A model for investment justification in information technology projects

School of Architecture and Building, Deakin University, Geelong, Victoria 3217, Australia
International Journal of Information Management (Impact Factor: 2.04). 10/2001; DOI: 10.1016/S0268-4012(01)00024-X


To remain competitive and ever increasingly sophisticated in the marketplace, businesses must invest in Information Technology (IT) if they are to survive in the long-term. Advances in IT have enabled new competitors to enter existing markets more readily, which has stimulated and strengthened the paradigm of global competitiveness. At the same time, increasing economic pressures are forcing businesses to re-evaluate their IT operations. In response to the changing business environment and to remain competitive and improve organisational performance some businesses have strategically made considerable investments in IT, yet their benefits are difficult to quantify. With this in mind, this paper aims to study the justification for investment in IT projects, by examining tangible and intangible benefits such as competitive advantage and securing future business by facilitating appropriate management change. A model to determine whether or not to invest in IT for any given company is presented. The developed model is then applied to a case study to analyse the implications of implementing IT and its impact on organisations.

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    • "Today customers are from every corner of the world; the supply chain strategy should have focus towards satisfying the customers. Without satisfied customers, the whole exercise of applying the supply chain strategy could be costly and futile (Gunasekaran et al., 2001). For improving performance, supply chain metrics must be linked to CUS (Lee and Billington, 1992). "
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    • "This is especially the case when considering logistic bullwhip effect-related ISs, where the role investmentrelated (structural) uncertainty is of great importance. Of course, IS have been evaluated previously by numerous authors, for examples, see Gunasekaran et al. (2001), Renkema and Berghout (1997) and Tam (1992), but to the best of our knowledge very few authors have discussed IS investment evaluation with regards to the bullwhip effect – discussing it is one of the contributions of this work. "
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    ABSTRACT: A simplified three-step methodology for profitability evaluation of an information systems investment into reducing the bullwhip effect in the supply chain is presented. The bullwhip effect is the effect of increasing variability of the demand upstream in the supply chain and it causes especially the upstream companies to suffer. Removing bullwhip is beneficial for the whole supply chain. There are remedies to the bullwhip effect, based on increasing the information flow throughout the supply chain – these remedies often require an information systems investment, the cost of which is hard to estimate exactly. Investment in a bullwhip reducing information system will take place if it is perceived to be profitable. Being able to evaluate the profitability, when information about the reachable benefits and the costs of the project is imprecise requires specialised methods: for this reason, the pay-off method is used for the analysis. The three-step process is illustrated with a numerical example.
    International Journal of Logistics Systems and Management 03/2014; 17(3):340-356. DOI:10.1504/IJLSM.2014.059766 · 0.47 Impact Factor
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    • ", [16], [18], [19]) ([6], [15], [17]) ([6], [15]-[18] "
    01/2014; 6(2):150-154. DOI:10.7763/IJCTE.2014.V6.854
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