The use and importance of financial appraisal techniques in the IS/IT investment decision-making process—recent UK evidence

Although the literature on capital investment appraisal techniques (CIAT) acknowledges a heterogeneity in appraisal methods, it fails to consider adequately the possible implications of the heterogeneity of the objects of appraisal. Here the use of CIAT is examined for appraising a particular type of investment—information systems/information technology (IS/IT). The results of a survey investigating appraisal practices of a sample of the top 1000 UK companies are presented and discussed. The extent to which CIAT are used to appraise the financial feasibility of IS/IT investments is determined, while drawing comparisons with findings in the accounting and finance, and IS/IT literature. The importance of the techniques is identified, and the particular problems associated with their use in IS/IT investments, including those related to knowledge and information problems.

[1]  Peter G.W. Keen,et al.  Shaping the Future: Business Design Through Information Technology , 1991 .

[2]  Alan K. Reichert,et al.  AN ANALYSIS OF THE FINANCIAL MANAGEMENT TECHNIQUES CURRENTLY EMPLOYED BY LARGE U.S. CORPORATIONS , 1983 .

[3]  Jonathan Miller,et al.  Measuring and aligning information systems with the organization: A case study , 1993, Inf. Manag..

[4]  Richard Pike,et al.  Do Sophisticated Capital Budgeting Approaches Improve Investment Decision-Making Effectiveness ? , 1989 .

[5]  Chandan Gurnani.  Capital Budgeting: Theory and Practice , 1984 .

[6]  Peter Weill,et al.  Managing Investment in Information Technology: Mini Case Examples and Implications , 1989, MIS Q..

[7]  T. Klammer,et al.  Empirical Evidence of the Adoption of Sophisticated Capital Budgeting Techniques , 1972 .

[8]  Lawrence A. Gordon,et al.  Sophisticated capital budgeting selection techniques and firm performance , 1985 .

[9]  B. Hochstrasser.  Justifying IT investments , 1994 .

[10]  P. Keen.  Value Analysis: Justifying Decision Support Systems , 1993 .

[11]  Leslie P. Willcocks,et al.  Evaluating Information Technology investments: research findings and reappraisal , 1992, Inf. Syst. J..

[12]  Gary L. Sundem,et al.  SURVEY AND ANALYSIS OF CAPITAL BUDGETING METHODS , 1978 .

[13]  Kar Yan Tam,et al.  Capital budgeting in information systems development , 1992, Inf. Manag..

[14]  R. Pike.  An Empirical Study of the Adoption of Sophisticated Capital Budgeting Practices and Decision-Making Effectiveness , 1988 .

[15]  David F. Scott,et al.  The Capital Expenditure Decision-Making Process of Large Corporations , 1975 .

[16]  Lawrence J. Gitman,et al.  A Survey of Capital Budgeting Techniques Used by Major U.S. Firms , 1977 .

[17]  T. Hope,et al.  Business investment decisions under inflation : theory and practice , 1976 .

[18]  Robert W. Scapens,et al.  PERFORMANCE MEASUREMENT AND FORMAL CAPITAL EXPENDITURE CONTROLS IN DIVISIONALISED COMPANIES , 1981 .

[19]  A. N. Oppenheim.  Questionnaire Design and Attitude Measurement , 1966 .

[20]  C. James Bacon,et al.  The Use of Decision Criteria in Selecting Information Systems/Technology Investments , 1992, MIS Q..

[21]  George P. Schell.  Establishing the Value of Information Systems , 1986 .

[22]  C. Allen,et al.  More on Self-Perception Theory's Foot Technique in the Pre-Call/Mail Survey Setting , 1980 .

[23]  Alan Sangster,et al.  CAPITAL INVESTMENT APPRAISAL TECHNIQUES: A SURVEY OF CURRENT USAGE , 1993 .

[24]  Tom Renkema.  Boekbespreking Farbey, B.; Land, F.; Targett, D.: how to assess your IT investment, a study of methods and practice (Butterworth Heinemann, Oxford, 1993) , 1994 .