Identifying the cost implications of manufacturing IT/IS investments

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Summary form only given as follows. As organizational investments in information technology (IT) and information systems (IS) continue to grow, significant amounts of capital need justifying. However, many companies are increasingly reporting their inability to justify their investment in IT/IS because of the nature of costs and benefits associated with its implementation. The reason for this is because many organizational budgeting processes rely on financially orientated appraisal techniques as an integral part of the decision making process. These accountancy frameworks are often used to assess the 'bottomline' financial impact of an investment, by setting tangible project costs against those quantifiable benefits and savings predicted to be achievable. However, traditional appraisal techniques are considered to be no longer appropriate in justifying investments in IT/IS because of the nature of intangible benefits, together with the complexity of direct and indirect cost implications. Hence, the predictive value in using many traditional investment appraisal techniques is increasingly being questioned. The authors in this paper identify the full range of cost implications associated with the adoption of IT/IS, with a particular focus on manufacturing resource planning (MRPII). These cost implications are then developed into a taxonomy of direct and indirect costs that clearly need consideration during the justification process.