Evaluating the Return on Investment for Infrastructure Projects with Geographic Analysis

Table of Contents

• Remarkable GIS-powered projects
• An empirical evaluation of the return on investment 
• Identifying problems geographic analysis can solve  
• Cost categories  
• Criteria to assess the benefits 
• Calculating the returns 

Remarkable GIS-powered projects

The London Crossrail Project, built using geographic information systems, used a combination of surface and underground rail to relieve congestion for millions of commuters. It serves 40 stations. It involved building eight subsurface stations, two above-ground ones, and 42 km of tunnels. 

Planners used GIS in the initial stage of the high-speed rail in California to analyze geographical data, which would have been impossible without those systems. It included data on land use, terrain features, and population density. They overlaid these data layers and found the best route orientations for the high-speed rail corridor. The data-driven approach helped optimize the route for accessibility and efficiency and minimize environmental impact. 

An empirical evaluation of the return on investment

More and more companies are using GIS software for infrastructure projects. This software’s market size is expected to grow by more than 15% a year. It was valued at $8.35 billion in 2022 and is predicted to reach %29.6 billion by 2031. 

Evaluating the ROI involves asking a few specific questions. Once you establish how much the software will cost, you need to ask if it’s worth the money, time, and effort. You must also consider how the benefits compare with other possible projects and when the benefits will materialize. 

GIS technology can alleviate many tasks that involve geographic location, information, and spatial relationships. Each potential GIS application requires specific data, based on which the GIS programs would perform more effective or efficient operations.  

Identifying problems geographic analysis can solve

Another aspect of evaluating returns involves identifying a problem and how GIS can solve it. A major one is overpopulation in cities. Mid-2023, 4.6 billion people lived in cities, or 57% of the world’s population. By 2050, the number is expected to double. Engineers can use GIS to build infrastructure to accommodate rising populations. 

Increasing construction activities in North America are hiking demand for such software. It is used in this sector to identify suitable construction site locations and assess projects’ environmental impact. According to reports, the North American construction industry is worth almost $2.6 trillion in 2024. 

One then collects data for these applications and ranks it in order of priority. After compiling and feeding data into the database, they test the GIS applications and revise them as needed. Then, they deploy the successful ones for the company’s ongoing operations. Finally, they calculate the costs of upgrading or developing GIS technology in the organization. 

Cost categories

When evaluating returns, one must consider the following cost categories:

• Startup costs
• Application and data development 
• Hardware and software costs 
• Installation, testing, training
• Ongoing operation

Criteria to assess the benefits

The potential benefits are reduced expenses, higher revenue, and cost avoidance. GIS technology could reduce staff resources needed to carry out functions and operations. These costs are rising. The employment cost index in the US increased by 1.2% in the first quarter of 2024, and wages rose by 1.1%, up 4.4% from the previous year. 

Increased efficiency and customer satisfaction can lead to higher revenue for a company. It’s estimated that customer retention rates rise by 5% for every 1% customer satisfaction increase. 

Finally, GIS technology can help reduce the costs of mistakes and errors. These can be very high: for example, imagine an emergency response team not finding a cut-off valve. GIS applications link relevant data to locations through the geographic database quickly. Quicker access to relevant information lets people make smarter business decisions.

Examples of benefits

Geographic analysis can save time, leading to greater efficiency and annual cost savings. Reduced errors also accrue as cost savings over time. A reduced number of wrong initial responses results in fewer repairs needed. In a more extreme example, avoiding a million-dollar lawsuit once every decade accrues as an annual benefit of $100,000.

Calculating the returns

Finally, one subtracts the annual cost of implementing the GIS tools from the annual benefits (both estimated and assessed). The result is the annual net benefit. Realizing the benefits of GIS applications takes at least a year. They take time to implement. Training staff and changing current infrastructure operations take time as well.