6/3/2015Andrew Frank1 Second Part: HOW TO PREPARE A FEASIBILITY STUDY FOR A PROJECT FOR NEW USE OF...

04/18/23Andrew Frank 1

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 [email protected]

mailto:[email protected]


Overview

ProgramReview of yesterdays lectures; questions?The second part of the feasibility study:

CostBenefitsComparison

Complex business models:Value chain


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


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


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


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


February 2nd -Lecture (Andrew U. Frank)15.00-15.40 - Presentation skills – for all

participants together


February 3rd –Presenting the Projects (Andrew U. Frank)13:50 – 16:50 - Presentation of selected

projects (10 min. each)


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


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


New Uses

Information for travellers: tourists, public transportation users,

Logistics, Transportation, Dispatch: Emergency servicesNavigation: Taxi drivers


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


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.


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.


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


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.



Part 2:• Resources required, especially data• Technical solution• Time and Personnel plan• Estimation of the costs and benefits• Cost-benefit analysis


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!


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.


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


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.


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.


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.


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)


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.


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



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.


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.



Part 2:• Resources required, especially data• Technical solution• Time and Personnel plan• Estimation of the costs and benefits• Cost-benefit analysis


Data Resources Required:

Geographic Data: Location of restaurants,Location of buildings of TUStreet network to calculate shortest foot path distance.


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


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


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


Technical Resources:

Large PCLink to the internet, GIS SoftwareDatabase software


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)


Personnel Resources – initial:

Design System3 month of software engineer

Software:Design and programming of system


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)


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.


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


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


Benefits:

Who can benefit from the system:- The direct user- The restaurant- The employer Only the benefits for user and restaurant are considered here.


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).


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.


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:


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


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


Restaurant Information System for TU Vienna:Number of potential users: 20 restaurantsActually interested people: 17 restaurantsMarket penetration 70% -> 15 restaurants

75,000 ATS/month


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


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!


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


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.

6/3/2015Andrew Frank1 Second Part: HOW TO PREPARE A FEASIBILITY STUDY FOR A PROJECT FOR NEW USE OF...

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