The economic contribution of Ordnance Survey - Channels

We have estimated the value provided directly by OS to downstream distribution companies (ie, VARs, Superplan Agents and Retailers). Interviews were conducted covering all three channels and the annual reports of a number of VARs were studied. As much of the financial information gathered was commercially confidential, it is only appropriate to quote the total figures in this public report.

Each VAR is different, but, for the purpose of this study, a representative sample has been used. A small number of VARs have been interviewed and a sample of their annual reports has been analysed.

VARs use OS data as a primary input into the production of some of their products and services. In general, they earn no commission from OS for the promotion and sales of its products. The only value-added for VARs is from any margin that is earned on products that use OS data as a base. To estimate the value of OS products and services to these companies, OXERA has examined the annual reports of a select number of VARs. The margin that VARs are likely to make on the sale of OS-related products and services has been estimated, and this has been applied to the cost to the VARs of purchasing these products. Using this approach, OXERA estimates that the value of OS products and services to the VARs in 1996 was £0.48m.

Many VARs are also System Suppliers, and it has proved impossible to determine what proportion of revenues can be attributed to the two activities. There is, therefore, some double-counting, with the OS-related value attributed to some VARs being accounted for in the analysis of value-added by System Suppliers (see section 7.8).

Superplan Agents are retailers that are used by OS to promote and sell the range of Superplan products and services, although they also usually sell a wide range of products and services not related to OS. The analysis is again based on an assumption about the margin that these agents earn on the sale of OS Superplan products and services. This approach results in an estimate of the value of OS to the Superplan Agents of £1.8m in 1996.

It should be noted that there are other potential synergies to be gained from the sale of Superplan products and services that are not quantified here. In particular, there is invariably scope for selling additional, non-OS, products to Superplan customers. These spillover effects have not been quantified.

Map Wholesalers and Retailers are crucial distribution channels for OS products, particularly in the consumer market. Walkers, referencers, drivers, and others pursuing leisure activities are able to purchase OS products only through Retailers. The market is dominated by the sale of paper products. This is one area where OS's dominance as the national mapping agency is not quite so evident since, in parts of this market, competitors offer similar products. Many of these are, however, based on OS data.

OXERA estimates that OS contributes £4.1m to this distribution channel. This estimate is based on an analysis of the cost of OS products and services to Wholesalers and Retailers, and an assessment of the margins earned by the distributors on these products.