Tag Archives: government as platform

The Real ROI for Government Open Data

Doug Hadden, VP Products

Make sure you calculate the Return on Investment of open data projects. Experts warn us: the open data business case is often lacking. Traditional ROI calculations are too narrow.

Traditional ROI Calculation and “Government as Platform”

A traditional calculation compares open data costs and lost revenue from selling the data relative to additional tax revenue achieved. Tim O’Reilly  coined the notion of “government as platform” where open data (such as GPS) generates significant economic development. Some, like Andrea di Maio, disagree that governments should be acting as platforms.  Yet, this is what governments do: build economic platforms such as highways and bridges.

The problem with:

$TaxRevenue > $OpenDataCost + $DataSales

is that the government organization that provides data and benefits directly from selling the data to the private sector does not directly receive the additional taxes nor can these taxes be easily directly attributed to open data.

1. Economic Development and “Government as Platform”

Open data as policy can be compared to stimulus programs. Stimulus programs can improve employment and reduce bankruptcies. This reduces social services costs:

$TaxRevenue + $SocialServicesCostAvoidance > $OpenDataCost + $DataSales

2. Freedom of Information Costs

David Eaves has pointed out that open data can reduce the costs of Freedom of Information:

So in a world without an open data portal the hypothetical cost of fulfilling these “Canadian” downloads as formal access to information requests would have been $967,184.46 in January alone. Even if I’m off by 50%, then the cost – again, just for January – would still sit at $483,592.23. Assuming this is a safe monthly average, then over the course of a year the cost savings could be around $11,606,213.52 or $5,803,106.76 – depending on how conservative you’d want to be about the assumptions.

Open data portals can eliminate the need for many Freedom of Information requests – a high cost to governments.

$TaxRevenue + $SocialServicesCostAvoidance + $FOIAvoidance 
> $OpenDataCost + $DataSales

3. Productivity

Open data shines light on the public service. Although transparency does not necessarily mean accountability in the sense of enforcement, it has the power to change behaviour. Government organizations become aware that the public is watching. Civil service behaviour changes.

$TaxRevenue + $SocialServicesCostAvoidance + $FOIAvoidance + $ImprovedProductivity 
> $OpenDataCost + $DataSales

4. Corruption

Procurement expert Jorge Claro estimates that procurement corruption costs up to 20% for governments in developing nations. That’s why countries like Timor-Leste open budget and procurement data: to improve oversight by vendors and civil society to reduce corruption. (This also reduces the cost for auditors when the press is examining all large government purchases.)

$TaxRevenue + $SocialServicesCostAvoidance + $FOIAvoidance + $ImprovedProductivity + $ReducedCorruption

> $OpenDataCost + $DataSales

5. Trust

There remains a distrust of government in many countries. Not just in developing countries: distrust of government is a powerful narrative in American politics. The distrust in government can boil over to protest (Tea Party, Arab Spring, Occupy Wall Street etc.) This costs governments – although the release of data might give cause for protest in some cases!

$TaxRevenue + $SocialServicesCostAvoidance + $FOIAvoidance + $ImprovedProductivity + $ReducedCorruption +$ReducedProtests

> $OpenDataCost + $DataSales + $IncreasedProtests

6. Tax Compliance

Developed and developing nations alike struggle with tax avoidance. This is especially rampant when citizens believe that governments are wasting tax money. This is often made acute because of the lack of open data. There are frequent studies that show a significant delta between how governments spend and what citizens think governments are spending. In particular: foreign aid and crime. One can make the argument that Scandinavians are less concerned about high tax rates than Americans because they see value.

$TaxRevenue + $ReducedTaxAvoidance $SocialServicesCostAvoidance + $FOIAvoidance + $ImprovedProductivity + $ReducedCorruption +$ReducedProtests

> $OpenDataCost + $DataSales + $IncreasedProtests

7. Reduced Perceived Business and Donor Risk

Transparency is fundamental in many governance valuations used by the World Bank World Governance indicators (WGI) and the Millennium Challenge Corporation (MCC). Transparency indicators used to demonstrate reduced business risk and help generate donor funds in developing countries include Open Budget Index for open budgets and Revenue Watch Index for revenue transparency from extractive industries. International transparency standards include the Extractive Industries Transparency Initiative (EITI) and the International Aid Transparency Initiative (IATI). Public Expenditure and Financial Accountability (PEFA) assessments are gaining widespread use by donors in making funding decisions. Transparency is a key element for 6 measurements in the PEFA Performance Measurement Framework:


B. KEY CROSS-CUTTING ISSUES: Comprehensiveness and Transparency
PI-5 Classification of the budget
PI-6 Comprehensiveness of information included in budget documentation
PI-7 Extent of unreported government operations
PI-8 Transparency of inter-governmental fiscal relations
PI-9 Oversight of aggregate fiscal risk from other public sector entities.
PI-10 Public access to key fiscal information

Transparency can reduce perceived business and donor investment risk in developing countries. This increases taxes, improves outcomes and ultimately improves credit ratings.


8. It’s a Network

ROI in the physical world is a diminishing returns calculation. Each new market for toothpaste increases costs. The virtual world is one of increasing returns. Each new chunk of open data adds value to previous chunks of open data. And the costs to collect and maintain open data goes down because the infrastructure scales. (That’s why Amazon can provide such value for the Elastic Cloud.)

∑($TaxRevenue + $ReducedTaxAvoidance $SocialServicesCostAvoidance + $FOIAvoidance + $ImprovedProductivity + $ReducedCorruption +$ReducedProtests)↑increasingreturns

> ($OpenDataCost + $DataSales + $IncreasedProtests)↓reducing costs


The ROI calculation is a bit mangled here. Yet, there is a compelling value proposition for government organizations to take the open data journey. The calculus depends on the country situation – in some cases open data can pay for itself thanks to reduced corruption or protest.

Why the jump in interest? In one quarter, FreeBalance presentation jumps from 733 to 1776 views

By James Elrick, FreeBalance

FreeBalance uses a balanced scorecard methodology that aligns customer measurements with financial, internal process and learning metrics. The balanced scorecard is evaluated quarterly and presented as part of the President’s Report to the Board of Directors.

As part of the Marketing team, I assemble our numbers for balanced scorecard using website statistics, Twitter, and more, including the number of views our white papers and presentations on Scribd and SlideShare gather. 

The presentations and white papers have proved popular, all are consistently up in numbers last quarter, but a few made notable gains, including an ICGFM presentation titled “Government Performance Management 2.0” at the 2009 ICGFM Winter Conference. I’ll write about the other documents that jumped in number of views at a later date.

This presentation delivered by Doug Hadden, VP Products at FreeBalance jumped from 733 views in the 2nd quarter to 1776 views in the 3rd quarter.

So why the jump? Why the major interest? You tell me because in the first quarter of 2011 it was at 594. It’s now at 1776 and growing.

Have a read and submit a comment at the bottom of this page. We’re curious to know.

The IMF, OECD and World Bank: Should their research be released for free?

Carlos Lipari, FreeBalance Washington

(editors note: like many businesses, FreeBalance leverages economic data to better understand what works in public financial management.)

Google and Facebook are outstanding examples of how companies providing “free” services can change society. Thanks to them, access to information and networking has become easier than ever.

Could we imagine what would Google be like if it had decided to attempt any expansion by billing internet users for its current services? Or how successful Facebook would be if it had chosen to ask its members for membership fees? We all know that free access was vital to the success of these two outstanding companies.

International organizations such as the IMF, OECD or the World Bank conduct research. This research is mostly focused on social, economic and development indicators and is regularly released on their official websites.

Even though they have at their disposal multi-million dollar budgets financed directly or indirectly financed by tax payers all over the world (the IMF alone expects to spend next year 985 million dollars in administrative costs), their reports are often sold, limiting access from the general population, businesses and institutions.

As it is known, downloading data from the internet has virtually no cost to suppliers (the organizations). Even so, these international organizations chose to impose an “extra tax” on society by having reports being sold at prices that inhibit many all over the world from reading them.

Why is research, subsidized in the first place by our own taxpayers’ money, being provided virtually exclusively to a restricted number of individuals and institutions?

Should we not have these international organizations and agencies giving an example to society of how important it is to avoid information asymmetry? How can we teach economics at business schools where the assumption is accessibility to effective data, when institutions such as the IMF or the OECD are the first ones failing to comply?

Free access would not substantially increase the financial burden on these institutions. Yet this would improve global awareness, increase public discussion, and allow new ideas to be produced and innovation to take place.

(Editors note: a loss of calculable but minimal revenue in return for incalculable economic benefits as described by Tim O’Reilly’s concept of government as platform.)

Instead of a few thousand readers (that bottom line provide a marginal contribution to the overall budget of these public organizations), these institutions could benefit society by allowing their reports to be red by millions of people all over the world. After all, information is power and we, taxpayers, primary sponsors of these international organizations, should be entitled to access. And multiply the economic potential of this information.

Government 2.0 and Innovation

Doug Hadden, VP Products

What exactly is “government innovation’? Perhaps, like my presentation last year pointed out about “government performance”, many may see this as an oxymoron. Nada Teofilovic argues against the assumption that  “bureaucratic administration lacks the prerequisites for innovation, namely creative thinking, idea experimentation and inventiveness.”

Innovation is an underlying theme for my upcoming presentation on Government 2.0.

Ms. Teofilovic describes  innovation using the Government of Canada as a case study:

In response to a range of economic, political and ideological demands, the structures and processes of governance are changing and modernizing. The traditional public service is developing creative ways to address fiscal restraints and citizen demands for efficient service delivery; conventional, process-oriented public administration is giving way to results-focused public management; and federal departments are collaborating and working horizontally to overcome the hegemony of central agencies. In view of these developments, innovation is becoming a reality in government.

Government 2.0 support government as an economic innovation incubator and as services modernization.

Innovation is alive and well in government and will be further transformed thanks to Government 2.0, as described in Steven Johnson’s  Where Good Ideas Come From: The Natural History of Innovation

Economic Innovator

Tim O’Reilly of O’Reilly Media, who invented the term “Web 2.0″, is a strong advocate of “government as platform“:

government is, at bottom, a mechanism for collective action. We band together, make laws, pay taxes, and build the institutions of government to manage problems that are too large for us individually and whose solution is in our common interest.

There are many who resist this notion of government as a “technology platform” or that “open data” can generate economic value. These are a bit hard to prove using legacy measurement tools. Nevertheless, there is compelling evidence of “government as platform” in the analogue world – the Internet, GPS, road and rails systems.

As Mr. O’Reilly sees it:

Government 2.0, then, is the use of technology—especially the collaborative technologies at the heart of Web 2.0—to better solve collective problems at a city, state, national, and international level.

Services Modernization

Governments are striving for services innovation. Reform of government to provide a better value to citizens has become a major political theme for the past 3 decades, according to Dr. Elaine Kamarack.

Government 2.0 promises to extend the value of citizen and business services beyond traditional e-government. E-government has focused primarily on computerizing service delivery and supporting transactions. Process-centric services. Structural. Not the services that can be enabled through collaboration, as I’ve described in a white paper about Knowledge Management 2.0 and Government 2.0.

Government 2.0 offers improved effectiveness in internal collaboration that can result in improved services.

Government application categories include:

  • Internal: internal by governments
  • External: external to government with government involvement
  • Structural: follow government structure and mandate
  • Social: enable collaboration

Our framework suggests that there are three classes of applications:

  • Back-office: operational budget, financial and civil service management-transaction management
  • E-Government: exposing government information and transactions
  • Government 2.0: social networking whether exclusively internal or collaborating externally

Therefore, Government 2.0 has the potential to extend services innovation from back-office and e-government functions. And, it has the potential to provide innovation separate from structural applications.