IT Investment Evaluation Research Articles

The role of evaluation in SMMEs’ strategic decision-making on new technology adoption

ABSTRACTThe complex nature of small business operations has led to adopting IT as a tool to enhance the productivity, efficiency and growth of Small, Medium and Micro Enterprise (SMMEs). Despite the increased spend on IT, many SMMEs do not understand the importance of IT investment evaluation, which adversely impacts their technology and decision-making ability to realise benefits. The study explores the role evaluation plays in SMMEs’ decision-making to adopt the technology, and the ability to evaluate technology potentials thereof. Case studies were conducted, data collected analysed using the thematic analysis, with hermeneutics employed to derive deeper and richer meanings from the findings. SMMEs often base their decision to adopt the technology on speculative and empirical knowledge from personal judgement, communication preferences and individual experiences. Implications of TE potential may lead to the adoption of inappropriate or non-adoption of the technology, with adverse effects on business sustainability.

Information Technology Investment: In Search of The Closest Accurate Method

In order to improve performance, company allocates significant amount of expenditures for IT investment. Regardless IT productivity paradox phenomenon, the companies certainly expect investment that have been made able to gain various benefits to the company. This research aims to compare five method of IT investment evaluation and find the closest accurate method according to selected literatures. Analysis was done by comparing: i) tangible and intangible ii) advantage iii) disadvantage iv) object and v) how to use. The result showed that Return on Investment (ROI), and Cost Benefit Analysis (CBA) focus on tangible. While Multi Criteria Decision Making (MCDM) focus on intangible. The method must justify tangible and intangible to get accurate result. Information Economics (IE) and Real Options Analysis (ROA) focus on both tangible and intangible. From both methods, IE was the closest accurate method because it could calculate tangible, quasi-tangible, and intangible, and also calculates the value of an investment based on enhanced ROI, business factors, and risk criteria.

Advancing Organizational Alignment Decisions

In this article, a theory-driven approach for managing the alignment process between business and IT by making high-quality IT investment decisions is developed. The aim is to increase the understanding of the dimensions of the alignment problem and to offer some support in solving it. The conceptualization of the alignment issue is searched from the structural alignment theory, arising from and applied in psychology. After the theoretical considerations, the article adopts a multidimensional and constructive approach to the alignment problem and looks for answers to the question: How should organizations align business and IT, or at least, how to support the business and IT alignment decisions? As a result, a theoretically sound framework originating from the alignment problem is proposed for the evaluation of IT investments, a methodology based on that framework, and a concrete investment support system to help decision makers. The applicability of the approach is evaluated in the context of an actual case in the finance sector.

No time to waste: the role of timing and complementarity of alignment practices in creating business value in IT projects

Despite significant research progress, alignment-related issues are among the top concerns of executives. Previous studies mostly focus on a company-wide strategic level of alignment; while this ‘top-down’ view has benefits, it largely ignores the operational practices that help achieve alignment in IT projects as well as the impact that timing and complementarity of practices have on achieving alignment. In our research we apply four alignment practices – communication, shared understanding, management commitment and IT investment evaluation – to individual IT projects rather than at a company level; specifically, we look at the role of timing and complementarity for these alignment practices throughout different project phases. A detailed analysis of six IT projects carried out at three companies in the telecommunications industry reveals that IT projects creating higher business value employ all four alignment practices immediately from the start. No project was able to recover from failing to establish these four alignment practices in the first phase. While supporting the importance of complementarity of alignment practices, our findings also add the importance of the earliness of this complementarity.

Applying real options to IT investment evaluation: The case of radio frequency identification (RFID) technology in the supply chain

Due to the high levels of flexibility and uncertainty associated with the deployment of RFID technology in the supply chain (e.g. alternative investment implementations based on the number of RFID-enabled processes or the different supply-chain nodes involved—e.g. stores, warehouses etc.), Real Options analysis becomes strongly suitable. In contrast to the few previous works that demonstrate the suitability of Real Options analysis for RFID investments through hypothetical numerical examples, this paper employs empirical data from a real case firm: 3E Coca-Cola HBC Greece. The proposed model for the case application addresses the simultaneous optimization of RFID investment timing and scale, in the face of (a) substantial uncertainty regarding the products circulated from and among the firm’s premises and (b) largely irreversible investment costs associated with RFID adoption (hardware infrastructure, tags, training and maintenance, etc.). A unique feature of our proposed modelling framework, with implications for a range of other supply chain information technologies with characteristics similar to RFID, is the explicit determination of the volatility of cash flows/revenues that will accrue from adopting the RFID technology from the volatility of RFID tagged items that are circulated from and among the business nodes. This alleviates the need to approximate or estimate the state-variable volatility (undeniably the most difficult parameter to infer in real options applications) through inaccurate or other questionable methods that have been employed in similar case studies in the literature.

Towards a B2B E-Commerce Evaluation Management Model to Assess Organizational Drivers in Hospitals

Effective utilization of business-to-business (B2B) electronic commerce (e-commerce) in hospitals may lead to many benefits such as increased accessibility to healthcare providers, improved process efficiency, enhanced quality of healthcare services, increased responses to changes, decreased scheduling conflicts, and reduction in administrative costs. However, many hospitals have found that they have not yet fully reaped the expected benefits from their B2B e-commerce investments. Despite this, there has not been much discussion in the literature with respect to the relationship between the organizational drivers on B2B e-commerce benefits for hospitals. Hence, a mixed-method of case study and survey was conducted to examine the relationships between B2B e-commerce benefits, IT evaluation resources allocation, IT investment evaluation methodologies, IT maturity, and user information requirements determination process. A B2B e-commerce evaluation management model was developed to test these relationships. The results provided empirical evidence in support of our proposed model and revealed that hospitals’ IT evaluation resources allocation practices mediated the relationship of IT investment evaluation methodologies, IT maturity, and user information requirements determination process with B2B e-commerce benefits. The results also showed that the level of IT maturity had a significant impact on the adoption of IT investment evaluation methodologies.

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The Fit Between Organizational B2B E-commerce Policy, IT Maturity and Evaluation Practices on B2B E-commerce Performance in Australian Healthcare Organizations

Healthcare organizations have started to make use of business-to-business (B2B) e-commerce technologies in overcoming many of the challenges they face. However, healthcare executives have found it increasingly difficult to justify rising IT expenditures and are often under pressure to find a way to evaluate the contribution of their B2B e-commerce investments to business performance, as well as to find reliable ways to ensure that the business benefits from the investments are actually realized. Despite high expectations for the value of IT in healthcare, its adoption remains poorly understood and is also a relatively under-researched area. Hence, a case study approach was conducted: (1) to examine the relationships between organizational B2B e-commerce policy and strategy, organizational IT maturity, and evaluation practices and their effects on B2B e-commerce performance among Australian healthcare organizations; and (2) to develop a framework which can assist healthcare organizations in realizing B2B e-commerce benefits and satisfaction within the Australian healthcare organizations. A key contribution of this study is the development of a B2B e-commerce benefits and satisfaction framework which can be used by healthcare executives in examining the relationships between organizational B2B e-commerce policy and strategy, organizational IT maturity, IT evaluation practices, and e-commerce benefits and satisfaction. Key words: E-commerce, healthcare, IT maturity, IT investment evaluation, benefits.

Developing a B2B web site effectiveness model for SMEs

PurposeThe study examines SMEs' investment in B2B web sites and the relationship between organizational drivers such as adoption readiness and constraints and evaluation of investments. We investigate how these drivers influence the perception of B2B web site benefits and the effect a great understanding of issues has on stakeholder satisfaction in the investment.Design/methodology/approachA quantitative approach is used to test the hypotheses, which are developed from the literature. Following a pilot study, a survey of 1,000 Australian SMEs with B2B web sites is used to collect the data, which is analyzed using structural equation modeling techniques.FindingsFindings reveal the mediating relationships between organizational drivers and their influence on SMEs' perceptions of benefits and stakeholder satisfaction and support the B2B web site evaluation effectiveness model. Further insights show that SMEs do not understand the complementary nature of the organizational drivers that support strategic alignment and therefore fail to realize benefits from their web sites.Research limitationsLimitations of the research are noted and discussed with regard to constructs and the views of survey respondents.Practical implicationsResults suggest that SMEs consider reallocation and/or prioritization of resources and business objectives in order to improve their IT investment evaluation practices. This would have a direct impact on the level of IT benefits realized, and ultimately affect the degree of stakeholder satisfaction with B2B web site adoption.Originality/valueA key contribution is the development of a B2B web site evaluation effectiveness model that supports greater understanding of how SMEs can gain more value from their B2B web sites.

Key performance indicators for IS/IT indirect human costs in the service sector

Information systems (IS) expenditure is necessary for gaining competitive advantage in the service sector and in certain cases mandatory for the effective delivery of services. Many formal processes for IS budgeting and evaluation do not take into consideration the vast amount spent on indirect human costs (IHCs) of IS implementation. The paper reviews existing work on the evaluation of IT investments and identifies a major problem in IS evaluation to be the identification of IHCs. The authors build on the theory of IHCs drivers by proposing key performance indicators (KPIs) that facilitate transparency and better management of these costs. They describe the context and propose a framework, using three cases from the service sector, namely health, financial and retail industries, where expenditures on IS have significantly increased in the past decade.

地方自治体における行政評価とＩＴ投資評価について:電子調達システムの開発・運用に関して

地方自治体における行政評価とＩＴ投資評価について:電子調達システムの開発・運用に関して

Evaluating Information Technology Investments - A Survey of Kenyan Commercial Banks

This study attempts to provide empirical evidence on the current state of practice in Kenyan banking institutions in evaluating IT investments ex ante. Results of the survey show that the most popular investment appraisal techniques used in such evaluation in Kenyan banks are cost-benefit analysis, technical arguments, risk analysis, competition, payback period and return on investment, while the least popular are the Internal Rate of Return, computer-based techniques and Net Present Value. The fundamental conclusion of this research is that in the banking industry, the level of usage of sophisticated techniques that integrate financial and strategic analysis to appraise IT investment is low compared to the usage of “traditional” appraisal techniques that focus on the financial return of an investment. Results of this study will help to establish banking industry-wide benchmarks and best practices in IT investment evaluation, thereby assisting IT executives to make more informed decisions for future investments.

Realising B2B e-commerce benefits: the link with IT maturity, evaluation practices, and B2BEC adoption readiness

Actual realisation of business-to-business electronic commerce (B2B e-commerce) benefits from IT investments has been a critical issue for large organisations. However, relatively little research has been undertaken to determine the drivers for realising B2B e-commerce benefits within these organisations. A survey research was conducted to examine the relationships between B2B e-commerce benefits, IT investment evaluation methodologies (IEM), IT benefit realisation processes (BRP), B2B e-commerce adoption readiness, and IT maturity in large Australian organisations. An IT investment management model was developed to test these relationships. The results had empirically validated the model and indicate that a higher level of BRP adoption and increased level of B2B e-commerce adoption readiness had a significant direct relationship with B2B e-commerce benefits. In addition, the level of B2B e-commerce adoption readiness, and the level of IEM and BRP adoption were significantly influenced by the level of IT maturity. However, the use of IEM alone had only an indirect positive influence on B2B e-commerce benefits through the higher level of BRP adoption and increased level of B2B e-commerce adoption readiness.

Diretrizes para a avaliação de investimentos em TI

The impact of information technology, IT, investment on business was discussed from economic and management standpoints in an evaluation based upon a review of literature and empirical and technical management surveys. Factors and techniques used as a means by those responsible for organizational IT investments were identified as guidelines for decisions to maximize possibilities for management of sustainable competitive advantages. Finally, future research lines for evaluation of IT investments were also identified.

A Study of Planning and Implementation Stages in Electronic Commerce Adoption and Evaluation: The Case of Australian SMEs

This research examines and explores the electronic commerce adoption and evaluation issues and practices of Australian SMEs during the planning and implementation stages. The results indicate d that most SMEs failed to link their objectives for e-commerce adoption with their organizational goals as well as to involve users during the planning stage. In addition, pre-project justification process and change management were often not properly carried out. Although it was found that almost all senior executives and managers were committed to the IT investments in e-commerce during the implementation stage, most of these organizations did not manage user resistance effectively. Moreover, it was also disappointing to see that most SMEs failed to conduct IT investment evaluation processes during the implementation stage. Finally, no formal IT benefits realization methodology was carried out in any of the SMEs interviewed.

Operational Use evaluation of IT investments: An investigation into potential benefits

The process of evaluation of IT projects often seems to cease just as quantifiable results start to become available—in Operational Use (OU). This paper investigates OU IT evaluation and contrasts it with the evaluation undertaken during the specification, construction, and testing of IT projects; which we choose to call Prior Operational Use (POU) to distinguish it from OU. Analysis of 123 usable responses from the FTSE 500 companies, show that many companies appear not to undertake OU evaluation. However, where OU evaluation was conducted, it appears to be of clear value to the organisations. Benefits claimed include the ability to assess deviations from their original plans, and to provide a basis for validating the original methods used (in their POU evaluations).

Evaluation of IT-Investments

An informatical innovation is essentially a private business in the life of a venture but the ability of evolution and adaptability of ventures is remarkable for the national economy too. This is why it is important to observe the economical effects of IT investments. The introduction of an information system – as in the cases of other investments – requires pre- and post-calculations for payback of fixed assest, thrift and profitability. The operation of an information system means not only one-off acquisition of instruments and intangible assets, but requires continuous development, version control and improvement of hardware in the sake of conservation. There is a high rate of depreciation of IT investments in Hungary, because such goods change too quickly, together with the economic environment. If the conservation of IT instrument value wanted one has to make new expansions continually. IT specialists have determined some indices, one of which is Total cost of Ownership, which is an important indicator for investment analysis. In practice, there are some other models and methods we can adopt in our analysis. In this paper, I collected several relevant and usable methods for pre analysis of IT projects. Management can adopt these models in his investment process to make sound decisions.

Economic Feasibility of Web-Based Project Management Solutions

Recently, Web-based Project Management (WPM) systems attracted a significant number of construction industry applications worldwide. These implementations, actual and potential, pushed many construction companies to the front of WPM investment decision-making. This paper reviews IT investment evaluation methods and concludes that a single economic analytical method or a simple combination thereof is insufficient to justify or decline an investment in WPM. To fulfil the practical need of many construction companies to implement WPM systems, the paper puts forward a multidimensional decision-making approach that the authors believe is closer to the style of decision-making in the construction business world.

A Multi-Objective, Multi-Criteria Approach for Evaluating IT Investments

While information technology investments have the potential for providing competitive advantage, actual returns on such investments have varied widely and a majority of CEOs rank IT investments as disappointing. Numerous methods exist for investment evaluation, but traditional methods do not adequately account for the intangible benefits that characterize strategic investments and lack other features of portfolio selection. This paper describes a model based upon the analytic hierarchy process, combined with integer programming, to overcome the deficiencies associated with traditional approaches to economic evaluation of IT investments. It also presents results of two case studies in which the model was used successfully and important contextual factors were observed. The multi-objective, multi-criteria approach was found to reflect both tangible and intangible benefits, link the investment to business strategies, increase management participation in the evaluation process, and provide important features of portfolio selection.

Evaluate IT Investment Opportunities Using Real Options Theory

In this paper, we discuss the real options theory and its applications in IT investment evaluation. We provide a framework within which the appropriateness of using real options theory in strategic IT investment evaluation is systematically justified. In our framework, IT investment opportunities are classified into four categories based on two criteria: the technology switching costs and the nature of competition. We point out that different real options models should be adopted for each category. The electronic brokerage’s investment decision in wireless technology is discussed as a real world case within the framework. Our study also provides some insights about the relationship between technology standardization and IT investment decisions.