Gaining Business Value from IT Investments

Abstract

The evaluation of information technology (IT) investments has been of concern to researchers and industrial management for many years. Much of the discussion has been concerned with techniques: the difficulty in measuring the less tangible benefits, the problems surrounding the application of the most commonly used method, cost-benefit analysis and the search for a better approach. This chapter reviews the progress made in these areas. The need for a flexible evaluation method that includes not only the financial but also the more strategic benefits, and that can be applied to the diversity of IT investment decisions is highlighted. The impact of the context in which IT evaluation takes place-the business context, organizational culture, and management style-on an organization's criteria for effectiveness and its attitude towards evaluation is examined. It is also recognized that benefits will not accrue automatically; the IT system provides the opportunity for changing business methods and processes, but it is these changes that will lead to the benefits, not the system itself. Thus the business changes and the delivery of the benefits need to be proactively managed; a model for managing this process is proposed. If investments in IT are to result in enhanced business value, the focus of IT evaluation must change-from a “once-off” exercise, undertaken as a means of gaining approval for the investment, to seeing IT evaluation as part of a process which identifies the benefits, assigns responsibility for delivering them, plans for the organizational change which will be required, and regularly monitors the achievement. In this chapter, we consider the entire process of managing the IT investment: the initial justification, including specifying and measuring the benefits, making the investment decision and, continuing after implementation, managing the realization of the expected benefits.