Information technology value model and its optimal application in IT-based firms

Abstract

This paper proposes the developed business performance based on the IT value model, which offers superior performance with profit maximisation due to increased revenue and reduced costs. The model stands on the resource-based view (RBV) theory, the partial adjustment valuation (PAV) theory, and the systems engineering approach. The model consists of firm performance, firm core competence, firm capability, and information technology resource subsystems. Each subsystem has inputs, namely the regular capital (K), the regular labour expense (L), and IT capital (I) where the output is the gross revenue (y). The data was collected from Telkom, Indosat, and XL, which are telco firms in Indonesia. The IT value model optimisation testing displays that the model is able to provide superior performance with increased revenue at a lower cost.