Overview

Why are companies spending more and more money on IT when most of them find it so difficult to justify their investment? The answer to this is not straightforward; but there would appear to be a number of important issues for investment decision makers to consider:

• the intangibility of costs and benefits

• the hidden outcomes of investing in IT and

• the changing nature of IT systems.

A proportion of most IT investments is associated with its tangible costs and benefits. These address the elements of an investment decision which can be easily identified and have a quantifiable value attached. Usually these have a historical cost in accounting terms and some physical form, e.g. a piece of hardware or off-the-shelf software. By contrast, intangible costs and benefits commonly do not have a physical form and are accounted for in terms of some expected future value, rather than historical cost. As a result they are difficult to measure and problematic to quantify. Examples of such intangibles include increased market share, gains in customer service and enhanced corporate image, among others. Benefits such as these are difficult to quantify with any degree of accuracy and increasingly rely on the subjective judgements of the decision maker.

While such intangibles are obscure and qualitative they are, nevertheless, widely recognized by decision makers. However, with any IT investment there may be a number of insidious outcomes which are hidden from the decision maker. This involves the qualitative...