In these tough fiscal times, all agencies are going to be focusing on doing more with less. How does one get more done with less budget and staff? Consider turning to Analytics.
The consulting firm Nucleus Research has been looking at the Return on Investment (ROI) for various types of IT projects. According to David O’Connell, Principal Analyst at Nucleus Research, “projects involving analytics have some of the highest ROIs of any projects studied.”
Nucleus Research recently studied an analytics project IBM performed at DC Water, the local water authority for Washington, DC. In 2008, IBM began a first of a kind project using advanced analytics to create a smarter water system that analyzes data on valves, storm drains, service vehicles, truck routes and more to optimize its infrastructure. With some pipes and other assets that date to the Civil War, maintaining high levels of service while replacing older infrastructure is an ongoing challenge.
The project has resulted in the following benefits from a combination of IBM Asset Management and Analytics technology and services:
- Field Services trucks can be automatically routed to optimize work management. This results in more work orders being completed each week, as well as up to 20 percent reduction of fuel costs related to fewer truck rolls and reduced “windshield” time.
- Revenue loss from defective or degrading water meters allowed recapture of $3.8 M because the analytics behind the advanced metering infrastructure delivers more timely identification and replacement of those meters. Revenue was also recaptured because DC Water can now identify and bill locations where there is unmetered water usage.
- DC Water has been able to identify assets most critically in need of repair using predictive analytics, so aging infrastructure replacement programs can be more accurately scheduled, preventing costly incidents that reduce service quality, such as outages and water main breaks. This reduces both maintenance labor costs and call center costs associated with emergency incidents.
Nucleus Research reported in its case study that the DC Water project resulted in $19.677 M of benefits over 3 years with a cost of $883 K, giving an ROI of 629%.
In 2010, Nucleus Research studied a number of other public sector analytics projects. The results from these projects are shown in the chart below. On average, the analytics projects have resulted in an ROI of almost 600%! This means that over 3 years, the projects have returned benefits 6 times the original cost of the projects. The payback period has been less than a year in all cases. This is important to government agencies because it means you can see cost savings in the same fiscal year that you invest in an analytics project.
According to David O’Connell, Principal Analyst at Nucleus Research, “When government entities adopt analytics, returns are high for two reasons. First, waste such as leaky water mains, defective meters, or benefits overpayments can be identified and eliminated. Second, by making information more readily available, employees spend less time looking around for information and more time getting their jobs done.” O’Connell went on to say, “Another improvement is better use of workers’ time. The more an organization knows about the public it serves, their needs, and the means of delivering service, the smarter managers’ decisions are when they hand out workers’ assignments.”
Has your agency implemented any analytics projects? What’s been your experience?
Don’t feel comfortable sharing publicly? I’d be happy to hear your thoughts directly as well ([email protected]).
Director, Analytics Solution Center
 ROI = (net savings year 1 + net savings year 2 + net savings year 3)/3 * 100
Poll of the Week
Could your inbox use a little more awesome?
Sign up to get a daily dose of awesome gov-focused resources, trainings, blogs and articles to help you do you job better.