Measuring the Value of Information Technology - A Framework (original) (raw)
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Development of an IT Balanced Scorecard
Journal of International Technology and Information Management
There is a generally acknowledged dearth of metrics for effectively measuring organizational performance. This is particularly true of the IT function, whose contribution to a firm's "bottom line" has been frequently called to question. This paper describes the development of a performance measurement tool called the Balanced Scorecard, which can be used to assess IT performance within the cordetU of overall corporate strategy and financial performance. Data for the scorecard was obtained via a sur^'ey of senior IT executives in various organizations. The paper concludes with a set of guidelines for successfully implementing an IT Balanced Scorecard, as well as potential pitfalls to avoid in the process. 2000). Information systems are still needed today for internal efficiency and effectiveness improvements. Howerier, there is greater opportunity now to utilize IT for much more than that. Advances in computer and telecommunications technologies have provided organizations with the ability to leverage IT for sustainable competitive advantage. Indeed, IT has permeated the very core of business, helping to create new products or enhance existing lines of products, redesign core business processes, create new distribution channels, enable total quality management and, in more recent times, has ushered in the era of electronic business. Various authors have noted that for many, if not most, organizations today, IT is actually driving strategy formulation and implementation
Proposal of a Compact IT Value Assessment Method
This paper contains a proposal of a compact IT value assessment method. It follows the assumption that most methods available for the public are either described in a very general manner or concentrate on one of the evaluation aspects only. The proposed method relates the evaluation approach to the main IT initiative characteristics, such as the investment purpose and IT element to be implemented. Based on these criteria, the evaluation process is shaped by putting emphasis on the relevant evaluation aspects and choosing the relevant evaluation methods. The method design is focused on the ease of use and practical relevance so it can be used by IT practitioners to assess IT initiatives in their organisations. The paper finishes with the case study of the method usage in a mid-sized production enterprise.
A Comparison of Approaches to the Measurement of IT Value
The measurement of information technology (IT) impact on economic performance at the business unit or enterprise level is receiving increased attention. Several researchers approached the problem by calculating key ratios of IT intensity and relating them to key ratios of firm performance. This approach is compared with a more rigorous approach of cost functions based on the microeconomic theory. Both procedures are applied to the same set of data from the banking industry. The results show that reasoning about IT impact based on key ratios may be misleading, especially when the figures are only calculated for a cross-section of data.
TOWARDS SYSTEMIC EVALUATION OF THE BUSINESS VALUE OF IT
Evaluating the IT business value is a challenging combination of managing the complexity of value phenomenon and the complexity of broad IT impacts. This study analyses the focal characteristics of IT business value evaluation and proposes a research agenda towards systemic evaluation approach. The systemic approach combines concepts of goal driven perspective for benefits, value as a combination of benefits and costs, and the lifecycle view of potential and realised value. These concepts are integrated through system dynamics modelling to understand the IT impact structures and dynamic value creating behaviour emerging from the structures. Finally, systemic approach should be supported by evaluation workflow practices that facilitate seamless data retrieval for the evaluation process, and the integration of evaluation outputs within the organisation.
Impact of IT practices and business value of IT measurement
International Journal of Productivity and Performance Management, 2019
Purpose The purpose of this paper is to measure the business value of IT (BVIT) and illustrate the relationship between IT practices and BVIT. Design/methodology/approach The paper uses a case study approach to collect the subject firm data over a period of one year. The data are about various IT systems used in the firm and their associated capital and operational cost components. The derived data are then compared with industry benchmarks. Findings The IT practices employed by the firm enable it to achieve a BVIT which is higher than the industry norm, from both strategic and operational perspectives. Research limitations/implications In this study, a year’s worth of data from a single firm is considered. The temporal frame of the research data limits the generalization of the results. To improve the generalizability, data from many years and across many firms may be used. Practical implications The paper provides insights to managers to identify the measures of BVIT. Further, man...
Evaluating the Business Value of Information Technology
Evaluating the multidimensional and dynamic nature of IT business value is a continuous challenge. This paper examines how system dynamics can be used in evaluating IT business value in a company level. We approach IT business v alue as a web o f impacts, where ben efits and sacrifices a re ultimately evaluated against company earnings logic. This study is based on an action research and covers a pilot project within two co-operating companies. System dynamics was utilised to construct a value creation model for an existing Gaming Management System. This value creation modelling covered two dimensions: 1) structural evaluation of IT impacts with causeand-effect models, 2) dynamic evaluation and simulation of value realisation over time. As a result, value creation modelling was able to provide a visual overview of how IT impacts were linked to business value through value paths, and how much and when value was realised. Value creation modelling enabled prototyping of value realisation that can provide value based insights for development activities like requirements elicitation and analysis. The examined approach proved its potential for providing a common language for technology and business parties, thus improving IT business alignment.
Management of information technology evaluation – the development of a managerial thesis
The aim is to address the approach and identify the assessment of the effectiveness of IT investment used by organisations, to develop a thesis of good practice in this area; and to test this thesis by reference to a focus group consisting of practitioners.The research began using the case study method to collect evidence and then content analysis was employed to analyse this evidence to identify empirical generalisations and thus develop a theory of IT investment, IT investment evaluation and IT benefit identification. Correspondence analysis was used on the case study data as one step in establishing the theory. A focus group was used to present the relevant theory and the models that were created. Finally, the practical management guidelines suggested by the research and the models and content analysis figures were presented to practitioners as a cross-validation process and the results reported. The results of this research are an objectively developed theory of how IT investments are formulated and evaluated and how IT investment benefits are identified.
The balanced scorecard: a foundation for the strategic management of information systems
Decision Support Systems, 1999
The balanced scorecard BSC has emerged as a decision support tool at the strategic management level. Many business leaders now evaluate corporate performance by supplementing financial accounting data with goal-related measures from the following perspectives: customer, internal business process, and learning and growth. It is argued that the BSC concept can be adapted to assist those managing business functions, organizational units and individual projects. This article develops a Ž. balanced scorecard for information systems IS that measures and evaluates IS activities from the following perspectives: business value, user orientation, internal process, and future readiness. Case study evidence suggests that a balanced IS scorecard can be the foundation for a strategic IS management system provided that certain development guidelines are followed, appropriate metrics are identified, and key implementation obstacles are overcome.
Balanced Scorecard in Information Technology, 2024
This study examined the application of the Balanced Scorecard (BSC) as a critical tool in organizational performance management, particularly in information technology (IT). The BSC, developed by Kaplan and Norton, has established itself as an important framework for implementing and measuring corporate strategies. The aim of this work is to shed light on the theoretical foundations of BSC, to analyze the implementation process in corporate IT and to demonstrate its specific relevance using case studies. A main focus is on the process of applying the Balanced Scorecard in IT, starting with identifying business goals and selecting appropriate perspectives for IT strategy. The steps of formulating strategic goals and measures as well as the creation of a strategy map to visualize the connection between the elements of the BSC in the context of information technology are covered. Success factors and challenges in implementing BSC in IT are highlighted, accompanied by an analysis of case studies and application examples from various industries and company sizes in the IT industry. The work offers best practices and recommendations for the implementation and continuous improvement of BSC specifically in information technology. The work therefore offers a comprehensive overview of the Balanced Scorecard, illustrates its practical relevance using case studies in the IT context and provides insights into the challenges and success factors of its use in information technology companies.
Approaching information system evaluation methodology and techniques: a comprehensive review
This paper advances our knowledge of information systems (IS) by drawing ideas and insights from IT/IS evaluation. The emergence and increasing pressure to invest in new IS architecture and infrastructures has become a high priority issue within organisations, and largely influenced by the need to deliver better value products and service through robust and responsive supply chains. With this in mind, business managers are seeking to use appropriate methods and techniques to appraise and justify the financial contribution of IS at strategic, operational and tactical levels. Thus, comprehensive but understandable methodologies are needed to solve the complicated project justification problems arising from the complexity of new technologies. Notwithstanding, a wide body of literature has emerged that sheds light on various methods for evaluating the cost and benefits of IT/IS investment, ranging from simple to very complex techniques. This paper sets out to provide a review of this literature in order to lend insights into our understanding of the plethora of reported research in the literature that has propagated investment justification and benefits management models and frameworks. We show that the IT/IS evaluation literature contributes significantly to scholarship on the IS.