Traditionally, GIS projects have been evaluated by the additional technical capabilities that they provide to an organization. However, because executives are increasingly pressured to improve business efficiencies, competitive advantage, and resource utilization, they are seeking more sophisticated approaches to prioritizing and targeting investment in GIS technology to prove how and when it will deliver a tangible ROI to their organizations. In contrast to measuring the technological benefits of a GIS, the business-based ROI indicia are much less developed. That is, there are very few examples of the measurable business benefits of GIS projects and no standardized technique for estimating the value or return on investment of using GIS within organizations.
It has become more and more apparent that a way to evaluate and compare business opportunities generated with a GIS implementation is needed. I envision a 10-step methodology that details the entire ROI process, from the initial concept to the final report. The first step is preparing for the implementation of the ROI project and includes, in part, the organization of a small team of employees committed to the goals of the project, a review of the company's mission statement, and an assessment of its previous experience with GIS. The remaining steps consist of identifying and prioritizing business opportunities, constructing the GIS program, defining project control, specifying and determining the cost of GIS projects, estimating business benefits, creating a benefits road map, calculating financial metrics, and building and presenting a final report.
While described here as an end-to-end process, some organizations will use only portions of such a methodology, such as developing a budget or modeling benefits they expect to deliver with their ongoing work. The methodology focuses on six key topics that are critical to creating a defensible position on the value of GIS for any organization: Demonstrate the real business value, determine the specific costs, estimate the time frame for delivery of benefits, understand the resource requirements, define the governance and management, and calculate the return on investment.
The greatest challenge typically faced by GIS professionals is gaining stakeholder commitment and buy-in across the whole organization because GIS has traditionally been seen as a departmental 'tool' rather than an enterprise solution, such as SAP. So there are challenges in getting the necessary broad-based support from others in the company. This ROI approach is different from standard methods for measuring the success of GIS projects because it is developed by means of a general needs assessment focusing on overall goals and benefits, not on specific activities. Also, the methodology considers, in addition to the ROI, all components required to successfully deliver the full value to an organization. This helps 'sell' the ROI enterprise concept.
The most difficult step for most GIS professionals is estimating the tangible benefits of their projects, not so much in identifying the benefits, but in translating the benefits into specific, measurable terms that can be ascribed a monetary value. The benefits estimation process of this methodology focuses on things such as the value added with GIS, costs avoided, additional revenue gained, and improvements in efficiency. The process of defining a benefit is broken down into a series of smaller constituent parts to aid in modeling activities so that they can be expressed in a measurable form. The data is then entered into a spreadsheet to provide yearly totals. Most organizations should use this approach several months ahead of their annual budgeting cycles so that they are well-positioned to submit a robust and defensible business case or budget.
Finally, it is important to understand that ROI calculations are only one piece of the complete procedure. Calculating ROI for a GIS project is a major aspect of the process, but delivering on the benefits expected in a consistent and complete manner is equally important. The key is to link the business benefits sought via the GIS initiatives to the organization's strategic goals and objectives.