SAAS: Integrating Systems Analysis with Accounting and Strategy for Ex Ante Evaluation of IS Investments

Abstract

For many companies, investment in information systems (IS) is one of the largest expenditures in the firm's capital budget. An important goal of ex ante investment evaluation of an information system is to reasonably determine the return on investment (ROI) of the proposed information system. However, past research has shown that business managers have significant concerns about the soundness of ex ante ROI evaluations of information systems. This relates to the fact that several benefits of an IS are intangible and nonfinancial. In addition, it has long been recognized that, unlike many other capital projects, IS projects exhibit significant contextual interaction. Further, different professionals such as accountants and Information Technology (IT) personnel often use different approaches to evaluate a potential information system. This study develops a framework and methodology that integrates and accommodates the different perspectives of IT personnel, accountants, and business managers. We propose a flexible ex ante framework and methodology that integrates systems analysis, accounting, and strategy (SAAS). The framework evaluates financial and nonfinancial factors and uses analyses that consider investment approaches used by both IT and accounting personnel. The framework is evaluated in two different organizations and recommendations are made for both future research in this area and for the applied use of the framework by professionals.

Information technology investment governance: What is it and does it matter?

“…This definition was formed by, and is consistent with, the literature on IT investment which acknowledges the importance of governance to ensuring IT investments' contribution to firms' performance by proposing certain structures and processes. They comprise: IT value governance Bajaj et al, 2008), decision making and evaluation structure ; IT investment portfolio (Weill and Aral, 2005;Kumar et al, 2008), IT risk management Kumar et al, 2008), pre-implementation evaluation (Bacon, 1992;Tallon et al, 2000;Langdon, 2006), post-implementation evaluation Sherer et al, 2002aSherer et al, , 2002b, and IT project management Jeffrey and Leliveld, 2004). Weill and Olson (1989) suggest organizations adopt an IT investment portfolio approach when managing their IT investment projects to align the IT investment initiatives with the business strategy and to initiate and involve senior management in tracking large investments in IT.…”

“…In this study, value is defined as "the impact of investments in particular IS assets on the multidimensional performance and capabilities of economic entities at various levels, complemented by the ultimate meaning of performance in the economic environment" (Schryen, 2013, p. 141). IT investments require proper governance, as improper governance of IT investments may jeopardize the level of IT's contribution to the overall business value achieved (e.g., Sherer et al, 2002aSherer et al, , 2002bJeffrey and Leliveld, 2004;Bajaj et al, 2008;Kumar et al, 2008). Prior studies propose areas that need to be governed effectively.…”

Towards Systemic Evaluation of the Business Value of IT

“…Specific evaluation frameworks/methods Balanced Score Card based approaches are proposed for integrative and holistic performance and evaluation tools for IT/IS (e.g. Martinsons et al 1999;Bajaj et al 2008). BSC frameworks provide a familiar measuring concept for business managers but by default their hierarchical format do not support feedback structures from the higher level elements back to the lower level elements.…”

Mining The Literature In Search Of IT Business Value

“…However, different opinions exist on what the best approach is to evaluating IT business value. For example, too much emphasis has been placed on hard aspects, while ignoring the soft aspects (Arnold, 2006;Stockdale & Standing, 2006); a balanced evaluation of the effect of IS on firm performance should include both tangible and intangible measures that are linked to business strategy (Bajaj et al, 2008); IT benefits should be measured before and after implementation (McBride & Fidler, 2003); changes must be tracked to make sure the intended benefits, both financial and non-financial, are actually realized (Sherer et al, 2002); what to evaluate and how to evaluate (Cronholm & Goldkuhl, 2003); lagging effect should be considered and the benefits should be IT specific (Sircar et al, 2000); a comprehensive evaluation should include measures of different dimensions -just one or two measures are not good enough (DeLone & McLean, 1992; and the type of system under study must be specified so as to make meaningful evaluation (Seddon et al, 1999). suggest that the conventional approach to IT evaluation using financial metrics does not reflect real IT business value as there are areas that cannot be measured financially.…”