Financial Issues

Overview

The economic factors of digitalThe economic factors of digital

AdvantagesAdvantages

DisadvantagesDisadvantages

Cost factorsCost factors

Planning expenditurePlanning expenditure

Opportunity costsOpportunity costs

Tendering and procuringTendering and procuring

Sustaining the funding stream – revenue Sustaining the funding stream – revenue modelsmodels

The economic factor

Effective utilisation of resources in developing Effective utilisation of resources in developing digital content and establishing digital digital content and establishing digital collections:collections:

Start up costs of creating or purchasing digital contentStart up costs of creating or purchasing digital content

Implementation costs for establishing access Implementation costs for establishing access

Implicit costs in managing and maintaining digital Implicit costs in managing and maintaining digital resources in the futureresources in the future

How do we define value and return on How do we define value and return on investment (ROI) in this environment?investment (ROI) in this environment?

Who will pay, how will they pay and what will Who will pay, how will they pay and what will they buy?they buy?

Benefits of digital resources

immediate access to high demand items

ability to reinstate withdrawn materials

potential to display materials in inaccessible formats e.g. glass plates or art works

’virtual reunification’

enhance digital images

integration into teaching/learning materials

enhanced finding aids through added metadata/descriptions

reducing the burden or cost of delivery

to enhance the prestige of the organisation

the potential for presenting a critical mass of materials

Economic advantages of digital information

The communication effectThe communication effect

AccessAccess

FlexibilityFlexibility

E-commerceE-commerce

Production costs - usually lowerProduction costs - usually lower

Volume enhancesVolume enhances

Enhanced service availability - the 24/7 cultureEnhanced service availability - the 24/7 culture

Economic disadvantages of digital information

Fair pricingFair pricing

Copyright and intellectual propertyCopyright and intellectual property

Access versus ownershipAccess versus ownership

Infrastructure - high maintenanceInfrastructure - high maintenance

AuthenticityAuthenticity

Preservation - the digital dark age?Preservation - the digital dark age?

Cost factors

Digitization cost – key factors:

Nature of the original item to be digitised

Digitization processes possible

Information, content and delivery objectives

More human intervention in any digitization process means higher costs.

10% Preparation20% Digitization30% Metadata creation40% System development and delivery mechanisms

A model for cost versus benefits

Deegan and Tanner (2002) Digital Futures: Deegan and Tanner (2002) Digital Futures: Strategies for the Information AgeStrategies for the Information Age

Planning your expenditure

Make sure you know what you want to do - clear goals

Initial costing at bid stage: important to be realistic, even if it makes the project look expensive

Cost EVERYTHING - even if you don’t always pay for everything - overheads, staff time, Web connection etc

Anticipate the on-going costs for sustaining the resource 2-5 years into the future - think sustainability

Katz’s Law: the cost of maintaining a database is equal to the cost of creation

Planning your expenditure

Work out your core costs by estimating known commitments

Consider a very small pilot to work out core costs that you do not know or have trouble measuring

Many projects do not come with overheads - thus are a net drain on institutional resources

Remember people will be your key cost driver not necessarily technology

No-one comes free (even volunteers)

Opportunity costs

Consider the opportunity cost of success!

The opportunity costs are the strategic costs implicit in directing resources to an activity (X), therefore reducing finite resources that may be expended upon some other strategic activity (Y).

The foregone benefits of the strategy Y constitute the opportunity cost of strategy X.

Tendering rules (EU)

~15% of the EU’s GDP is represented by public sector spending - therefore should be spent in the EU.Tender notices have to be published in the Official Journal of the European Communities (OJEC).The threshold levels are set in Euro (€220,000), and equates to ~£150,000 for goods and serviceswww.tenders.co.uk

Formal tendering rules

Contracts may not be artificially split to make them fall below the threshold.European criteria for awarding tenders:

The lowest price only The most economically advantageous tender – using various criteria such as price, period for completion, running costs, profitability, technical merit.

If used, must state “most economically advantageous” method at point of tender advertising.

Buying big technology

Create a decision analysis matrixTalk to users of existing systems and servicesVendor assessment - will they be there in 5 years?

Try to never:be the 1st customer to buy the product!buy a proprietary product that will not allow open systems access and interoperability!

Decision matrix

Sustainability Planning

What is sustainability?

Big Picture:

Meeting the needs of the present without

compromising the ability of future generations to

meet their own needs.

For projects sustainability is:

A product or process that can be maintained

over a long period of time, especially after grant

monies disappear, that is beneficial to

stakeholders & the host institution.

Sustainability Planning

What to sustain?

Products

Services

Processes

Expertise and knowledge

People

To sustain any of these requires focus and clear

objectives.

It also requires a cool head to decide

what to not sustain!

Sustaining - Revenue models

Advertising model: supported by advertising revenue

Infomediary model: user data as revenue

Merchant model: traditional retail model

Affiliate model: financial incentives to affiliated partner sites

Community model: users invest in a site (e.g. contribution of

content, money, time, hosting)

Subscription model: users pay for access to “value added”

content (e.g. high resolution files, complete reports not summaries)

Utility model: metered usage or pay-per-view