International Journal of Information Management 21 (2001) 349–364
A model for investment justification in information
A. Gunasekarana,*, Peter E.D. Loveb, F. Rahimic, R. Mieled
aDepartment of Management, University of Massachusetts, 285 Old Westport Road, North Dartmouth,
MA 02747-2300, USA
bSchool of Architecture and Building, Deakin University, Geelong, Victoria 3217, Australia
c34 Claremont Avenue, Camberley, Surrey GU15 2DR, UK
dDepartment of Marketing and Information Systems, University of Massachusetts, North Dartmouth,
MA 02747-2300, USA
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. r 2001 Elsevier
Science Ltd. All rights reserved.
Keywords: Information technology; Investment; IT projects; Financial benefits
Most businesses use some form of Information Technology (IT) in their business operations.
The increasing use of the Information Superhighway and E-Commerce to conduct business
*Corresponding author. Tel.: +1-508-999-9187; fax: +1-508-999-8776.
E-mail address: email@example.com (A. Gunasekaran).
0268-4012/01/$-see front matter r 2001 Elsevier Science Ltd. All rights reserved.
PII: S 02 6 8- 40 1 2 ( 0 1) 00 0 24 - X
demonstrates that many firms are in fact becoming dependent on IT. However, investing in IT can
be an extremely expensive and time-consuming exercise and its justification is difficult to quantify
because of ineffective Information Management Systems (IS). For the purpose of clarification the
authors feel that the differences between IT and IS should be identified, as this paper deals with
only IT. Essentially, IT is a generic term for the convergence of computers, hardware, software,
telecommunications, Internet, electronics and the resulting technologies. Whereas, IS is a wider
concept, which refers to how information flows are designed in an organisation so as to meet an
organisations information needs.
There has been a rising trend in IT expenditure over the last two decades (Benchmark Research,
1997), which corresponds to the mass of IT products now available in the market. Such new
products pose in ever increasing problem to managers, as they constantly have to invest and
justify their decisions to update software and hardware to keep abreast of their competitors.
Together with the rising expenditure trends managers are faced with the problem of having to
*identify what their competitors are doing with IT;
*determine whether or not they can remain competitive with or without IT; and
*evaluate how the adoption of IT can improve their performance and/or competitiveness.
In stating a case for the justification of IT, managers must embrace various appraisal
techniques suchas IT budgeting,IT investment
investment budgeting, payback period performance metrics and return on investment
(ROI). However, the justification of IT is a complex issue due to many intangibles
and non-financial benefits which are inherent in the implementation of IT (Irani, 1999;
Irani, Ezingeard, Grieve, & Race, 1999; Swamidass & Kotha, 1998). Farbey, Land, and Targett
(1992,1993,1995) found that companies that used traditional approaches to justify the
implementation of IT indicated a degree of uncertainty about how to measure the full impact
of their investment. They state that there is no ‘best’ appraisal technique that addresses ‘all’
project considera-tions. Further, they argue that the reason for this is that strategic investments in
IT are aggregates of complexity, and notably different from each other. Essentially, each
investment displays its own characteristics, and offers a range of benefits and costs. Conversely,
each appraisal technique that can be used also displays its own characteristics, and has its own set
of limitations (Irani, Ezingeard, & Grieve, 1997; Peppard & Ward, 1999; Hares & Royle, 1994).
Therefore, the development of an ‘all embracing’ generic appraisal technique for justifying IT
expenditure that takes account of the wide variety of IT related implications, may be considered
too rigid and complex for use.
According to Parker and Benson (1989), most chief executive officers (CEOs) are not
comfortable with the current tools and techniques used to justify their investments in IT, because
they lack the preciseness of definition in the financial methods used. The apparent inability of
traditional modes of financial analysis to justify certain investments has led to a growing number
of managers and observers to call for a moratorium in their use. Based on a review of the
literature and findings from a case study, this paper proposes a model that can be used to
determine the effectiveness of implementing IT at the strategic, tactical, operational levels as well
as to determine intangible and non-financial benefits.
management, IT projectplanning,
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364350
2. Justification of investments in IT
Well-managed IT investments that are carefully selected and focused on meeting business/
mission needs can have a positive impact on an organisation’s performance. Likewise, poor
investments, those that are inadequately justified or whose costs, risks, and benefits are poorly
managed, can hinder and even restrict an organisation’s performance. According to Willcocks
and Lester’s (1991) survey of American, British, Australian and New Zealand companies in 1990,
the quality with which investment decisions are made on IT projects can have a dramatic effect on
an organisation. At the same time, increasing economic and competitive pressures can compel
companies to cut costs and force them to scrutinise their IT operating and capital budgets more
carefully, so as to allocate limited resources among competing projects in the best way possible
(Carlyle, 1990). Thus, careful and correct IT investment (or project selection) decisions are an
economic and competitive necessity.
Hochstrasser (1992) argues that the high rate of failure in IT projects is partly attributed
to a lack of solid but easy to use management tools, for evaluating, prioritising, monitoring and
controlling investments in IT. Voss (1986) claims that most technology focused investments
fail due to organisational problems, and has identified economic justification as a significant
contributing factor. In a similar fashion, Hochstrasser and Griffiths (1991) identified the
overwhelming belief by many industries that they are faced with outdated and inappropriate
procedures for investment appraisal, and that all responsible executives can do is cast them aside
in a bold ‘leap of strategic faith’.
Essentially, the purpose of IT investment is to improve operational efficiency of an organisation
so as to reduce costs and improve profit levels. Thus, many traditional appraisal techniques are
used to evaluate tangible benefits, which are based on direct project costs. Although this
operational emphasis has milked the efficiency benefits of investing in IT, many managers are now
appreciating the wider strategic implications of an IT infrastructure, and making investments to
help transform their business processes. As a result, many qualitative benefits are being realised, and
typically include improved customer support and greater product flexibility. However, these may be
impossible to assess and quantify, with many companies even possibly having to accept short-term
losses, in order to reap long-term benefits (Hochstrasser, 1992; Wilner, Kock, & Klammer, 1992;
Belleflamme, 2001; Kulatilaka, 1984; Lefley & Sarkis, 1997; Meredith & Suresh, 1986).
Irani et al. (1999), Farbey et al. (1993), Ward, Taylor, and Bond (1996), and
Maskell (1991) suggest that traditional appraisal techniques are often unable to capture
many of the qualitative benefits that IT brings. These techniques also ignore the impact that the
system may have in human and organisational terms. Companies may, therefore, be left
questioning howto comparea strategic
range of intangibles, with other corporate investments whose benefits are more tangible.
Simmonds (1983) suggests a shift in justification emphasis towards a strategy based review
process, where focus is placed on progress being measured against its contribution towards the
corporate strategy, and not how well it meets the criteria laid down by accounting rules and
regulations. Therefore, this implies the strategic significance of the investment. Hence, companies
should identify opportunities for making investments in projects pertinent to the objectives of
their business, and that investment decisions should not be made on the sole basis of a monetary
investmentin IT, which deliversa wide
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364351
There are few universally accepted guidelines for evaluating IT projects, with much research
suggesting that many companies have no formal IT justification process, and lack adequate post-
implementation audit techniques, against which project objectives can be measured (Kennedy &
Mills, 1992; Kumar, 1990; Primrose & Leonard, 1987). This claim is further substantiated by
Hochstrasser (1992) who reported in a survey, that only 16 per cent of companies sampled were
using rigorous methods to evaluate their IT investments. Other studies such as that undertaken by
Currie (1995) are less pessimistic.
Willcocks and Lester (1991) concluded that many industry sectors when looking to introduce
IT still use the cost–benefit and competitive advantage as their primary evaluation criteria. While
more experienced users such as central government, publishing and education sectors use a variety
of methods to assess their projects. Willcocks and Lester (1991) found that the most established
sectors such as the financial services and manufacturing industries, with the exception of IT, have
not changed their evaluation criteria since they first introduced IT. This is because some
organisations simply do not have the necessary techniques for alternative evaluation or they lack
confidence in them and/or prefer to keep tried and tested formulae.
There are some techniques which are still widely used in justification investment in IT such as,
ratio based techniques, etc. which are based on the traditional view of ROI. However, there are a
growing number of academics and IT managers who believe, that ROI on its own simply does not
work as an appraisal mechanism for information systems (Irani et al., 1999; Slagmulder &
Bruggeman, 1992). Cost–benefit analysis is an appropriate technique to evaluate internal
effectiveness of IT investments and could be used to identify organisations that mainly look
towards internal benefits from IT (Willcocks & Lester, 1991). Less optimistically, criteria used to
measure internal effectiveness such as capacity utilisation, employee productivity, scrap level, etc.
may have the effect of restricting and biasing the evaluation process. Other less experienced
sectors such as services, agriculture, mining and construction, perhaps encouraged by the IT
industry, are beginning to use more adventurous criteria as a priority over the traditional
techniques. In this sense they may well be able to leapfrog part of their learning curve on IT
evaluation, while more experienced organisations, such as financial and manufacturing may find it
difficult to shed their inherited legacy of techniques and criteria. However, it could simply be that
the financial services and manufacturing industries are satisfied with their evaluation methods and
therefore do not need to look elsewhere. Whilst the less experienced sectors have had to find new
criteria because established evaluation methods may be adapted to their industries or specific
According to Willcocks and Lester (1991) management and financial controller’s attitudes have
changed towards the IT investment criteria, in the sense that:
*IT is seen more as a support function rather than a strategic tool;
*executives are unsure about how IT may be effectively implemented; and
*most view IT from a technical rather than a business approach.
Based on the literature review on investment justification in IT projects, some significant
general points emerge from reviewing the major research studies in this area:
*managers have found it difficult to justify the cost associated with purchase, development and
use of IT in financial terms,
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364352
*the difficulties in measuring benefits and cost are thought to be a major constraint to IT
*there should be methods other than financial criterion devised to investigate the IT investment
*the current financial justification methods are inadequate to deal with IT investment issues,
*intangible benefits are valuable assets but cannot be quantified in monitory term.
*IT investment should be part of infrastructure investment of an organisation.
In order to study the implications of IT on organisational performance and for the justification
of investments in IT projects a conceptual model is developed and presented in the next section of
3. A conceptual model for evaluation of IT projects
Existing methods for justifying the investment in IT projects are considered to be inadequate
based on reasons that include lack of strategic integration and ignoring the intangibles and non-
financial performance measures. With this in mind, an attempt has been made to address the
benefits and costs at all levels of organisations including various decisions making at different
levels together with appropriate performance measurements. A conceptual model that places
emphasis on evaluating the benefits of strategic, tactic, operational, financial and intangible
investment appraisal techniques is presented in Fig. 1. This model offers a feasible, potentially cost
effective method to determine if investment in IT is a viable proposition taking into consideration
the points mentioned above.
3.1. Strategic impact
Inputs into corporate strategy need to be linked to the objectives of the business. The essential
nature of this tie-up is twofold. Firstly, it provides the basis for establishing a clear strategic
direction for the business, and demonstrates both the strategic awareness and strategic
willingness, which are essential to corporate success. Secondly, it will define the boundaries and
mark the parameters against which the various inputs can be measured and consistency
established, thus providing the hallmarks of a coherent corporate plan. For each company, the
objectives will be different in nature and emphasis will reflect the nature of the economy, markets,
opportunity and preferences of those involved. The important issues here, however, are that they
need to be well thought through, held logically together and should provide the necessary
direction for the business. Typical measures concern profit in relation to sales and investment,
together with targets for growth in absolute terms or with regard to market share. Businesses may
also wish to include employee policies and environmental issues as part of their overall objectives.
3.2. Tactical considerations
On this branch of the conceptual model, resources are identified and as such there is a need to
establish ‘tactical’ critical success factors (CSFs). These should be project specific, and are
requirements, which must be fulfilled by isolating detailed tasks, processes and resources, to
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364353
ensure medium/short-term tactical success. If these CSFs are not achieved, they will become an
obstacle to corporate progress, and may ultimately result in a loss of business, and failure in the
achievement of project deliverables (Hochstrasser & Griffiths, 1991; Swamidass & Waller, 1991).
It is essential that when tactical CSFs are identified, appropriate ‘hybrid’ performance measures
are identified and described. Such measures might include the impact the project has on turnover,
manufacturing lead times, new product development, and so on. Although the strategic
perspective may not have non-financial indicators, the tactical dimension will have a combination
of both tangible and intangible measures. Furthermore, it is essential to develop appropriate
mechanisms for the quantification of the tangible measures.
3.3. Operational performance
The next immediate consideration is ‘operational’ evaluation. Here the identification of
operational project specific critical success factors (CSFs) is done. These are requirements, which
Fig. 1. A model for investment justification in IT projects.
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364354
must be achieved at an operational day-to-day level, to ensure project success. Again, when
operational CSFs are identified appropriate micro performance measures must be detailed. These
considerations could be classified as follows: IT and IS are being developed with the IT or IS
department working closely with the business functions, the company emphasising on the
importance of balance between involvement of user departments and technical IS or IT functions
in the design of IS. In operational justification, the existing IT infrastructure operation has to be
considered to resolve the integration problems. Data migration, upgrades, host servers, the need
for a database, level of internal expertise, system administrator, need for training, department
users affected, type of licence required are just some of the issues in this branch of the model.
3.4. Financial considerations and justification
Another consideration is that of ‘financial’ evaluation. Naik and Chakravarty (1992) have
identified issues associated with organisational financial positioning that should be raised. These
include: Is the company in a position to make the required investment? What are the sources of
finance for capital budgeting? Does the investment fit in with the company’s overall strategy?
What is the overall outcome of the investment in IT/IS. This means increase in profit, ROI, etc.
Once finances are agreed, and in place, the objective is then to match the most appropriate
financial appraisal technique to the characteristics of the project being implemented. Preliminary
research (Hochstrasser, 1990; Farbey, Land, & Targett, 1995) suggests that this is possible, as it is
claimed that project characteristics affect the way in which an investment decision is made, and
therefore indicate which of the alternative appraisal techniques might be more suitable for a
particular investment. This process is further assisted, as the individual project characteristics
would have already been addressed during ‘strategic’ and ‘tactical’ justification.
The financial performance of the investment is then examined to see whether the suggested
financial returns achievable meet the specific requirements of the organisation (payback period,
hurdle rates, etc.). This process is essential, as applications of IT as high installation and start-up
costs, and when combined with over optimistic forecasted savings and ambitious benefits, could
ultimately result in the project being considered a failure. It is therefore necessary to include this
issue, as a successful investment decision must yield a return in excess of the cost of capital
invested (Kaplan, 1993).
3.5. Intangible benefits
Rate of return on investment (ROI) methods are based on an ‘investment’ view of decision
making. Managers are seen as having a certain amount of money under their control and they
decide to ‘invest’ in the projects that will bring the largest return. This process sometimes has the
sophistication of a ‘hurdle’ rate, which is the minimum rate of return from a project before it can
be approved. However, some investment decisions do not fit in with this ‘investment’ view of the
Owing to the dynamic factors inherent in IT investments, evaluation must be regarded as a
continuous process which needs to be constantly reviewed. It cannot be tenable to justify a policy
proclaiming a single one-off evaluation procedure. Without regular re-evaluation, additional
potential benefits may be missed for the following reasons:
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364355
*the technology itself may develop to a stage where cheaper technical solutions become viable;
*users may outgrow the current system; and
*the demands of the market environment in which a company operates may change so that older
systems no longer address current needs.
The lack of relevant and regular evaluation procedures may lead to the loss of control of IT
investments. Without relevant evaluation procedures, the introduction of IT is based on an act of
faith without repeating these procedures at regular intervals, benefits once achieved may no longer
be realised. As such, the development of a comprehensive programme is not an overhead, but an
investment in a valuable tool for supporting a company’s strategic IT deployment.
4. Research methodology
A case study is a ‘‘methodology based on interviews, which are used to investigate technical
aspects of a contemporary phenomenon with its real life context; when the boundaries between
phenomenon and context are not clearly evident; and in which multiple sources of evidence are
used’’ (Yin, 1984, p. 3). Thus, a case study approach may lead to a more informed basis for theory
development. It can provide analytical rather than pure statistical generalisations. Thus, ‘‘theory’’
can be defined as a set concepts and generalisations. A theory can provide a perspective and a way
of seeing an interpretation, which ultimately leads to understanding some phenomenon (Agar,
1986). Thus, a case study was used to gain an understanding as to how the developed model could
be used to justify IT in the selected organisation.
Structured interviews were used as the primary source of data collection. The questions asked
can be found in Appendix A and were divided into six different categories: Company’s details,
strategic, tactical, operational, tangible/intangible, and cost related benefits of IT employment.
The questionnaire was used to interview the Knowledge Manager in the selected case company.
The questionnaire has been designed to study the major dimensions of the model. These include
strategic impacts, tactical considerations, operational considerations, tangibles and intangibles.
The main objective of the case study was to study the application of the model in the real world.
5. The case studyFICL
ICL is a leading European IT company. Operating in over 80 countries, it supplies integrated
system and services that improve the performance of its customers’ business. In 1997 it generated
revenues of 3.1 billion pounds. Fujitsu is the major shareholder and ICL is an autonomous part of
the Fujitsu group of companies. ICL was formed in 1968 by the merger of leading British
indigenous computer suppliers, and its corporate centre is in London. In 1984 ICL was acquired
by STC PLC, which then became the second largest UK based industrial electronic group. In
November 1990, Fujitsu Ltd. of Japan invested in ICL by taking 80 per cent of its share holdings.
Appropriate data were collected by interviews at ICL’s headquarters in Slough, England. The
interview was arranged and given by the Knowledge Manager (KM). The responsibility of KM is
to provide information on all the projects, contracts, bids, R&D, successes and failures, lesson
learned, etc. The KM provides this facility by creating an internal web page which contains this
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364356
information and makes it available for the selected individuals across the company, who have
been gives passwords to gain access to these pages. For this service, they were required to
purchase suitable equipment, employ skilled staff and continuously update their legacy software
and hardware. Naturally, this required financial justification. The purpose of case analysis,
therefore, was to establish investment justification for such an operation and whether or not this
information centre fits in with proposed model described above.
6. Analysis of data
In this section, the data collected through a structured questionnaire (see Appendix A) and the
information acquired from the interview with respect to the developed model are analysed.
Being an IT company, ICL is of the view that IT is vitally important and plays an essential role
in the survival of any business in today’s competitive market. On the question of justifying
investment in IT, the KM’s answers are very much in line with the framework offered earlier.
The effectiveness of IT investment can undoubtedly be maximised through better strategies.
The elements within the infrastructure strategy should be regarded as an agreed standard set of
integrated components required to offer ICL a viable IT platform.
This strategy, they found to be continuously changing to address the need for adaptability in an
ever-changing world of technology. One of the important issues within the strategy relates to the
question of the mobility of staff. The KM made the following comment:
For example, fixed PCs are not suitable for a sales person. ICL would like its people to be able
to get into the network at any time, any where through a secure fire wall and get information
without it falling over.
Within the department was no traditional cost justification calculation. The KM stated that:
It is a matter of writing a short report informing the director of amount needed to carry out a
job, the reason for this is that if there is no chance of getting the money, the time spent
preparing a formal report will not be wasted. The investment/expenditure is done as and when
it is needed, so long as it is within the IT strategy. Their top management is in total support of
investment in IT and encourage their customers to do the same.
In fact, one of the ways ICL do cost justifications is to estimate the cost of not doing it.
However, the KM considered that this method of justification was not scientific and stated:
Just before 1980, ICL was responsible for implementation of a word processing system into the
company, it was impossible to predict what effect the word processing would have, ICL had to
go through a vigorous cost justification process and had to loose two people. The argument was
that if we do this, then we do not need as many people. The misconception here was that by
losing two people the company also lost the experience, loyalty, and also implanted the fear for
future IT implementation into other staff. That was 20 years ago, today its absolutely
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364357
imbedded, everybody has IT at their disposal. Today there are 19000 people in the company;
when it was introducing the word processing, the organisation had 400 people with 5
The KM then added ‘‘So therefore the way of justifying an IT implementation is cost of not
having itFthe place will fall apart’’. It transpired that KM in fact has been involved in many
projects before, in none of which could the project manager quantify the information, it would
start by using scientific methods; however, soon they would realise that this would not work in
monetary terms. For any given IT projects then, they would try to estimate what is the cost of not
The expectations from the new investment had been to gain a competitive advantage. The aim
was do something faster with improved quality and accuracy and by doing it better ICL hoped to
be able to respond better than their competition. However, it was very difficult for ICL to estimate
the cost for such projects.
Job enhancement is another advantage of investment in IT, keeping people knowledgeable and
learning new techniques is all part of ICL’s competitive advantage. Also, investment in IT is of
strategic importance to the company. Traditionally, companies such as ICL were measured on
inventory and how much they had in stock. Today, the value of ICL is measured by how much
their people know, that is, their Intellectual Capital, which of course is difficult to quantify.
ICL is involved in hundreds of different projects; however, individual employees do not know
anything about these projects, and the individual project managers who work on these projects
are exposed to the details and therefore are aware of all aspects. This resulted in very few people
having vast experiences across the company. It was perceived that a very limited amount of
knowledge is shared across the company and this has led to reinventing the wheel every time, as
no solid library of documentation had been kept on previous projects carried out. The KM’s aim
was to rectify this imbalance. It was envisaged that IT would help the company to capture this
information and therefore enhance its value. Another very important aspect of IT relates to the
use of management information tools. With these mechanisms data are readily available for
commercial directors to make strategic decisions. This medium was not available to ICL but the
company is working towards this goal. It has envisaged that these tools will enable the company
to respond quickly to the customer’s needs and consequently their relationship will undoubtedly
6.3. Cost related
ICL had a capital budgetary procedure for investment in IT. The procedure aimed to focus the
project owner’s mind in the way they are aiming to use IT and how the performance of a project
was to be monitored. Specific performance indicators were used by management to make a
decision as to whether or not to fully fund the investment. If the indications were negative, even
though the budget may well have been allocated to the project and by no means exhausted,
management had the right to withdraw the funding. For IT expenditure, no ROI calculations
A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364358
were carried out; however, risk assessment was considered to be important and there were risk
management teams dedicated to undertake risk assessment. For example, ICL is involved with the
London Underground Ticketing System whereby they are looking at developing a ticketing
system that can use smart card, transactions as ICL will be paid on each transaction rather than
by the project. This project was considered to be a high-risk venture.
Security for some IT projects, are a major consideration. We are about to embark on a new
project, which is going to cost millions of pounds and will be going through with our group
By implementing IT, the company is exploiting its existing market. By providing a web based
information system, we are able to share information with our customers, quickly and
effectively. When we sell a service to a customer, we tend to win a whole range of other services
and IT helps us to do that because we can share information a lot easier.
The success of projects are not measured in monitory terms, the projects progress with such
speed that it will be not cost effective to evaluate the success of the project. However, if the project
is not progressing well, this is when the project costs will be taken into consideration.
Customer perception was very important to ICL. It has happened in the past, when ICL has
sent consultants to a customer site and found that company had far superior IT than ICL. The
KM stated that:
It is therefore of vital importance that we use the right technology at the right time for the right
customer. This is part of the strategy to have a good image which will increase the confidence of
our customers in our capabilities.
Implementation of IT was welcomed by all members of ICL staff and in fact was felt to be long
over due. Technology changes all the time and the company had to keep abreast of the latest
developments. However, with changing technologies come uncertainties and the need for greater
support. As a part of measuring the effectiveness of these steps taken, help desks were established.
An evaluation process was carried out at several stages of purchasing new IT. Depending on the
level and size of purchase, many different layers of management were involved in ensuring that the
new purchases were in line with the company’s strategy.
At one stage, the company went through a phase when the IT departments did not work with
the business functions. However, they were aware of this situation and relationships were
established to overcome this issue. There were checks carried out all the time to make sure that
ICL’s entire IT system was Y2K compliant. A dedicated committee had been assigned to this task
to ensure that the systems currently in place were Y2K compliant. This was further developed to
take a look externally at customers systems’ Y2K compliancy.
The company no longer has a mainframe-distributed service. They used to have mainframes
and a number of terminals but now they have servers, which facilitate a community of
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applications. The operation has changed from one of a star system to a fully integrated (plant
servers) one and some applications are shared.
Integration of ICL’s system was an issue, which operationally was taken seriously. It happened
all the time, as it was seen to be a vital ingredient in developing the internal network. This is more
so recently when they have had to capture some information from their legacy systems into a new
one. The systems are now being developed in modules. This is because the requirements of the
business increases so can the IT systems which support it. Database is another area where it
requires attention. Work is constantly carried out on integration of series of databases. Daily
system administration is an operational issue, which is outsourced to another part of the
The main aim and objective of ICL is to improve the quality of service it provides to its
customers. Traditionally, the company has sold a solution to a customer and maintained it.
Today, the aim of the company is to provide a solution for customers’ customer. For example,
ICL is providing cash dispenser machines, for a variety of high street banks and it is paid on every
transaction. The benefit to the customer is reduced cost and improved quality of service. There
have been some projects that have not worked, and as such have cost the company a fortune. This
failure of a project can be primarily contributed to bad communication between the customer and
the account team, requirements not being understood, and risk analysis not being carried out
ICL has taken a proactive role in IT. The company sees IT as an essential part of the
infrastructure of the business rather than a mere tool. They provide a comprehensive range of
services to help their customers exploit their IT investment. They facilitate their management to
have a right medium to have access to the right information, which would lead to strategic
decisions and win contracts. ICL has a comprehensive IT strategy which it has to comply with.
Traditional methods such as RIO, payback period, etc. are not carried out for justifying IT
investment but there are procedures, which include preparation of a report, which addresses the
issue of the cost of not investing in IT. ICL illustrates/portrays a positive outward looking attitude
toward IT development, which is a highly effective lever for commercial success.
The findings from the case study have indicated that the current accountancy evaluation
process, for investment justification in IT such as ROI is not sufficient to warrant an investment
decision. There are many intangible benefits offered by IT, which are not of a quantifiable nature
but essential to the endurance of a company. When implementing IT overall consideration must
be given to the company’s organisational strategy and full support and commitment of the
company must be in place before commencing any projects. In particular, an organisations IT
manager should have full knowledge of the company’s strategy, commitment from management
employees are also some of the important issues that need to be considered when contemplating
an investment in IT. Tactical considerations are equally consequential in the success of an IT
project, as there should be measures to monitor the success of the investment. These performance
measures should be constantly monitored to ensure that the project is progressing in line with the
aim and objectives of the project as well as the organisation’s strategy.
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Appendix A. Interview Questions
Had primary/short-term objective
Had secondary/long-term objective
There is an IT strategy
IT is seen as essential to business
IT investment had top management support
When are projects considered:
d As and when proposed,
d Management asks for projects periodically,
d Management advises when necessary,
d When IT strategy dictates,
d When customer need/dictate it
Not investing in IT will lead the Company to suffer
What expectation do you have from the new system?
service to the public,
quality of product,
improve management information,
By implementing the new IT has the quality of service/product improved?
Is there a management information tool built into this IT system?
Is the implementation of new IT will have any competitive advantage?
Will the IT improve the customer relationship?
Has there been any invitation to tender?
Has there been any risk analysis carried out?
By implementing the new IT will the company consolidate the existing market and create
Has IS development been led by the CEO? Chief Executive Officer?
Can data available/generated by IT be used for later use?
(therefore time/labour savings)
Can the success of the project be measured by monitory value?
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If relevantFHow will customers perception change with the introduction of the new IT?
d Will increase the business
d It is cosmetic but good for the image
d It would not make a difference at all
What implication will new IT system have on staff in company project?
d Welcome the move
d Longed and well over due
d Concerned that they will not be able to cope
Who completes/caries out the evaluation?
d IT department
d Users department
d Separate committee
d Project office
Are you satisfied with IT evaluation process?
d Not satisfied
d Could do better
Have IT and IS been developed with the IT or IS department working closely with the
Has your Company put any emphasis on the importance of balance between involvement
of user departments and technical IS or IT functions in the design of information systems.
Are other departments going to be affected by it?Y
Is there sufficient budget set aside for this project?
For any capital expenditure, is there any
ROI calculation carried out?
Is there a budget for security?
For a given IT investment, is there any evaluation methodology such as:
d Return on investment (ROI)
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d Industry standards Download full-text
d Arthur Anderson SD method
d Cost benefit
d CCTA guidelines
d Common sense
d Risk assessment
d Finger in the air
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