TABLE OF CONTENTS Although there are no certainties about the overall impact of IT on business economics, there are numerous large-scale examples of IT investment with little or no associated process change. The most prevalent use of computers by individuals in business is word processing hardly a process innovation
If nothing changes about the way work is done and the role of IT is simply to automate an existing process, economic benefits are likely to be minimal.
Thomas Davenport, Process Innovation: Reengineering Work through Information Technology (1993)
Before embarking on the discussion of how IT effectiveness may be measured and the role of cost benefit analysis in this process, it is appropriate to consider some of the general questions related to the matter of assessing business performance.
There is a deep need in Western industrial culture to regularly measure business performance. There are several reasons for this, including the need to enhance performance as well as ensure growth. Both performance and growth enhancement are required to meet stakeholder expectations including increased salaries, wages, profits, dividends, etc. Although business performance measurements take a variety of forms and are therefore difficult to describe in general terms, business performance assessments frequently focus on the issues of liquidity, activity, profitability and future potential. In assessing these dimensions, a variety of ratios are used such as EBIT%, NP%, GP%, stock turnover, ROI, ROE, administration costs/turnover, asset turnover, capital intensity, etc. The number and type of ratios used vary from...
