The use of the balanced scorecard for the evaluation of Information and Communication Technology projects

Abstract

There is a large consensus among academics and practitioners that ICT investments should be carefully justified, measured and controlled. In practice, the traditional capital investment appraisal techniques (CIAT's) such as payback period or net present value are by far the most used techniques. Nevertheless, serious doubts about the fitness of these techniques in an ICT environment arise. ICT investments have special characteristics (high risks, LT-return, large proportion of intangible/hidden costs and benefits…) which makes the use of these techniques very difficult and the reliability of the outcome most uncertain. Efforts are made to find more appropriate techniques. CIAT's are adjusted so that these techniques become more reliable in an ICT environment. New justification methods/techniques are developed. However neither these adjusted techniques nor the new techniques are frequently used. This might be explained by the fact that the outcome of these techniques is difficult to interpret and to use and the fact that some significant problems (like the estimation of hidden costs) remain unsolved. Moreover, most of the new techniques are still in the conceptual phase. Despite the existence of a wealth of literature, the IS community appears to be no nearer to a solution to many problems associated with ICT appraisal. Since all techniques presented in the article have their drawbacks, it is safe to say that reliance on a sole technique may lead to sub-optimalisation or even failure. Therefore it makes sense to use a mixture of techniques, eliminating or diminishing the weaknesses of each of the techniques used. We strongly recommend a multi-layer evaluation process, or an evaluation process derived from the balanced scorecard, for the appraisal of major ICT investment projects.