November 01, 2013

Economic value of open data estimated at $3 trillion

annually
Open data has been gathering momentum among governments ever since United
States Federal Government data was placed in the public domain.  The principle of
free and open access to government geospatial data has been adopted by many
governments including US Federal, Canada, Japan, South Africa, Brazil, California
state and counties, and by the City of Vancouver and other cities.  G8 leaders
(Canada, France, Germany, Italy, Japan, Russia, United Kingdom, United States,
and the European Union) recently signed a charter on open data.  But being able to
access prepared maps and other derived material is just a first step, governments
need to provide access to raw geospatial data in commonly used Web-friendly
formats.  In May 2013, President Obama issued an Executive Order making open
and machine readable the new default for federal government information in the
United States. 
A major motivation for open data has been government transparency.  But there is
also a strong belief that open data contributes to the economy.  I blogged earlier
about a study by a team at Cambridge University commissioned by the Treasury that
found that making all Ordnance Survey data (geospatial data)  free would cost the
government £12m but bring a net gain of £156m.  Australia and New Zealand have
commissioned studies of the contribution of spatial data to the national economy that
have concluded that with appropriate government policies the contribution to the
GDP, estimated to be on the order of 1%, could be doubled.
McKinsey Global Institute (MGI) have just published a study that seeks to quantify
the value of open data by examining applications in seven fields of the global
economy: education, transportation, consumer products, electricity, oil and gas,
health care, and consumer finance.  Their research found that seven sectors alone
would generate more than $3 trillion a year in additional value as a result of open
data.

For each of the sectors they looked at, MGI identified ways that open data could
create economic value and identified potential barriers to adoption.
Electricity sector

For example in the electricity sector, MGI identified five levers for using open data to
improve efficiency across the electricity value chain:
1.improved generation investment
2.efficient generation operations
3.optimized investment in transmission and distribution
4.efficient transmission and distribution operations
5.optimized retail and consumption
By using publicly available data such as siting applications, resource planning
documents, and regulatory filings, utilities can streamline the permitting process for
new power projects.
ƒƒ 

By sharing benchmarking data about processes such as maintenance routines and

equipment utilization, power companies can optimize the performance of generating
operations.
Open data can help optimize investments in transmission and distribution.
Sharing data gathered via “smart grid” technologies can help identify efficiency
opportunities in transmission and distribution operations.
Open data makes it possible to compare products and services so that residential
and business users make better decisions about which appliances, equipment an
electric service to use.
Electric power usage data combined with community-wide data can show customers
how their energy use compares with neighbors and peer organizations.
MGI estimates that open data has the potential to add $340 billion to $580 billion of
value annually across the electricity value chain.
Economic potential
MGI found that the benefits of open data has a large potential economic value
including increased efficiency, new products and services, and a consumer surplus
(cost savings, convenience, better products).  The concluded that it benefits
consumers more than businesses, by creating price and product transparency as
well as new channels to provide feedback that improves the quality of goods and
services (including public ones).
But open data involves business risks, including the potential release of negative
information; the potential consumer backlash from aggressive open-data use; and
the inadvertent release of confidential information.
The barriers to wider use of open data include privacy issues and the need for legal
and regulatory frameworks.  To address these issues MGI recommends that
governments need to play a central role by developing and implementing policies to
mitigate consumer and business concerns about the misuse of open data and to
help set standards that will allow the potential economic and social benefits to
materialize.