Information systems are vital to the operation and management of every organization. Managers investing in IS are interested in the benefit their organizations gain from this investment. However, neither managers nor researchers have found a way to justify investment in IS based on its contribution to an organization’s performance. Most studies examining the relationship between IS and performance level have found no positive relationship between the two variables . But these studies have been holistic, relating the total IS investment—software, hardware, personnel—to the total profit of the organization. Our study now suggests that the analysis should be particulate, not holistic. An organization should not look for benefits by viewing the IS applications portfolio as one entity. Benefits should be found for each individual area of activity/IS application (such as suppliers and purchase orders, customers, and sales) as a function of the organization’s characteristics. Hence, IS managers should justify the investment in each IS application, not in the entire IS application portfolio. A 1985 study that examined service sector firms found no significant relationship between investment in IS and high performing firms . A 1992 study found a “statistically significant negative relationship between productivity growth and the hightech intensity of the capital” . However, it also pointed out that the negative results may have been due to measurement problems. In 1993, Brynjolfsson summarized this issue: “It is possible that the benefits of IT investment are quite large, but that a proper index of its true impact has yet to be analyzed,” adding that “The lack of good quantitative measures for the output and value created by IT has made the MIS manager’s job of justifying investments particularly difficult” . We offer other measurements and a different approach to identifying and evaluating the benefits derived from... [continues]
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