Geographic Information Systems: An Introduction, 3rd Edition

17.7 Financial Evaluations—Cost-Benefit Analyses

A prerequisite for obtaining funding for GIS should be that the proposals for introduction be based on solid plans and financial evaluations. It is important to know what can be achieved through GIS so that the right decisions can be reached as to what functions should be performed and how profit can be achieved. Cost-benefit analyses ensure that projects can be selected that can show profitability. User surveys and (possibly) pilot projects provide the basis for such analyses.

The purpose of financial evaluations is primarily to:

• Improve the basis for decision
• Increase profit
• Increase economy consciousness
• Improve planning

The following factors, which are important in making decisions, are affected by cost-benefit analyses:

• Ranking of prospective projects (GIS versus other systems)
• Revealing the need for further consideration/planning
• Considering the adaptation of the GIS project to increase profitability
• Ranking of solutions internally with the project
• Deciding whether projects be carried out or not

17.7.1 Theoretical basis

In business, costing tends to focus on the improved internal efficiency and increased productivity resulting from a new technology. This is usually expressed in terms of profitability. Government agencies evaluating the change to new technologies often take socioeconomic factors into consideration. This mandates a broad view that includes both internal efficiency and external effectiveness. Socioeconomic ...