Economical value and business models for Open Government Data

The Communication of 2011 of the European Commission to the European Parliament

“Open data an engine for innovation, growth and transparent governance” has an emblematic

35 http://opendefinition.org/licenses/.

36 Read more about the Open Definition at: http://opendefinition.org/od/.

37 http://en.ilmatieteenlaitos.fi/open–data–licence.

38 http://www.europeana.eu/portal/.

39 M. Palmirani, M. Mockus, Open Government Data Licensing Framework [in:] Electronic Government and the Information Systems Perspective, A. Kő, E. Francesconi (eds.) Fourth International Conference, EGOVIS 2014, Valencia, Spain, September 1–4, 2015, Proceedings, Springer, 2015.

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and challenging heading: “Turning public data to business opportunities: new services and economic growth”⁴⁰.

As referred to above, the PSI is the single largest source of information in Europe. The Open Data Package included evidence in a careful and detailed survey in order to show the economic opportunities arising from the exploitation of Government Data.

The European Commission believes that “overall economic gains from opening up this resource could amount to € 40 billion a year in the EU. Opening up public data will also foster the participation of citizens in political and social life and contribute to policy areas such as the environment”.⁴¹ This information has a significant – currently untapped – potential for re–use in new products and services and for efficiency gains in administrations.

A recent study carried on by Graham Vickery⁴² and commissioned by the EC estimates the total public sector information related market across the EU in the year 2008 at Euro 28 billion and in 2010 at 32 billion Euro. The study indicates that the overall economic gains from further opening up public sector information by allowing easy access are at around 40 billion Euro a year for the EU27. The aggregate direct and indirect economic impacts from PSI applications and use across the whole EU27 economy would be in the order of Euro 140 billion annually. As to the Vickery study, the average growth rate in PSI–related markets is 7%. The total direct and indirect economic impact of PSI reuse is from 70 up to 140 billion of Euro.

Finally, the welfare gains from to marginal cost pricing of the PSI will be 40 billion Euro.

Hal Varian, Professor of Information Sciences, Business, and Economics at the University of California at Berkeley and Chief Economist, Google maintains that “the ability to take data – to be able to understand it, to process it, to extract value from it, to visualize it, to communicate it – that’s going to be a hugely important skill in the next decades, not only at the professional level but even at the educational level for elementary school kids, for high school kids, for college kids. Because now we really do have essentially free and ubiquitous data. So the complimentary scarce factor is the ability to understand that data and extract value from it.”⁴³

The main issue arising from the revision of the Directive and affecting the economic value of datasets is the principles governing charging regulated in Article 6. The Directive in Article

40 http://eur–lex.europa.eu/legal–content/EN/TXT/?uri=CELEX:52011DC0882.

41 Communication on Open Data,

http://ec.europa.eu/information_society/policy/psi/docs/pdfs/directive_proposal/2012/open_data.pdf.

42 Search on the web: Review of recent studies on PSI re–use and related market developments, G. Vickery, August 2011.

43 Hal Varian on how the Web challenges managers

http://www.mckinsey.com/client_service/business_technology

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6.1 lays down a charge, applying to all, for public sector data re–use in the EU, except the situations specified in Article 6.2: “public sector bodies may charge no more than the marginal cost of reproducing, providing and disseminating the documents”. Nevertheless, article 6.2 of the Directive expressed the possibility “to sell” open government data reflecting “marginal costs incurred for their reproduction, provision and dissemination” along with “a reasonable return on investment”.

The policy of lowering charges has been supported by researches and by the outcome of public consultations conducted by the Commission⁴⁴. A series of case studies on public sector bodies that moved from full cost recovery to a marginal costs system show that the move not only increased re–use, but also benefited the public sector bodies concerned⁴⁵.

Heli Koski⁴⁶ from the Research Institute of the Finnish Economy has recently carried on a study about marginal cost pricing of PSI⁴⁷. Assessing the performance of 14,000 firms in the architectural, engineering and related technical consultancy sectors, located in 15 different countries, the study analyses the effect of maximum marginal cost pricing for geographical PSI on the firms’ growth performance during the years 2000–2007. The conclusions that Koski has reached are strongly supporting free data re–use.

This “reasonable return on investment” provision in the PSI Directive opens up an unexpected scenario for a business model based on the free circulation of knowledge not reflecting the OGD concept of datasets available free of charge⁴⁸.

However, the scientific research on business model (BM) of OGD is still scarce⁴⁹. Therefore, the network economy is still facing a lack of studies that analyse and describe a suitable BM archetype for OGD.

44Commission staff working document SEC(2011) 1552 final; https://ec.europa.eu/digital–

agenda/en/news/commission–notice–guidelines–recommended–standard–licences–datasets–and–charging–re–

use.

45 Study on ‘Pricing of Public Sector Information’, Deloitte consulting and others, June 2011.

46 Does Marginal Cost Pricing of Public Sector Information Spur Firm Growth?’, Heli Koski, The Research Institute of the Finnish Economy. http://www.etla.fi/files/2696_no_1260.pdf.

47 About Principles governing charging see further on paragraph 3.2

48 Monica Palmirani, Michele Martoni, Dino Girardi – Open Government Data Beyond Transparency in: Andrea K˝o Enrico Francesconi (Eds.) Electronic Government and the Information Systems Perspective Third

International Conference, EGOVIS 2014 Munich, Germany, September 1–3, 2014 – Proceedings.

49 Eight Business Model Archetypes for PSI Re–Use by Osella –

Ferro,www.w3.org/2013/04/odw/odw13_submission_27.pdf; Open growth Stimulating demand for open data in the UK – by Deloitte’s and The Open Data Institute,

http://www2.deloitte.com/content/dam/Deloitte/uk/Documents/deloitte–analytics/open–growth.pdf; Open data business models, by Jeni Tennison, www.theodi.org; D. Girardi, M. Palmirani, Legal Issues and Economic Exploitation of Open Government Data, “Jusletter IT” 15. Mai 2013; C. Bonina, New business models and the value of open data: definitions, challenges and opportunities, http://www.nemode.ac.uk/wp–

content/uploads/2013/11/Bonina–Opendata–Report–FINAL.pdf; Magalhaes, Roseira, Manley, Business models for open government data, opendata500.thegovlab.org/files/Business_Models_for_OGD.pdf.

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In our opinion, an appropriate and applicable BM archetype for Open Data should distinguish two different models: one for Enterprises and NPO’s and one designed for Public Sector Bodies. Considering a BM archetype for Enterprises it basically requires to describe differences and peculiarities between those using OGD as core business and those using OGD as a complementary business. Nevertheless, in our opinion it is of fundamental importance to develop a sustainable BM tailored for Public Sector Bodies.

Thinking from a research point of view, the analysis for developing a sustainable Business Model archetype for OGD should consider for instance solutions regarding: the analysis of the possible re–use and exploitation of available datasets on a large scale not only for political purposes (transparency and accountability); the implementation of back up option in case of a luck of delivering of data; the analysis of the quality of data (i.e. punctual, timely, complete, statistics); the accessibility for the end consumer; personal data and copyright issues; the consistency with the original purposes that have enabled the opening of the datasets; the benefits and the value creation for the Public Sector Bodies and the whole society.

The BM should primarily consider the following budgeting components:

– the expenditures related with the operational costs for collection, production, digitalization, manipulation, processing, storage, and dissemination of the datasets;

– consequently, the budgeting components associated with the expected revenue streams for the Public Sector Bodies like charges and tax revenue;

– additionally, the so–called indirect benefits and the social benefits arising for the exploitation of OGD, whenever they can be monetized.

Finally, the BM should describe two archetypes designed for public sector bodies that are required to “charge PSI at marginal cost” and one for those who are “required to generate revenue”. In respect of the latter model, we should recall Article 6 “principles governing charging, that at point 2 reads: “paragraph 1 shall not apply to the following:

(a) public sector bodies that are required to generate revenue to cover a substantial part of their costs relating to the performance of their public tasks;

(b) by way of exception, documents for which the public sector body concerned is required to generate sufficient revenue to cover a substantial part of the costs relating to their collection, production, reproduction and dissemination. Those requirements shall be defined by law or by other binding rules in the Member State. In the absence of such rules, the requirements shall be defined in accordance with common administrative practice in the Member State;

(c) libraries, including university libraries, museums and archives. Finally, “Where charges are made by the public sector bodies referred to in point (c) of paragraph 2, the total

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income from supplying and allowing re–use of documents over the appropriate accounting period shall not exceed the cost of collection, production, reproduction, dissemination, preservation and rights clearance, together with a reasonable return on investment”.