The Business Benefits of GIS: An ROI Approach
Implementation Steps
- Getting Started
- 1. Prepare for the ROI Project
- 2. Identify Business Opportunities
- 3. Prioritize Business Benefits
- 4. Construct GIS Program
- 5. Define Project Control
- 6. Specify and Cost GIS Projects
- 7. Estimate Benefits
- 8. Create Benefits Roadmap
- 9. Calculate Financial Metrics
- 10. Build and Present Report
Reference Tools
Glossary
- Breakeven Point
- The level (or year) at which total benefits equals total costs.
- Capital expenditures (CapEx)
- Funds used by a company to acquire or upgrade physical assets such as equipment, property, buildings, etc.
- Capability Maturity Model (CMM)
- A reference model of mature practices in a specified discipline, used to assess a group's capability to perform that discipline.
- Cost-Benefit Analysis (CBA)
- The process of weighing the total expected costs against the total expected benefits of one or more actions in order to choose the best or most profitable option.
- Fixed Price
- A fixed amount, typically with numerous invoices over the time of a project delivery.
- Internal Rate of Return (IRR)
- The interest rate or discount rate that results in a net present value of zero. The return expected to be generated by the investment. Also known as the Discounted Cash Flow (DCF) rate of return.
- Key Performance Indicators (KPI)
- Financial and non-financial metrics used to quantify objectives to reflect the strategic performance of an organization. KPIs are frequently used to "value" difficult to measure activities such as the benefits of leadership development, engagement, service, and satisfaction. KPIs are typically tied to an organization’s strategy. They help an organization to measure progress towards their organizational goals, especially difficult to quantify knowledge-based activities.
- Margin
- Net operating income ÷ Sales; the lower the OpEx per dollar of sales, the higher the margin.
- Maximum Cumulative Free Cash Flow (FCF) Subsidy:
- The total amount that will need to be invested by the organization before the project starts self-funding itself and becomes total cash flow positive.
- Net Operating Income
- Income before interest and taxes and is sometimes referred to as Earnings Before Interest and Taxes (EBIT). Different than "net income". Reducing expenses & good cost control will increase net operating income.
- Net Present Value (NPV)
- The present value of the expected future cash flows minus the cost.
- Operating assets
- Cash, accounts receivable, inventory, building/plant/lab and equipment, and all other assets held for productive use in the organization; usually averaged betw. beginning and end of year. Reducing assets impacts turnover.
- Operating Expenses (OPEX)
- The on-going costs for running a product, business, or system. Operating expenses consists of salaries paid to employees, research and development costs, and other misc. charges that must be subtracted from the organization’s income. Also referenced as "Operational Expenditures".
- Opportunity Costs
- The benefits you could have received by taking an alternative action, or making a different decision, given multiple choices.
- Payback Period
- The length of time required to recover the cost of the investment.
- Point Purchase
- A type of cost that is a singular occurrence with one payment, during the budget year of a project.
- Return on Investment (ROI)
- Net operating income divided by average operating assets. Also Margin x Turnover.
- Resource Driven:
- A type of cost dictated by how much and how long the resource is used on a given project.
- Total Cost of Ownership (TCO)
- A method of analyzing the direct and indirect costs to help determine the actual cost of specific implementations. For example, with technology assets, designates the total cost of owning resources, including initial hardware and software acquisition costs, installation, hardware and software upgrades, maintenance, technical support, infrastructure, and training.
- Turnover
- Sales ÷ Average operating assets; A measure of the sales generated for each dollar invested in operating assets.
