Defining the Cost and Determining the Value of Enterprise GIS

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This paper discussed common methods for funding municipal enterprise GIS, with a focus on the GIS O&M funding methodology utilized by King County (WA).

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Defining the Cost and Determining the Value of Enterprise GIS

  1. 1. Greg Babinski, GISP Finance & Marketing Manager King County GIS Center 201 South Jackson Street, MS: KSC-NR-0706 Seattle, WA 98104 Voice: 206-263-3753 Fax: 206-263-3145 Email: greg.babinski@metrokc.gov DEFINING THE COST AND DETERMINING THE VALUE OF ENTERPRISE GIS Abstract: Many enterprise GIS operations are expected to obtain funding directly from the departments they serve. However, end-users may question the value of GIS services or the fairness of the enterprise GIS cost allocation model. This paper describes how the King County GIS Center developed an objective funding model to finance its enterprise operations. Detailed costs are determined for each of 24 discrete enterprise GIS services. The annual cost for each GIS service is allocated to one or more communities of users. Aggregate user community costs are then allocated to each of the 30 GIS user agencies within King County. The method to determine proportional agency value within each user community is outlined. The result is a fair, objective, and non-controversial allocation of the KCGIS Center’s enterprise GIS costs. The KCGIS funding approach may benefit other city and county enterprise GIS operations when considering objective allocation of real enterprise GIS costs to end-user agencies based on actual relative value received. INTRODUCTION Enterprise city or county GIS management usually provides operational efficiency and cost sharing benefits. Maturing local government GIS operations often consolidate core enterprise GIS services in a central organization. Some local governments fund enterprise GIS operations from a single central source. This approach is simple, with low administrative overhead and strong end-user support. Many enterprise GIS operations however are expected to obtain funding from the departments they serve. This approach is not simple. End-users may question the value of GIS services or the fairness of the cost allocation model. This paper will outline the King County GIS (KCGIS) Center’s methods to determine accurate costs to provide a wide variety of individual enterprise GIS services for King County, Washington. It will also describe how KCGIS determines the value each county agency receives from individual enterprise GIS services as a means to allocate costs to GIS users. The KCGIS Center enterprise GIS funding methodology is designed to make a clear connection between the cost of individual GIS services and the value that agencies receive by using those services. This transparent approach results in an allocation of GIS costs that agencies recognize as both objective and controllable within the context of their business goals. KING COUNTY GIS CENTER The King County GIS Center is the enterprise GIS service provider for King County, Washington. The KCGIS Center is organized as an internal service fund within King County‘s government structure, responsible for providing GIS services to internal clients and external agencies. As an internal service fund, the KCGIS Center is responsible for developing its customer base and to obtain all necessary operating revenue and capital funding. The KCGIS Center has a current staff of 31 GIS professionals. Other County departments are free to establish and maintain their own department specific GIS operations. The County ordinance establishing the KCGIS Center also explicitly empowered it to provide GIS services to external customers.
  2. 2. Defining the Cost and Determining the Value of Enterprise GIS Greg Babinski Page 2 of 6 KING COUNTY GIS CENTER BUSINESS LINES The KCGIS Center provides a broad array of GIS services and products. Each of the individual services we offer is built around the concept of providing value to our clients, by using GIS more effectively and/or economically to meet their unique business needs. Our services and products are organized into three distinct but complimentary lines of business: • Enterprise Operations: Core GIS resources or services, including GIS data warehousing, system administration, and enterprise GIS data maintenance and access applications. • Matrix GIS Staffing Services: Providing dedicated GIS staff to agencies at negotiated services levels. • On-demand GIS Client Services: Providing short term or highly specialized GIS services. The current method for defining the cost and determining the value for the KCGIS Center’s Matrix GIS Staffing Services and on-demand GIS Client Services has been described previously (Babinski, 2003). This paper focuses on a refined funding methodology for core enterprise GIS services. ENTERPRISE GIS OPERATIONS FUNDING MODELS The KCGIS Center (and its predecessor entity) originated in the early 1990’s as the King County Capital GIS Project – Project Management Office. As the capital project neared completion, it was recognized that defined central enterprise GIS operation and maintenance (O&M) services would be most cost- effectively provided by a designated central organization. However, there was considerable disagreement regarding allocation of central GIS O&M costs within the County agencies that used GIS. By 1996 it was recognized that agreement was needed on a methodology to allocate the 1997 budget of $1.2 million. The County’s GIS Oversight Committee identified nine possible budget allocation scenarios: 1. Number of ArcInfo licenses in GIS user departments 2. Number of FTE’s in GIS user departments 3. Number of GIS ‘sites’ in GIS user departments 4. Equal share per all departments, including non-GIS user departments 5. Hybrid (1 and 4) 6. Number of ArcInfo licenses in GIS user departments (1), but with radical 28% budget reduction 7. Hybrid (2 and 3) 8. Hybrid (3 and 4) 9. Hybrid (6, with 28% of budget allocated equally to each GIS user department) The GIS Oversight Committee selected scenario 1, allocating a total cost of $31,486 for each of the 40 ArcInfo seats then in use within King County. Individual department costs ranged from $15,743 (two departments shared one seat) to $409,317 for the County DOT, which operated 13 seats. In 1997, the King County Auditor found that the selected GIS funding model was “…the fairest and most reasonable when compared to other cost allocation methods because it is the most easily quantifiable method for GIS usage patterns…” (Eklund, 1997, pp. 10-12). However, this funding model had a fatal flaw. Because the cost to acquire or increase GIS capability within a business unit now included not just hardware and software purchase along with annual maintenance and specialized staff training, but also a substantial share of GIS O&M costs, departments had a powerful disincentive to invest further in GIS. Indeed, some departments with marginal GIS use saw an opportunity to realize substantial cost savings, and one department did decommission its GIS capability by 1998. To try to cope with this issue, the GIS Oversight Committee for the 1998 budget year agreed that the County GIS O&M budget would be allocated to departments based on the same proportions as in 1997, despite any additional GIS software purchases. This practice of freezing allocations repeated for the
  3. 3. Defining the Cost and Determining the Value of Enterprise GIS Greg Babinski Page 3 of 6 1999 budget year as well. By 2000 however, a number of departments outside the funding model had begun to use GIS. A survey showed that GIS software seats had increased from 40 ArcInfo, to 269 ArcInfo, ArcView, and MapInfo seats. To facilitate the entry of additional agencies into the GIS funding model, central GIS management instituted a new funding model based on equal allocation of the $1.2 million budget into 269 shares. The per seat share cost declined from over $31,000 to $4,500. All agencies benefited by the new participant in the funding model, and some agencies realized additional substantial cost savings because of their small number of GIS seats. Other agencies though saw big cost increases and complained that they were being ‘penalized’ for their success implementing GIS. Many agencies still saw the $4,500 per seat cost as a disincentive. For the 2002 GIS O&M Budget, the GIS Oversight Committee made another attempt to devise a new funding model that focused on the ‘benefits’ and usage that agencies made of enterprise GIS services. The model adopted for 2002 was be based on a weighted calculation of the benefit and cost of GIS services provided to all county departments that use desktop GIS capability. Specific components that comprise this funding model include: • Core GIS data layers used by the agency • Core GIS applications used internally by the agency • Core GIS applications that support external clients of the agency • Geographic extent of GIS data needs (local service area or countywide) • Extent of GIS data criticality to agency operations • Positional accuracy requirement for GIS data • Extent of GIS integration within agency While the components that comprised this model were logical, the O&M cost of each component was difficult to compute and the relative usage of each component by agencies was based on an assigned score and therefore perceived as highly subjective. For 2003, the GIS Oversight Committee once again merely prorated GIS O&M costs to agencies based on the previous years funding model allocations. At the same time, the GIS Oversight Committee requested KCGIS Center management to propose a new funding model that correlated actual costs to actual usage, to the maximum extent possible, and that maximized actual GIS usage statistics to eliminate as much subjectivity as possible. KCGIS Center management worked with the King County Budget Office, which defined the following goals for a funding model that would be highly objective and facilitate annual adjustment of relative costs: • Establish a solid accounting of what is driving the costs by type of service provided • The [usage] measure must tie to the service and have benefit to the payer The Budget Office also provided the following general guidance: ‘While we understand your desire to reduce disincentives for the use of GIS services, it is even more important to charge equitably for services so that no fund is being charged for a service which provides no direct benefit or creates a situation in which one fund benefits another.’ During the next two years KCGIS Center management worked with its internal cost accounting methods, brainstormed how cost components tied to actual usage and value by client agencies, and most importantly, educated both traditional and new users of enterprise GIS services. Defining Enterprise GIS Operation Costs To meet its GIS client services customer-billing requirements, KCGIS instituted a project/activity based time recording system (TRS) for all employees in 2003. TRS allows actual labor costs to be determined for each of 24 discrete enterprise GIS services, as well as management and administrative services. The GIS 24 services include:
  4. 4. Defining the Cost and Determining the Value of Enterprise GIS Greg Babinski Page 4 of 6 • GIS Governance Support (Oversight Committee, GIS Technical Committee, GIS standards & best practices, and annual countywide GIS O&M plan) • GIS priority initiatives • GIS program coordination (CRM & focused marketing) • Regional GIS coordination • Spatial data warehouse management (infrastructure, content, and metadata) • Countywide GIS applications (website, utilities, back-end, front end (desktop), and front end (web)) • Data maintenance coordination (agency data coordination & Q/C), external data acquisition, and designated data layer maintenance) • Contract management • Outreach (brownbag GIS training, helpdesk, GIS day, GIS user meeting) Determining the Value of Enterprise GIS Operation Services To determine their value, a simple excel spreadsheet is used to allocate labor costs (based on current year TRS actuals modified by planned future year adjustments) for specific FTE’s to each of the 24 enterprise GIS services. Use of actual FTE labor costs, as opposed to an average FTE labor cost, ensures that each service cost reflect the variable salaries paid to provide the service. For example, higher paid GIS programmers typically support GIS applications, while lower paid GIS technicians support data maintenance or Q/C services. For each of the 24 GIS services other appropriate costs are allocated, based on FTE allocation for each service. These other costs fall into three categories: • Management & administration labor costs • Central overhead (rent, payroll & financial services, risk management, county general overhead, etc.) • All other direct costs (training, supplies, miscellaneous services, telecomm, motor pool, and all hardware & software (except spatial data warehouse)) The only non-labor costs not allocated on the basis of FTE’s are software and hardware costs directly related to the KCGIS spatial data warehouse. These costs include server and data storage hardware (including annual allocation to an equipment replacement reserve fund), backup systems, and database related software (OS, MS SQL Server, Oracle, ArcSDE, ArcIMS, etc.). These costs are allocated directly to the spatial data management service category, in addition to the labor and other costs allocated based on FTE. The result of this process is a total cost for each of the 24 enterprise GIS services. The sum of these 24 costs equals the total GIS enterprise services budget. This service level information allows both GIS Center management and the KCGIS Oversight Committee to make knowledgeable, informed business decisions about the value of each specific GIS service. Allocating Enterprise GIS Operation Costs to Users Once the total budget cost for each GIS service is determined, that cost is allocated to one or more ‘community’ of GIS users. The concept of ‘communities’ of GIS users was developed to reflect the varying business approaches and decision-making processes of users of enterprise GIS services. This concept reflects the fact that not every community values every GIS service. The four user communities are: • GIS Oversight Committee/Sponsor agencies: This community is comprised of county departments that sit on the GIS Oversight Committee and that have the greatest policy and financial interest in the direction of KCGIS. These agencies include King County’s Transportation, Natural Resources/Parks, and Permitting departments.
  5. 5. Defining the Cost and Determining the Value of Enterprise GIS Greg Babinski Page 5 of 6 • GIS Technical Committee agencies: This community is comprised of 17 county departments or divisions that have active desktop (ArcView or ArcGIS) GIS usage. These agencies each provide a representative to the GIS Technical Committee, which focuses on aligning the technical and operational details of KCGIS with the business level needs of users within their divisions. • Desktop GIS users: This community is comprised of the individual GIS desktop users within county agencies. The number of GIS users per agency is based on ‘seats’ with desktop-based software that access the KCGIS spatial data warehouse. The census of seats is based on data from the centrally managed ESRI software contract, spatial data warehouse user accounts, and software usage reported in the County’s annual GIS O&M plan. • Web-based GIS users: This community is comprised of any user in any county agency that makes any use of the KCGIS Center’s web based mapping applications. These are ArcIMS based applications, known as iMap and ParcelViewer, that provide interactive access to a variety of business focused map data views. Web-based GIS usage is based on the total number of individual iMap and ParcelViewer map ‘hits’ as recorded by King County’s Network Operations Center (NOC) using the subnet pinger feature of a web-activity monitoring product called WebTrends7. The NOC is able to report usage of iMap and ParcelViewer on a monthly basis, by IP address ranges that correspond to individual departments and agencies within King County government. A total of 32 discrete county business agencies have been identified as GIS users via this method. The cost for each GIS service is allocated to one or more communities, as appropriate. For example, the cost for Oversight Committee related GIS Governance is allocated only to the GIS Oversight Committee/Sponsor Agency community. The cost for GIS utilities and backend applications is allocated only to the GIS Technical Committee, because these relieve functions that would otherwise be performed by managers in individual desktop user departments. Spatial data warehouse costs are allocated to the Technical Committee, desktop users, and web based users, because each derives benefit from this central GIS service. The total cost for each service is allocated in proportion to the total number of ‘communities’ that benefit from the service. For example, all the cost for Oversight Committee related GIS Governance is allocated to the Oversight Committee/Sponsor community, because only this one community benefits. The cost for spatial data warehouse management however is allocated one-third each to the three communities associated with that service. Once the total cost for each service has been allocated to the appropriate communities, the total cost by community is calculated. Once again, the sum of the costs allocated to the four communities equals the total GIS enterprise services budget. Once the total cost of GIS services for each of the four communities is determined, it is a simple matter to allocate costs to the individual agency budgets that make up those communities, based on proportional usage: • GIS Oversight Committee/Sponsor agencies: This community decides the allocation among itself based its own agreement. For 2005 and 2006, the allocation will be a 2:2:1 allocation among DOT, DNRP, and Permitting. For 2006, each share will cost $45,000. • GIS Technical Committee agencies: Each of the 17 Technical Committee agencies is allocated community costs on an equal basis. For 2006, each share will cost $33,000. • Desktop GIS users: Each agency is allocated a proportion of desk top user costs proportional to the total number of desktop GIS seats within the agency. For 2006, each seat will cost $1,175. • Web-based GIS users: Each agency is allocated a proportion of web-based GIS costs proportional to the total number of web-based GIS ‘hits’ within the agency. For 2006, each ‘hit’ will cost $0.07.
  6. 6. Defining the Cost and Determining the Value of Enterprise GIS Greg Babinski Page 6 of 6 Some agencies are allocated costs for all four communities. 12 agencies are allocated costs for three communities and 13 are allocated costs only for web-based usage. Once again, the sum of the costs allocated to each of the individual agencies equals the total GIS enterprise services budget. An indication of the utility and adaptability of this cost allocation methodology occurred early in 2005 when King County began development of a new GIS-based business performance monitoring system, to be known as KingStat. KingStat will generate statistical and spatial performance data for as many as 30 specific programs in seven county departments on a weekly basis. The KCGIS Center was contracted to develop this system, with operation to begin in 2006. Development to date has been by the KCGIS Center’s client services group, funded as a normal billable client services project. Based on a projected 1.0 FTE to support KingStat in 2006, this was added as a 25th service to the KCGIS Center Enterprise Operations budget. The total cost for this new service was easily determined using the basic methodology outlined above. It was also simple to allocate the cost to a fifth community of users, KingStat agencies. As currently included in the 2006 proposed budget, total KingStat costs are allocated to each of the seven agencies on an equal basis. As the 30 individual performance indicators are determined, costs can be reallocated based on the number of performance indicators within specific departments or sub-agencies. Benefits and Results For two years now the KCGIS Center’s O&M Budget costs have been allocated to user departments based on an objective system that correlates real costs for providing specific services to user agencies based on their actual proportional usage of those services. The methodology supports informed decisions about individual GIS services, based on the real cost to provide each service. While there is still a cost to agencies to add desktop GIS capability, the per-unit cost has declined and will continue to decline as more users are added. Indeed, two new agencies have adopted desktop GIS in the past few years and the agency that dropped GIS in 1998 has since reinstituted its participation in KCGIS. The inclusion of web-based GIS users has broadened the funding base for KCGIS Enterprise Operations. It has also increased interest by management in further GIS use in departments where it was previously unknown (courts, jail, risk management, finance, etc.). The example of KingStat demonstrates the adaptability of the system to add new enterprise GIS services. The KCGIS Center O&M funding methodology has also been adopted by other central services providers within the County, most recently by the Facility Management Division to cover both development and O&M costs for a new County Real Estate Portfolio Management System. The KCGIS funding approach may benefit other city and county enterprise GIS operations when considering objective allocation of real enterprise GIS costs to end-user agencies based on actual relative value received. REFERENCES More information about King County GIS Center financials (including funding, rate setting, billing, budget detail, and financial plan) is available at: http://www.metrokc.gov/gis/kb/Content/KCGISCenter_Finances.htm. Babinski, Greg, 2003. “King County GIS: A Business-Line Approach to Enterprise GIS Finance,” in Urban and Regional Information Systems Association Proceedings. 2003. Edited by Mark J. Salling. Atlanta, GA., pp. 176-183. Eklund, Don, King County Auditor, 1997. “Management Audit: Information and Telecommunications Services,” King County Auditor’s report No. 97-10, Seattle, WA. GB: gb:kc:urisa2005:urisa2005paper(fundingmodel) October 20, 2005

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