k.fedra 2003 1 env-e-city wp 8, t8.3: business model (updates, june 2003) ddr. kurt fedra ess gmbh,...

K.Fedra 20031

ENV-e-CITYENV-e-CITY

WP 8, T8.3: WP 8, T8.3: Business ModelBusiness Model

(updates, June 2003)(updates, June 2003)

ENV-e-CITYENV-e-CITY

WP 8, T8.3: WP 8, T8.3: Business ModelBusiness Model

(updates, June 2003)(updates, June 2003)

DDr. Kurt Fedra ESS GmbH, [email protected] http://www.ess.co.at

Environmental Software & Services A-2352 Gumpoldskirchen

DDr. Kurt Fedra ESS GmbH, [email protected] http://www.ess.co.at

Environmental Software & Services A-2352 Gumpoldskirchen

K.Fedra 20032

WP 8: Business modelsWP 8: Business modelsWP 8: Business modelsWP 8: Business modelsThe business model will be based upon a The business model will be based upon a

two-level architecture two-level architecture Basic servicesBasic services

1.1. non-profit operation (does not mean free of non-profit operation (does not mean free of charge - subscriptions ?)charge - subscriptions ?)

2.2. open interfaces to value-added service open interfaces to value-added service providers providers (within consortium ?)(within consortium ?)

– market-driven developmentmarket-driven development– usage feesusage fees , subscriptions ?

• open interface to additional basic services open interface to additional basic services linked from other organisationslinked from other organisations

The business model will be based upon a The business model will be based upon a two-level architecture two-level architecture

Basic servicesBasic services1.1. non-profit operation (does not mean free of non-profit operation (does not mean free of

charge - subscriptions ?)charge - subscriptions ?)2.2. open interfaces to value-added service open interfaces to value-added service

providers providers (within consortium ?)(within consortium ?)– market-driven developmentmarket-driven development– usage feesusage fees , subscriptions ?

• open interface to additional basic services open interface to additional basic services linked from other organisationslinked from other organisations

K.Fedra 20033

From the TA:From the TA:From the TA:From the TA:

Pricing module: for every information and service provided, there will be a pricing module plus an exploitation platform, provided as an infrastructure for major data owners outside the consortium that would like to have an electronic way of selling info – is this still true ?

DO WE HAVE ANY MAJOR DATA OWNERS OUTSIDE THE CONSOTRIUM BY NOW ?

Pricing module: for every information and service provided, there will be a pricing module plus an exploitation platform, provided as an infrastructure for major data owners outside the consortium that would like to have an electronic way of selling info – is this still true ?

DO WE HAVE ANY MAJOR DATA OWNERS OUTSIDE THE CONSOTRIUM BY NOW ?

K.Fedra 20034

Business modelBusiness modelBusiness modelBusiness model

Objectives:• Break even (for a supporting

activity by an institution that has a related mandate)

• Make profit (through a commercial entity) – is there a commercial entity ?

Objectives:• Break even (for a supporting

activity by an institution that has a related mandate)

• Make profit (through a commercial entity) – is there a commercial entity ?

K.Fedra 20035


Revenues:

1. Usage fees, subscriptions

2. Funding, sponsorships3. Indirect benefits (matches

with existing mandates, advertising)

Revenues:

1. Usage fees, subscriptions

2. Funding, sponsorships3. Indirect benefits (matches

with existing mandates, advertising)

K.Fedra 20036


Costs (after the EU project):1. Development (European coverage)

2. Operation:1. Technical infrastructure

2. Maintenance

3. Content management

4. Administration

Costs (after the EU project):1. Development (European coverage)

2. Operation:1. Technical infrastructure

2. Maintenance

3. Content management

4. Administration

K.Fedra 20037


Costs (annual, 4 year write-off)1. Development 1252. Extended EU coverage 1503. Operation:

1. Technical infrastructure 252. Maintenance 1203. Content management 2404. Administration 40

TOTAL ANNUAL COST 700K




K.Fedra 20038








K.Fedra 20039


Revenues: brokerage (selling third party information)

Value of information ?

1. Market prices (GIS, meteo data)

2. Opportunity costs

BUT: EeC does NOT OWN that data, only a small % fee seems possible

Revenues: brokerage (selling third party information)

Value of information ?

1. Market prices (GIS, meteo data)

2. Opportunity costs

BUT: EeC does NOT OWN that data, only a small % fee seems possible

K.Fedra 200310


Revenues:Data/Services must be• Complete:

– High coverage and resolution– Up to date– Integrated ??

• High quality/reliability• UNIQUE ???to be of commercial value – NOT YET.

Revenues:Data/Services must be• Complete:

– High coverage and resolution– Up to date– Integrated ??

• High quality/reliability• UNIQUE ???to be of commercial value – NOT YET.

K.Fedra 200311


The raw material: DATASupplied by third parties:

– Access (timing, formats, on-line ?)– Cost– Reliability– Exclusivity

BUT WE ONLY OFFER META-DATA OR FREE SERVICES NOW ?

The raw material: DATASupplied by third parties:

– Access (timing, formats, on-line ?)– Cost– Reliability– Exclusivity

BUT WE ONLY OFFER META-DATA OR FREE SERVICES NOW ?

K.Fedra 200312


Brokerage of third part content or services:

• WHAT DOES ENV-e-CITY OFFER ?

• WHY SELL THROUGH EeC ?

• ADDED VALUE GENERATED ?

• WHAT % is realistic ??

Brokerage of third part content or services:





K.Fedra 200313


Revenues (technically):1. Micro-payments for individual

data sets of services2. Annual subscriptions for unlimited

access (different bundles)3. Annual subscriptions for tailored

services (ASP, subscription bundles for different users)

Revenues (technically):1. Micro-payments for individual

data sets of services2. Annual subscriptions for unlimited

access (different bundles)3. Annual subscriptions for tailored

services (ASP, subscription bundles for different users)

K.Fedra 200314

Micro-payments per item:Micro-payments per item:Micro-payments per item:Micro-payments per item:

Value of brokerage or re-selling is a small percentage of the basic value or turnover (a few %)

Expected total turnover ?Assuming the value of an average

transaction is X, we would need to have

700,000/X “sales” per year

Value of brokerage or re-selling is a small percentage of the basic value or turnover (a few %)

Expected total turnover ?Assuming the value of an average

transaction is X, we would need to have

700,000/X “sales” per year

K.Fedra 200315


Unit cost: Transactions:

1 700,000

10 70,000

100 7,000

IS THIS PLAUSIBLE ??

Unit cost: Transactions:

1 700,000

10 70,000

100 7,000

IS THIS PLAUSIBLE ??

K.Fedra 200316


HOWEVER:

These revenues are GROSS;

What is the NET part that would belong to an EeC operator ? 10-50% ??

HOWEVER:

These revenues are GROSS;

What is the NET part that would belong to an EeC operator ? 10-50% ??

K.Fedra 200317


Data requirements to estimate possible revenues:

1. Unit cost of service

2. Market size and share (expected number of sales)

3. Net portion (%) for EeC

Data requirements to estimate possible revenues:

1. Unit cost of service

2. Market size and share (expected number of sales)

3. Net portion (%) for EeC

K.Fedra 200318

Business modelBusiness modelBusiness modelBusiness modelService: Cost: Transactions: Revenue: Net revenue for EeC

LOH1 10 100 1,000 LOH2 20 10 200LOH3 60 50 3,000IER3 2.5 20 50IER4 2.0 30 50 2,625IER5 2.0 30 50IER6 50 10 500 IER7 40 5 200IER8 40 5 200ESS3 30,000 5 150,000 7,500GSUb 500 50 25,000 12,500

TOTAL ANNUAL NET INCOME 22,625

THIS AMOUNTS TO 7% OF OPTIMISTIC COSTS.

Service: Cost: Transactions: Revenue: Net revenue for EeC

LOH1 10 100 1,000 LOH2 20 10 200LOH3 60 50 3,000IER3 2.5 20 50IER4 2.0 30 50 2,625IER5 2.0 30 50IER6 50 10 500 IER7 40 5 200IER8 40 5 200ESS3 30,000 5 150,000 7,500GSUb 500 50 25,000 12,500

TOTAL ANNUAL NET INCOME 22,625

THIS AMOUNTS TO 7% OF OPTIMISTIC COSTS.

K.Fedra 200319


High-value ASP:

subscription for institutions, cities

Services would need to be customized to be valuable

Customization increases cost of development or support

BUT: COSTS ARE EXTERNAL WITH THE SERVICE PROVIDERS

High-value ASP:

subscription for institutions, cities

Services would need to be customized to be valuable

Customization increases cost of development or support

BUT: COSTS ARE EXTERNAL WITH THE SERVICE PROVIDERS

K.Fedra 200320


Value added customised ASP and third party services:





Value added customised ASP and third party services:





K.Fedra 200321

Market size:Market size:Market size:Market size:

Cities > 100,000

Current EU: 264

New countries: 537

Europe, Russia 152

TOTAL: 953

Cities > 100,000

Current EU: 264

New countries: 537

Europe, Russia 152

TOTAL: 953

K.Fedra 200322


Cities > 100,000

TOTAL: 953

5% (48) 15.0K

10% (95) 7.5K

720,000 == break even

BUT: do we offer something for cities ?

BUT: only a small % accrues to EeC

Cities > 100,000

TOTAL: 953

5% (48) 15.0K

10% (95) 7.5K

720,000 == break even

BUT: do we offer something for cities ?

BUT: only a small % accrues to EeC

K.Fedra 200323


Cities > 100,000

TOTAL: 953

BUT this implies

• Support of MANY national languages and thus high development and support costs

Cities > 100,000

TOTAL: 953

BUT this implies

• Support of MANY national languages and thus high development and support costs

K.Fedra 200330


Conclusion:We can NOT sell primary information (we

don’t own/generate any data of economic value!)

We can only sell • Information packaging and distribution

services – low revenues, uneconomic ?

• Added value through integration and complex analysis – WHICH SERVICES DO OFFER THAT ?

Conclusion:We can NOT sell primary information (we

don’t own/generate any data of economic value!)

We can only sell • Information packaging and distribution

services – low revenues, uneconomic ?

• Added value through integration and complex analysis – WHICH SERVICES DO OFFER THAT ?

K.Fedra 200331


Conclusion:IN ANY CASE, It may be difficult to

generate sufficient revenues from the END USERS of environmental information – expectation: it’s free !

It may be more promising to generate revenues from the SUPPLIERS of environmental information who have a mandate and obligation to distribute.

BUT: domain structure does not support that e.g., for cities ?

Conclusion:IN ANY CASE, It may be difficult to

generate sufficient revenues from the END USERS of environmental information – expectation: it’s free !

It may be more promising to generate revenues from the SUPPLIERS of environmental information who have a mandate and obligation to distribute.

BUT: domain structure does not support that e.g., for cities ?

K.Fedra 200332


Conclusion:Best estimates:1. Capital requirement of 1.5 to 2.5 M over

the first four years2. Annual shortfall for continuing operation

after development for complete EU coverage) from

0.0 break even ! - -250,000 Return on investment: negative.

Conclusion:Best estimates:1. Capital requirement of 1.5 to 2.5 M over

the first four years2. Annual shortfall for continuing operation

after development for complete EU coverage) from

0.0 break even ! - -250,000 Return on investment: negative.

K.Fedra 200333

Open questions:Open questions:Open questions:Open questions:

1. Continuation model – any ideas, commitments ?

2. WHO is ENV-e-CITY after December 31, 2003 ??

3. Contracts with suppliers (LOH, FMI)4. Objective for Deliverable:

break even ??

5. Check data on Services ?6. Individual exploitation issues ??

1. Continuation model – any ideas, commitments ?

2. WHO is ENV-e-CITY after December 31, 2003 ??

3. Contracts with suppliers (LOH, FMI)4. Objective for Deliverable:

break even ??

5. Check data on Services ?6. Individual exploitation issues ??

K.Fedra 200334

Open questions:Open questions:Open questions:Open questions:

Commercial entity1. Cost of incorporation (10-50K)2. Capitalisation (1-2M – IPO ??)3. Distribution of shares4. Distribution of revenues

1. By shares ?2. By services used ?

5. Contractual arrangements – who pays ?

Commercial entity1. Cost of incorporation (10-50K)2. Capitalisation (1-2M – IPO ??)3. Distribution of shares4. Distribution of revenues

1. By shares ?2. By services used ?

5. Contractual arrangements – who pays ?

k.fedra 2003 1 env-e-city wp 8, t8.3: business model (updates, june 2003) ddr. kurt fedra ess gmbh,...

Documents

additional basic services

business model revenues

business model objectives

business model updates

business model costs

administration slide

profit operation

business models