Framework for evaluating information systems investment

17 Oct

“IT/IS investment evaluation problem has special characteristics, which makes it more complex and challenging than conventional investment evaluation problems.” (Azadeh, Keramati, Jafary 2009)

I beleave that IS investments must be evaluated not just on there financial benefits but also on the value they add to a company. Helping a company to reach its long term goal and to gain a strategic advantage may not be financialy measurable but this must still be accounted as a benefit.

Gunasekaran & Love (2001) stated that existing methods for justifying the investment in IT projects are considered to be inadequate and so presented a conceptual model that places emphasis on evaluating the benefits of strategic, tactic, operational, financial, and intangible investment appraisal techniques.

Azadeh, Keramati & Jafary 2009 propose an integrated Delphi/VAHP/DEA framework for evaluation of information system investments. (illustrated below)

“Delphi is designed to overcome the interpersonal behavior problems of work groups. VAHP has been used for supplier selection problem, and DEA is a universally accepted non-parametric method that uses linear programming to calculate the efficiency of defined DMUs.” (Azadeh 2009)

The above framework was put into practice in a large multidisciplinary power holding organization in Tehran. The company used the above framework to test what IS investment to invest in and this resulted in the company investing in a ERP (A Meta system for organization’s resources planning at enterprise level) and a product development system. This validated the results of the framework which showed that both the ERP and the product development system were efficient investments.

The framework was also examined by ten IT/IS experts who had completed a questionaire on the framework marking it out of ten in certain areas. The framework scored high in Measuring Tangible & intangible benefits and costs. It also scored high in measuring risk and using both qualitative and quantities data.

Azadeh developed this framework to overcome some of the problems of traditional methods of evaluating information system investments such as quantifing intangible benefits. His paper was published in 2009 which makes me beleave that this is a relativly new framework. Perhaps there are older more proven frameworks for evaluating informations systems investments? Or does anyone have an opinion on how IS Investments should be evaluated?


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