Measuring Business Performance.

29 Jan

The impact of information systems investment on business performance is very important for organisations today. The ever increasing expenditure on information systems (IS) has been accompanied by an increasing demand to measure the business value of the investment. There are several frameworks available to determine the contribution of a firms IS investments business performance. In my last blog I discussed the Balanced Scorecard framework as an effective way to measure business performance. In this blog I will discuss some other frameworks measuring IS effectiveness in business terms.

Rubin (1991) introduced the Business Value framework. This is where IS performance is arrived at in three stages in terms of its business contribution. In the first stage of this framework, key measures for evaluating technical and software processes are defined in terms of quality, productivity and the impact on customer satisfaction. In the second stage, the key technical indicators are related to business performance. For example, the IS organisation should be able to make the following assertion about its performance in business terms: “If we show a productivity increase of N% this year, the business will be able to lower product costs by Y% or produce Z new products”.[1] In the third stage, IS can directly express changes in its performance in terms of such key measures as cycle time, quality and profitability.

Berger (1988) introduced the Enterprise-Level measurement. This framework says that IT is not the sole responsibility of one department (the IS department). Other departments, such as engineering, sales and customer service, should be able to buy and operate their own IT/IS. “The approach firstly requires the determination of the enterprise’s business objectives and goals. Secondly, the decision is made whether or not IT is needed to accomplish these objectives and goals and, if so, what strategy is needed. The effectiveness of IT is measured through business actions that will result in increased market share, new market penetration, and lower product costs”.[1]

“A firm can only manage what it measures. But, by the same token, a firm should also measure only what it wants to manage“.[2] If a business continually monitors and efficiently manages the use of proper business metrics then they will be able to gain competitive advantage. Given the high level of IS investments it is extremely important for organisations to investigate the benefits and the value they create, and also their impact on business performance.

[1]. dl.acs.org.au/index.php/ajis/article/download/413/374

[2].http://www.freepatentsonline.com/article/Advances-in-Competitiveness-Research/204480543.html

 

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