IT Investment Chapter 1

IT Investment Chapter 1 - Information Technology...

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Information Technology Investment: Decision-Making Methodology by Marc J. Schniederjans, Jamie L. Hamaker and Ashlyn M. Schniederjans World Scientific Publishing Co © 2004 (Extracted from 24x7 books on DePaul’s digital library for printing purpose) Chapter 1: Introduction to Information Technology Investment Decision-Making Methodology Learning Objectives After completing this chapter, you should be able to: Describe different types of IT investment decisions manager face. Briefly describe some of the methodologies that are used in IT investment decision-making. Explain why IT investment decision-making is important as a subject to study. Explain some of the limitations that should be considered when using IT investment methodologies. Explain the role of IT investment decision-making within organizational planning. Introduction The Productivity paradox refers to the absence of a positive relationship between spending on information technology or IT and its resulting contribution to productivity or profitability (Lucas, 1999). Robert Solow, the 1987 Noble Prize winning economist felt there was a singular absence of measured productivity from the use of computers when looking for it at the industry or economy level of analysis. Other researchers seeking to find a connection between capital investments in IT and productivity at the company or business firm level of analysis have been equally surprised to confirm the lack of a relationship between investment on IT and firm performance (Brynjolfsson, 1993; Landauer, 1995; Qing and Plant, 2001). However, several other researchers have found that there is a positive relationship between IT investments and firm productivity and performance (Bhatt, 2000; Dewan and Min, 1997; Stratopoulos and Dehning, 2000; Swierczek and Shrestha, 2003). The inconsistency in the research results mentioned above can be viewed as a metaphor on the subject of IT investment decision-making. That is, there are no single, simple methodologies that will give a consistent, reliable and optimal solution to managers facing an IT investment decision. One type of investment methodology can suggest one alternative and another methodology a completely different alternative to an IT investment decision choice. To try to help in this very complex decision situation, the purpose of this book explores a series of methodologies that can be used individually or 1
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in concert to help aid in IT investment decision-making. We will try to explain where these decision methods can be used, in most cases their mathematical computational procedures, their informational value, and their limitations. In the next few sections of this chapter, we will briefly introduce some of the types of IT investment decisions managers face to provide an orientation to better understand the problems IT manager's face. We follow that section with an overview of the various types of methodologies available to aid in making those decisions and a brief discussion on
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IT Investment Chapter 1 - Information Technology...

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