Advertisement

Assessing the value of strategic information technology investments

  • Brian L. Dos Santos

Abstract

Today, information technology (IT) is extremely important to the smooth operation of many organizations. Firms in many industries would be seriously affected if their IT-based systems failed even for short periods. In addition to being important to operations, IT-based systems are just as important in the control and planning functions (Bruns and McFarlan, 1987). There now is a growing awareness that IT investments can be of strategic importance to a firm, that is, IT investments can improve a firm’s competitive position or allow the firm to become more vulnerable to competitive forces (Parsons, 1983; Benjamin et al., 1984; Cash and Konsynski, 1985; Clemons and Row, 1988). The list of publicized cases where IT investments have enabled firms to gain a competitive advantage includes investments by such firms as American Airlines, American Hospital Supply Corporation, Avis, Bank America, Citicorp, Digital Equipment Corporation, and General Electric (Cash and Konsynski, 1985; Ives and Learmonth, 1984; Porter and Millar, 1985; Strassmann, 1988; Wiseman, 1985).

Keywords

Call Option Development Cost Exercise Price Discount Cash Flow Discount Cash Flow Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Banker, R. D. and Kauffman, R. J. (1988) Strategic Contributions of Information Technology: An Empirical Study of ATM Networks, Proceedings of the Ninth International Conference on Information Systems, Minneapolis, Minnesota, pp. 141–50.Google Scholar
  2. Benjamin, R., Rockart, J., Scott-Morton, M. and Wyman, J. (1984) Information technology: a strategic opportunity, Sloan Management Review, Spring, 3–10.Google Scholar
  3. Bittlestone, R. (1990) Computerization: out of control? Computerworld, 12 March.Google Scholar
  4. Black, F. and Scholes, M. (1973) The pricing of options and corporate liabilities. Journal of Political Economy, 81 (3), 637–54.CrossRefGoogle Scholar
  5. Brealey, R. and Myers, S. (1988) Principles of Corporate Finance, 3rd edn, McGraw-Hill, New York.Google Scholar
  6. Bruns, W. and McFarlan, F. (1987) Information technology puts power in control systems. Harvard Business Review, September—October, 89–94.Google Scholar
  7. Cash, J. and Konsynski, B. (1985) IS redraws competitive boundaries. Harvard Business Review, March—April, 134–42.Google Scholar
  8. Cash, Jr J. I., McFarlan, F. W., McKenney, J. L. and Vitale, M. R. (1988) Corporate Information Systems Management: Text and Cases, 2nd edn, Irwin, Homewood, Illinois.Google Scholar
  9. Clemons, E. K. and Row, M. C. (1987) Structural differences among firms: a potential source of competitive advantage in the application of information technology. Proceedings of the Eighth International Conference on Information Systems, Pittsburg, PA, pp. 1–9.Google Scholar
  10. Clemons, E. K. and Row, M. C. (1988) McKesson Drug Company: a case study of Economost —a strategic information system. Journal of Management Information Systems, 6 (1), 36–50.Google Scholar
  11. Clemons, E. K. (1991) Evaluation of strategic investments in information technology. Com-munications of the ACM, 34 (1), 22–37.CrossRefGoogle Scholar
  12. Copeland, D. G. and McKenney, J. L. (1988) Airline reservation systems: lessons from history. MIS Quarterly, 12 (3), 353–70.Google Scholar
  13. Dos Santos, B. L. (1991) Justifying investments in new information technologies. Journal of Management Information Systems, 7 (4), 71–89.Google Scholar
  14. Dos Santos, B. L. and Peffers, K. (1991a) The effects of early adoption of information technology: an empirical study. Proceedings of the Twelfth International Conference on Information Systems, New York, December, pp. 127–40.Google Scholar
  15. Dos Santos B. L. and Peffers K. (199lb) Rewards to Investors in Innovative Information Technology Applications: A Study of First Movers and Early Followers in ATMs. Working Paper, Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907.Google Scholar
  16. Dos Samos, B. L., Peffers, K. and Mauer, D. C. (1991) The Value of Investments in Information Systems: An Event Study. Working Paper, Krannert Graduate School of Management, Purdue University, West Lafayette, IN 47907.Google Scholar
  17. EDP Analyzer (1985) Six Top Information Systems Issues,Canning Publications Inc., 23 (1), January.Google Scholar
  18. Feeny, D. F. and Ives B. (1990) In search of sustainability: reaping long-term advantage from investments in information technology. Journal of Management Information Systems, 7 (1), 27–46.Google Scholar
  19. Glaser, P. F. (1988) Using technology for competitive advantage: the ATM experience at Citicorp, in Managing Innovation Cases from the Services Industry (eds B. R. Guile and J. B. Quinn ), National Academy Press, Washington, D. C.Google Scholar
  20. Gold, B. (1976) The shaky foundations of capital budgeting. California Management Review, 19 (2), 51–60.CrossRefGoogle Scholar
  21. Gremillion, L. L. and Pyburn, P. J. (1985) Justifying decision support and office automation systems. Journal of Management Information Systems, 2 (1), 5–17.Google Scholar
  22. Harris, S. E. and Katz, J. L. (1991) Organizational performance and information technology investment intensity in the insurance industry. Organization Science, 2 (3).Google Scholar
  23. Hayes, R. H. and Garvin, D. A. (1982) Managing as if tomorrow mattered. Harvard Business Review, May—June, 71–9.Google Scholar
  24. Ives, B. and Learmonth, G. (1984) The information system as a competitive weapon. Communications of the ACM, 27 (12), 1193–1201.CrossRefGoogle Scholar
  25. Keen, P. G. W. (1981) Value analysis: justifying decision support systems. MIS Quarterly, 5 (1), 1–15.CrossRefGoogle Scholar
  26. Keen, P. G. W. and Scott-Morton, M. S. (1978) Decision Support Systems: An Organizational Perspective, Addison-Wesley, Reading, Mass.Google Scholar
  27. Kester, W. C. (1984) Today’s options for tomorrow’s growth. Harvard Business Review, March—April, 153–84.Google Scholar
  28. Margrabe, W. (1978) The value of an option to exchange one asset for another. The Journal of Finance, 33 (1), 177–86.CrossRefGoogle Scholar
  29. Mason, S. P. and Merton, R. C. (1985) The role of contingent claims analysis in corporate finance, in Recent Advances in Corporate Finance (eds E. I. Altman and M. G. Subramanyam ), Irvin, Homewood, Illinois.Google Scholar
  30. McNurlin, B. C. and Sprague, R. H. Jr (1989) Information Systems Management in Practice,2nd edn, Prentice-Hall.Google Scholar
  31. Myers, S. C. (1984) Finance theory and financial strategy, Interfaces, 14 (1), 126–37. Oster, S. M. (1990) Modern Competitive Analysis, Oxford University Press.Google Scholar
  32. Parker, M. M., Benson, R. J. and Trainor, H. E. (1988) Information Economics: Linking Business Performance to Information Technology, Prentice-Hall, Englewood Cliffs, New Jersey.Google Scholar
  33. Parsons, G. (1983) Information Technology: A New Competitive Weapon, Harvard Business School Case Services, Boston, MA.Google Scholar
  34. Porter, M. and Millar, V. (1985) How information gives you competitive advantage, Harvard Business Review, July—August, 149–60.Google Scholar
  35. Raho, L. E., Belohlav, J. A. and Fiedler, K. (1987) Assimilating new technology into the organization: an assessment of McFarlan and McKenney’s model, MIS Quarterly, 11 (1), 47–58.CrossRefGoogle Scholar
  36. Sharpe, W. F. (1985) Investments, Prentice-Hall, Englewood Cliffs, New Jersey.Google Scholar
  37. Silk, D. A. (1990) Managing IS benefits for the 1990s, Journal of Information Technology, 5, 185–93.CrossRefGoogle Scholar
  38. Stoddard, D. (1988) Otisline,Harvard Business School Case Services, No. 9–186–304, Boston, MA 02163, January.Google Scholar
  39. Strassmann, P. A. (1988) Management productivity as an IT measure, in Measuring Business Value of Information Technologies, ICIT Research Study Team #2 (ed.), ICIT Press, pp. 93–120.Google Scholar
  40. Vitale, M. R. (1986a) American Hospital Supply Corp. (A): the ASAP Systems,Harvard Business School Case Services, No. 9–186–304, Boston, MA 02163, March.Google Scholar
  41. Vitale, M. R. (1986b) The growing risks of information systems success. MIS Quarterly, December, 327–36.Google Scholar
  42. Vitale, M. R., Ives, B. and Beath, C. M. (1986) Linking information technology and corporate strategy: an organizational view, Proceedings of the Seventh International Conference on Information Systems, San Diego, CA, pp. 265–76.Google Scholar
  43. Wiseman, C. (1985) Strategy and Computers, Irwin, Homewood, Illinois.Google Scholar

Copyright information

© Leslie Willcocks 1994

Authors and Affiliations

  • Brian L. Dos Santos

There are no affiliations available

Personalised recommendations