Open data and economic growth: which link, if any?

One of our Facebook followers, Paul Beentjes, posted on our page:

You hear this a lot these days: “Open data is a driver of economic growth”. But how can you explain this?

True, the link is not always evident, but OGP believes it is there.

Open (data) for business

At OGP when we say open data, we think of governments and public institutions opening up their data. Examples are geographical information, statistics, weather data, data from publicly-funded research projects, and digitised books from libraries. We think economic gains will happen around the world along three main channels:

Business innovation: Broader and more rapid access to scientific papers and data will make it easier for researchers and businesses to build on the findings of public-funded research. This will help boost a country or region’s innovation capacity in fields like pharmaceutics and renewables. Taking the example of the European Union, it will give that region a better return on its €87 billion (USD $106 billion) annual investment in R&D.

Business creation: A new market for public service information will thrive if data is available and products/services are developed by businesses by adding value to the original public service data provided by a government. Businesses, in other words, can build new innovative applications and eServices based on those data that the government can make available with minimal cost to itself.

Business efficiency: Businesses (and public bodies) could benefit from more open data by gaining more precise and complete insight into customers’ (and citizens’) preferences and needs, thus becoming more efficient in tackling those needs and at the same time contributing to a smart growth.

Some country-specific examples

Australia: a study conducted by the Australian government of the aggregate economic impacts of spatial data on the national economy suggested that open spatial data and high precision positioning systems can increase productivity by billions of Australian dollars across a range of industry sectors. For instance spatial information industry revenue in 2006-07 could have added cumulative gain of AUD 6.43-12.57 billion (USD $6.7-13 billion) , equivalent to 0.6-1.2% of GDP.

Denmark: a study (in Danish) on Quantifying the value of open government data showed that banking, insurance and energy indicated that better access to public sector information could be of significant value, with the energy industry estimating that in conjunction with the construction industry the potential national market for energy improvements drawing on various government data sources is €0.54-2.7 billion (USD $0.55-3.3 billion).

European Commission: a recent European Commission Communication on Open Data predicts that overall economic gains from opening up public data could amount to €40 billion (USD $48.7 billion) a year in the EU.

Ireland: a study by TASC has shown that charging for data does not lead to cost recovery, that the country’s FOI law is not “expensive” as such, and that the estimated value of the business potential of reusing public data is between €83-399 million (USD $101-486 million) per annum.

Kenya: Kenya became Africa’s first country to digitise its information as part of a wide-scale open data initiative. The initiative is yielding a secondary economy with a range of apps that are being created to help people access, manage and comment on government information.

Spain: a government-commissioned study found in-country business volume directly associated with open data released by national government was €550-650 million (USD $669-791 million) and between 5,000 and 5,500 employees were directly assigned to activities related to re-using information.

US: opening its weather data led to gross receipts by commercial weather industry of USD $400-700 million a year with 400 firms employing 4,000 people. By comparison, Europe had a similar sized economy but with largely closed weather data, and had only 30 firms with 300 employees and receipts of USD $30m-50m a year.

Can you share examples from other countries or regions? Do you agree that open public data is a driver of economic growth where you live?

Image credit: Building an open source business by opensourceway via Flickr

http://www.kroupys.com Paul Beentjes

Hi, thanks for dedicating this blogpost to my question

I understand the three main channels: business innovation (making R&D research more accessible), business creation (businesses which add value to the original public service data) and business efficiency (becoming more efficient through customer insights).

I certainly agree with “business innovation” and “business efficieny”, but I would like to dive deeper in “business creation”.

On a small scale, this is what I see right now:

1. Government starts an ‘open data’ challenge and opens data;
2. Developers use open data to develop new applications;
3. The newly created applications can be downloaded for free on the web (because nobody is going to pay for a government app..).

In this last case, government benefits because they don’t have to invest in expensive applications. Of course, this is great: a huge cost-cut! And this is what government needs in these days of economic crisis.

Hence, the businesses/developers are not bringing in money, so how does this relate to economic growth? I do understand that they create a lot of value, but the applications are free (yes, most of them also without advertisements).

Maybe this is just the way to start? And the predictions in the blogpost are longterm. But right now, I don’t really see the benefits for business creation, apart from their societal value added and their huge contribution to government’s cost reduction. What do you think?

I also would like to invite you to contribute on this topic via: http://www.kroupys.com/12958/How-can-open-data-be-a-driver-of-economic-growth/

I just launched this website and working hard to build a community for social knowledge sharing. Thanks.

Greets, Paul.

http://www.opengovpartnership.org Blog Editor

Dear Paul,

I agree that we are still in the early days of this process, but we still see a lot of potential there. The steps that you describe at points 2 and 3 of your reply are certainly correct, but are just one of the many possible ways in which businesses can use the data. Businesses and private companies can use the freely available data to develop applications, products and services with a commercial value. In other words, they can sell what they have developed on the basis of open data. Public data also enable social enterprises to start and reinforces local economies and small businesses. Businesses can also use the data to better understand their market and customers.

To see in more detail how this logic can work out, you can have a look for instance at the very recent Deloitte’s Open data: Driving growth, ingenuity and innovation http://www.webanalisten.nl/wp-content/uploads/2012/06/uk-insights-deloitte-analytics-open-data-june-2012.pdf. There are many other serious studies out there where everything is explained, such as the European Commission’s 2000 paper “Commercial exploitation of Europe’s public sector information” http://ec.europa.eu/information_society/policy/psi/docs/pdfs/pira_study/2000_1558_en.pdf.

Thank you for sharing your views. We will take a look at your website and good luck with it!

http://www.ausgoal.gov.au Baden Appleyard

Hi,

Thanks for the post. You may be interested in a more recent economic study done in Australia. It was conducted by the Australian National Data Service (ANDS), whom are strategic partners with the Australian Governments’ Open Access and Licensing Framework (AusGOAL). In summary, the study found that for every dollar spent/forgone by government in opening up data, 5 dollars is returned to the economy. In the case of geospatial data, that return is in the order of 1 to 18-26 dollars. These figures are not theoretical, rather they are based on actual departmental figures and comparisons. The study and a summary presentation can be found here: http://ands.org.au/resource/cost-benefit.html

Kind regards,

b

http://www.opengovpartnership.org Blog Editor

Hi Baden – Thanks for your comment. That sounds like a great return on investment.

Would you like to write a guest blog post explaining more? If yes, please send it via How To Submit A Guest Blog Post to OGP or email it along with a short biog and photo of yourself. If you have any images or video that can accompany the post please share them with us.

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