Executives’ Perceptions of the Business Value of Information Technology: A Process-Oriented Approach

Abstract

Despite significant progress in evaluating the productivity payoffs from information technology (IT), the inability of traditional firm-level economic analysis to fully account for the intangible impacts of IT has led to calls for a more inclusive and comprehensive approach to measuring IT business value. In response to this call, we develop a process-oriented model to assess the impacts of IT on critical business activities within the value chain. Our model incorporates corporate goals for IT and management practices as key determinants of realized IT payoffs. Using survey data from 304 business executives worldwide, we found that corporate goals for IT can be classified into one of four types: unfocused, operations-focus, market-focus and dual-focus. Our analysis confirms that these goals are a useful indicator of payoffs from IT in that executives in firms with more focused goals for IT perceive greater payoffs from IT across the value chain. In addition, we found that management practices such as strategic alignment and IT investment evaluation contribute to higher perceived levels of IT business value.

Revisiting IS business value research: what we already know, what we still need to know, and how we can get there

“…This argument indicates the necessity to distinguish between performance, which is measured by means of economic indicators, and its (potentially different) values in terms of the subjective interpretation of (different) stakeholders. While the former perspective is referred to as 'outcome approach' (Sethi & King, 1994), the latter corresponds to what is referred to as 'perceived benefit' (Tallon et al, 2000;Chau et al, 2007). However, the literature is remarkably silent on the aforementioned aspects of IS business value.…”

“…We find it important to note that the relevance of considering subjective preferences of stakeholders goes even beyond the evaluation of intangible value items. Even when 'hard' economic performance measures are applied, such as productivity and total shareholder return, different stakeholders interpret these values differently when they have partly conflicting interests and thus divergent preferences (Tallon et al, 2000;Chau et al, 2007). In order to account for this phenomenon, researchers can draw on the concepts proposed in utility theory (Fishburn, 1970).…”

A Research Model for Measuring IT Efficiency in German Hospitals

“…There is strong evidence from literature to take on a business process perspective, because it is more appropriate to investigate the impact of IT factors on business outcomes (Barua, Kriebel, and Mukhopadhyay, 1995;Tallon, Kraemer, and Gurbaxani, 2000). One of the reasons to focus on business processes is to avoid a level of aggregation (such as analysis on firm level) that would lead to disguising the effects of IT by having too many influencing context factors.…”

Impact of IS Strategy and Technological Innovation Strategic Alignment on FirmPerformance

“…In this study, the direct approach of self-typing to measure business-IT strategic alignment [115] was used to determine the alignment between technological innovation and IT strategy. Participants were directly asked to determine the extent of alignment between IT and business strategies [116] (how IS supports technological innovation), shared knowledge and understanding between business and IT executives [67], and whether alignment impacts the performance of their firms.…”