Financial appraisal and the IS/IT investment decision making process

Abstract

This paper explores the techniques used by organizations to appraise Information Systems (IS)/Information Technology (IT) investments, and concentrates, in particular, on techniques of capital investment appraisal. We draw on relevant studies reported in both the accounting and ® nance, and the IS literature, which have addressed their usage. Where possible comparisons are drawn between both sets of literatures. The results of a survey that speci® cally examined IS/IT investment appraisal practices of a sample of UK companies is also presented. Among the issues discussed include the extent to which capital investment appraisal techniques are used to appraisal investments, the importance of the techniques used and the problems attendant on the decision making process.

An Ethnographic Study of Is Investment Appraisal

“…After the data has been assessed, a judgement still has to be made, and, in the absence of complete knowledge of all the alternatives and the consequences, this is an essentially political activity. Despite this observation, which reflects the nature of the intervention as necessarily a subjective process, recent research confirms previous observations (Ballantine, Galliers and Stray, 1994) that practitioners show little sign of moving away from quantitative, financially-based data as a basis for IS investment appraisal (Ballantine and Stray, 1998) (Lycett and Giaglis, 2000). Financial reviews of costs and benefits still represent the most common aspect of evaluation procedures and financial techniques such as NPV (Net Present Value) and IRR (Internal Rate of Return) predominate (Farbey, Land and Targett, 1995).…”

Information systems evaluation: navigating through the problem domain

“…Regardless, Ballatine and Stray [3,4], and Lefley [38] report the use of traditional appraisal techniques during the evaluation of IT although, argue that such methods have become obsolete and inappropriate. In doing so, discouraging long-term strategically important projects that typically offer intangible and non-financial benefits.…”

Interventions for information systems introduction in the NHS

“…There was little evidence at any of the five sites of any willingness to justify in financial terms the outlay on systems introduction, thus reinforcing the difficulty of justifying large investments in systems-related projects. This has been discussed by Ballantine and Stray [27], who examined techniques used by organizations to appraise IS. Bodin et al [28] discussed the use of analytic hierarchy processes in making such analysis.…”