Categorising IT investment for the Business Case

5 Feb

The research carried out on the business case for IS investment got me thinking about the different kinds of investment that the business case promotes in order to generate funding for the project.  In their paper ‘Beyond the Business Case: Strategic IT investment’ , Ross and Beath  Categorise IT investments under four different headings;

(i) Transformation

(ii) Renewal

(iii) Process Improvement

(iv) Experimentation

The main type of IT investment is probably the most obvious, which is the complete overhaul of the core IT infrastructure used within the organisation. This type of investment is usually carried out in a firm that is lagging behind its competitors when it comes to a comprehensive IT system, and is aware that the organisation needs to catch up to its peers. This type of overhaul investment was carried out by Delta airlines in the late 1990’s when the company spent billions over a multi-year period to completely transform their IT system.

http://www.cio.com/article/31708/Delta_Aims_for_Infrastructure_Overhaul_

When a firm is undertaking this type of investment, the business case is not the most important tool in order to receive funding for the project. Top management are aware that a lack of competitiveness exists and therefore do not need too much convincing of the merits that this type of investment will bring.

Renewal of the infrastructure is the next type of IT investment. As the name suggests, this simply involves renewing or improving outdated technologies. This type of investment allows the firm to improve the quality of its IT service and thus become more efficient. For this type of investment the business case is necessary as managers can be shown how an outdated system is impacting negatively on competitiveness. An example of renewal could be an accounting firm updating its systems to Sage.

Process improvement involves the updating or improvement of existing processes. Unlike renewal , this type of investment builds on pre-existing IT infrastructure. An example of this type of investment would be a mobile phone network allowing customers to top up by text. Here we have a pre-existing process which has been improved in order to increase efficiency. In this scenario the Business Case is the best funding approach as core processes are altered or improved to become more efficient.

The final type of investment categorised in the paper is investment through experimentation where new technologies are embraced and implemented by the firm on an experimental basis. Pilot projects are then carried and if they are successful then the project is rolled out across the firm. The business case is not used for experimental investment as a funding committee would not approve funding for experiment projects. According to the paper these types of investments are funded by CEO’s or manager driven by intuition and passion for the project.

http://dspace.mit.edu/bitstream/handle/1721.1/1571/Beyond%20the%20Business%20Case%20Strategic%20IT%20investment%204357-01.pdf?sequence=2

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