Impacts of open data: business

The following post is an excerpt from my thesis entitled Linked open data for public sector information.
There is no direct return on investment on open data. As a matter of fact, economic impact of releasing open data is difficult, if not impossible, to anticipate and quantify beforehand, prior to the publication date. The causal chain connecting open data as a cause with its economic effects is particularly unrealiable. However, it seems to be feasible to recount the effect on business after the moment data is made accessible. For instance, an analyst may consider the number of uses by businesses comparing how it changed before and after the data was opened [1]. Accordingly, the economic value of open data can be rather considered as indirect.
Given the way open data affects economy, estimates of the market size for public sector data are based on methodologies that are insufficient to come up with accurate numbers. For example, most of the studies evaluating economic impact of opening up data in the public sector were based on extrapolations from research conducted on a smaller scale. In his study for the European Commission, Graham Vickery assessed the aggregate volume of the direct and indirect economic impacts of opening public sector information in the EU member countries to be EUR 140 billion annually [2, p. 4]. In contrast with this number, estimates of the direct revenue based on selling public sector information were much lower, and Vickery quantified it to EUR 1.4 billion [Ibid., p. 5].
Open data opens new opportunities for private businesses. It allows new business models to appear, including crowdsourced administration of public property by services such as FixMyStreet. Another example of a business that is based on public sector data is BrightScope that delivers financial information for investors. An area that may benefit the most from availability of public sector data are location-based services. The EU Directive on the reuse of public sector information was reported to have the strongest impact on the growth of the market of geospatial data that is essential for such services to be operated [Ibid., p. 20].
The opportunities offered by open data are particularly important for small and medium enterprises. These businesses are a prime target for reuse of open data since they usually cannot afford to pay the charges to public bodies for data that is not open. Stimulation of economic activities may result in new jobs being created. Availability of public data may give rise to a whole new sector of “independent advisers”, that add value to the data by making it more digestible to citizens [3]. More businesses eventually generate more tax revenue, which ultimately promises to return the investment in open data back to the budget from which the public sector is funded.
Open data fosters product and service innovation. It affects especially the areas of forecasting, prediction, and optimization. For example, European Union makes its official documents available in all languages of the EU member states. This multilingual corpus is used as a training set for machine translation algorithms in Google Translate leading to an improvement in quality of its service [4].
At the same time, open data disrupts existing business models that are based on exclusive arrangements for data provision by public sector bodies to companies. This is how businesses that thrive on barriers to access to public data are made obsolete. Open data weeds out companies that hoard public data for their benefit and establishes an environment, in which all businesses have an equal opportunity to reuse public sector data for their commercial interests.

References

1. ORAM, Andy. European Union starts project about economic effects of open government data. O’Reilly Radar [online]. June 11^th, 2010 [cit. 2012-04-09]. Available from WWW: http://radar.oreilly.com/2010/06/european-union-starts-project.html
2. VICKERY, Graham. Review of the recent developments on PSI re-use and related market developments [online]. Final version. Paris, 2011 [cit. 2012-04-19]. Available from WWW: http://ec.europa.eu/information_society/policy/psi/docs/pdfs/report/psi_final_version_formatted.docx
3. HIRST, Tony. So what's open government data good for? Government and “independent advisers”, maybe? [online]. July 7^th, 2011 [cit. 2012-04-07]. Available from WWW: http://blog.ouseful.info/2011/07/07/so-whats-open-government-data-good-for-government-maybe/
4. DIETRICH, Daniel; GRAY, Jonathan; MCNAMARA, Tim; POIKOLA, Antti; POLLOCK, Rufus; TAIT, Julian; ZIJLSTRA, Ton. The open data handbook [online]. 2010 — 2012 [cit. 2012-03-09]. Available from WWW: http://opendatahandbook.org/