When should the value of IS investments be measured quantitatively or qualitatively?

17 Nov

According to Ward and Daniel 2006, the value of IS investments are measured quantitatively when the benefits are tangible and are often financial measure. E.g. Of such benefit could be the revenue generated by the launch of a new e-commerce website. This benefit can easily be measured and the unit of measurement could be financial. Such benefit are often termed ‘hard’ and many organizations concentrate their considerations of new IS/IT investments solely on such hard benefits.
In some cases it may be that a benefit has a quantitative measure, but it’s not financial.

On the other hand the value of IS investments are measured qualitatively when the benefits are intangible and can only be judged subjectively. E.g. of such benefits include improvements in satisfaction, either of customers or employees, or an improved ability to make decisions. Some organizations that recognize the importance of such qualitative issues in their organization, work hard to develop suitable measures. Other organizations recognize the importance of such intangible benefits, but understand that they cannot derive a financial value for them. However, they are recorded in the business case for new investments, where they are viewed as important as more tangible benefits.

I agree with irguru and sully1210 that a combination of both measures should be used when evaluating IS/IT investments. Organizations should not concentrate their consideration of new IS/IT investment solely on ‘hard’ benefits.

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One Response to “When should the value of IS investments be measured quantitatively or qualitatively?”

  1. thestrategicblogger November 19, 2012 at 11:57 pm #

    Nice post we ve been discussing “productivity paradox” a lot in class lately and I agree with your assessment that intangible benefits such as improved customer relationship can be more important than tangible benefits.

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