It Doesn’t Add Up: Why Financial Evaluation Methods are Inadequate in Appraising IS Investments

Corporate investment in Information Systems (IS) is growing at an ever increasing rate and is being touted as a solution to business issues and as a source of prosperity. Growth in IS and the opportunity this offers has increased the number and range of ideas for new IS investments to be presented to organisations. With such a vast array of options available, organisations are looking for better ways to justify these investments and one way in which this has been done is to employ evaluation methods which have traditionally been used to appraise capital financial investments. However, there are drawbacks of doing so. This study aims to explore the merits and deficiencies in applying evaluation methods from the accounting, finance and economics disciplines to IS investments. A deeper look in to the structure and intended use of each method will be coupled with a review of empirical studies in the area to shed some light on these methods in practice

The Impact of Information System and Technology (IST) Investment Announcements on the Market Value of Australian Companies: An Event Study

The research presented in this paper studied the impact selected Information System and Technology (IST) investment announcements had on the market value of firms. It applies the event study method, a method to measure how a company’s share price reacts to new information, to a list of publicly traded Australian firms. It uses and explicitly describes its approach to the selection of a reliable sample and the calculation of share return, which is well-known in financial research, but not established in IS research On this background a total of 62 announcements related to the launching of new IST products or initiatives were selected over 1996 to 2003. On a whole the research showed that these announcements yielded positive abnormal returns only on -1 to +2 days from the announcement dates, the other days in the event window -15 to +15 yielded negative abnormal returns. The results indicate a possible market reaction, but they were not found to be statistically significant. This, in line with previous studies, supports and extends the claim that IST investments have not resulted in increased market value for publicly traded firms not only in the United States, but also in other developed, western countries such as Australia

THE ADVANCEMENT OF IS EVALUATION: A LITERATURE REVIEW

A significant amount of attention has been placed on IS Evaluation within the literature over the years and much has been written. In this paper we review the advancement of research in this area. We found however, that only a limited understanding of the phenomenon exists and only modest progression has been made: while the literature states the importance and objectives of IS evaluation, and its complexity and problematic nature,, not all concepts related are clearly defined. In addition, several taxonomies for classifying evaluation approaches exist, but there is no agreement as to which of these is acceptable for the entire research community, let alone for practice. Our review also shows that the literature is replete with reports of what industry uses in terms of evaluation approaches and methods, but that there is a lack of thorough accounts of actual evaluation practice, what works well and what the concrete problems associated with it are. Finally, we also found that the role and interplay of formality and intuition in IS evaluation is controversially discussed. On this basis the paper identifies a research gap and argues for more detailed empirical studies of actual evaluation practice to advance the field of IS, both in theory and practice

Pre-Investment Information Systems Assessment: An Actor Network Theory Account

The dominant view in the information systems (IS) and software engineering literature is that the application of a rigorous pre-investment evaluation methodology is the key to ensuring the selection of the best IS projects – that is those with the highest expected value for the organisation and with the highest probability of success. While the literature is replete with methodologies for the evaluation of IS projects, there is insufficient attention given to the evaluation process itself and to what constitutes successful IS evaluation. Whilst some within IS argue that the development of more elaborate evaluation methodologies is necessary for the advancement of the field, many report that it is not methodologies as such that need improvement. What is missing is an understanding of IS evaluation processes in practice and how organisations adopt and apply evaluation methodologies. In this paper we focus on the IS evaluation process in a company with a history of IS successes and examine the ways in which the evaluation process shapes and ensures the selection of the best IS projects. By adopting the Actor Network Theory lens we demonstrate a) that the view of pre-investment IS evaluation in the literature is very narrow, b) that the practice of IS evaluation produces the ‘object’ it evaluates, c) that this object, that is the IS project proposal document, is an inscription device produced by relations in the actor network formed around it, and d) that these networks and relations as well as the translation of actors’ expertise, experiences and interests into the document (inscription device) are critical for IS project proposals evaluation and their chances of success

Understanding IS Projects Evaluation in Practice through an ANT Inquiry

In this paper we propose a radical departure from the dominant conceptions in IS evaluation literature by adopting Actor-network Theory (ANT) to provide a better understanding of the development and evaluation of IS proposals in practice and examine the ways in which the evaluation process shapes and ensures the selection of the best IS projects. By drawing on a field study of the IS evaluation processes in a company with a history of IS successes, we reveal the relational nature of IS project proposals and the ways they are constitutively entangled with business processes and practices. Our ANT account demonstrates a) that the view of pre-investment IS evaluation in the literature is very narrow, b) that the practice of IS evaluation produces the ‘object’ it evaluates, c) that this object, that is the IS project proposal document, is a focal actor (an inscription device) produced by relations in the actor-network emerging around it, and d) that reconfiguration of these relations involving the translation of actors’ expertise, experiences and interests into the IS proposal documents are critical for the evaluation of IS project proposals and their chances of success

A Framework for Identifying the Intangible Capital Value of ICT Investments.

Adequately considering the intangible value of Information and Communication Technology (ICT) investments has been problematic for as long as organisations have been making ICT investment decisions. This paper presents a framework for considering the intangible capital value of ICT investments. The framework applies the tripartite model of intangible resources, as proposed by the Australian Society of Knowledge Economics. The development of the framework was commissioned by the Australian Government Information Management Office (AGIMO) to inform the Australian government’s Business Case Initiative process and its ICT Investment Framework. The concepts, models and frameworks presented in this paper provide a fresh approach to IT investment strategy and governance by supporting the consideration of the intangible capital value of one ICT investment vs another when making ICT investment decisions. In addition to taking a systems perspective they are grounded in emerging best practice concerning the consideration of intangible capital value as adopted by the accounting profession and academia

Storytelling as a tool for knowledge transfer in the IT industry

Pre-investment evaluation of information system project proposals persists in being problematic and highly risky in practice. Numerous evaluation approaches and methodologies, offered in the literature, have not contributed to major improvements in practice. As the literature review shows, these methodologies have assumed an ideal of objective and scientific evaluation and taken the view of methodology as science. In this paper we aim to revisit the notion of IS evaluation methodology in practice and specifically explore the methodology as both the ‘science’ and the ‘art’. We achieve these aims by conducting an Actor Network Theory (ANT) study of IS evaluation in a large financial services company. The ANT study allowed us to investigate the methodology as it is enacted in IS project evaluations in practice without making any a priori decision of what methodology is or should do. By defining a series of processes, inscription aids and mandated checkpoints we found that the evaluation methodology engenders the evaluation process as ‘science’; and by allowing a degree of freedom in conducting the evaluation processes, the methodology is also enabling the evaluation processes to emerge as ‘art’ and by doing so stimulating creativity and innovation. Thus the ANT approach assisted in our discovery of the dual nature of methodology as simultaneously science and art

Mediating Service Recovery Satisfaction in the Relationship between Internet Service Recovery and Customer Loyalty

This current study purposes to identify the relationships between service recovery strategies, service recovery satisfaction, and both dimensions of customer loyalty in regard to Internet providers using the partial least squares (PLS-SEM) approach on a sample of 430 internet customers in Egypt. This study contributes insights into how seven service recovery strategies affected customer loyalty with its both attitudinal and behavioral dimensions directly and indirectly via service recovery satisfaction. These insights are helpful for service managers faced with service failure and academicians interested in how service providers respond to service failures and customer dissatisfaction in the B2C context. The results of this study show that some SR strategies positively influence both service recovery satisfaction and customer loyalty toward internet providers. Furthermore, service recovery satisfaction positively influencing the customer loyalty. In addition, SRS plays a mediating role in the relationship between SR strategies and customer loyalty. The results highlight that internet service providers should implement SR strategies quickly and with an empathetic manner to satisfy customers and to encourage customer's loyalty. Finally, some implications and further research directions were presented