial cost (amortization): 15,000 ATS/month
Grand total of cost: 65,000 ATS/month
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Benefits:
Who can benefit from the system:- The direct user- The restaurant- The employer Only the benefits for user and restaurant are considered here.
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Method for estimation of benefits:Estimate benefit for one useMultiply with the number of users
Assess total population of potential users (market)
Estimate the percentage of users actually use the product(market penetration).
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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 ProductDifference gives the maximum value of the Geoinformation Product
Not all the benefits can be transferred from the user to the producer through price.
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Restaurant Information System for TU Vienna:Benefits to a user:
10 ATS per useCost of acquiring the information : 1 minutes (5 ATS)
Total benefit: 5 ATSDifficult 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:
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Restaurant Information System for TU Vienna: Benefit to users
Number of potential users: 1000 personsActually interested people: 500 personsMarket penetration 10% -> 50 persons
250 ATS/day -> 5,000 ATS/month
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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
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Restaurant Information System for TU Vienna:Number of potential users: 20 restaurantsActually interested people: 17 restaurantsMarket penetration 70% -> 15 restaurants
75,000 ATS/month
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Comparing Cost with Benefits:
Cost (including amortization of initial costs)65,000 ATS/month
Benefits: 75,000 ATS/monthConclusion:The project to design and implement this
system should be continued To the next level of detail
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Return on Investment
Return on InvestmentQuarter 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Cost 360 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50Cummulative Cost 360 410 460 510 560 610 660 710 760 810 860 910 960 1010 1060 1110 1160
Benefitsusers 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5restaurants 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75Cummulative Benefits 80 160 240 320 400 480 560 640 720 800 880 960 1040 1120 1200 1280
Difference Cummlative Cost - Cummulative Benefits330 300 270 240 210 180 150 120 90 60 30 0 -30 -60 -90 -120
Investment is recovered after 3 years!
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Graphical Presentation of Return on Investment
Return on Investment
-200
0
200
400
600
800
1000
1200
1400
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Quarters
AT
S
Cost Benefits Difference
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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.