Defining the benefits of IT investment for the Business Case

6 Feb

For a number of years now there has been an ongoing debate, and even frustration among business executives with regards to IT expenditure and the perceived intangible benefits that may or may not be derived from the investment. Firms can end up spending millions on IT infrastructure without seeing a real monetary benefit. Firms can also end up outsourcing their entire IT department only to realise that they have actually lost a competency that was core to the success of the business. The key to overcome this is to quantify what is perceived to be unquantifiable in the business case. The validity of the business case in this scenario is vital as it is one of the final steps in the realisation of an IS investment. However, a pitfall that could arise here would be to overstate the benefits of the investment in order to receive funding.

In their paper ‘Building better business cases for IT investments’, Ward et al outline a framework for structuring the benefits that are expected from a certain investment. The outline of this framework can be viewed in the link below on page seven of the paper

http://www.scribd.com/doc/54990291/Better-Business-Cases-for-IT-Investment

This framework structures the benefits  under two factor: degree of explicitness, how much do we know about the potential benefits before the investment is made and the type of business change that gives rise to that benefit. According to the authors, structuring the benefits of an investment in this way encourages a greater level of discussion and evident gathering among managers and executives which in turn produces a strong business case.

When developing a business case for IT investment it is important to highlight the following points to the funding committee. Firstly there is very little value to be gained from just having the technologies. The benefits are gained from the organisation use of the IT infrastructure. According to Peppard et al (2007) “It is only when individuals or groups within the organization, or amongst it customer and supplier bases, perform their roles in more efficient or effective ways that benefits emerge”. Ward et al state that a large number of organisations believe that their approach to business cases is far from satisfactory. They also found that the quality of the business case has a significant effect on the success of IT investments.

A major problem associated with the business case is how to quantify the soft benefits such as customer satisfaction and employee interaction with the new technology. According to CIO columnist Jack Keen “People make decisions on intangibles much more than tangible”.  These soft benefits can work with the tangible benefits within the business case to strengthen the overall case presented, or as Keen points out they can act like a ‘buffer’ for the tangible benefits.

Sources:

Ward et al, (2007).  ‘Building better business cases for IT investments’ available http://www.scribd.com/doc/54990291/Better-Business-Cases-for-IT-Investment

Peppard et al, (2007) ‘Managing the realisation of Business benefits from IT investment

How to make the case for IT investment. Available:  http: http://www.cio.com/article/32084/How_to_Make_the_Case_for_IT_Investment?page=4&taxonomyId=3155

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