Quantifying the Business Value of Information Technology: An Illustration of the 'Business Value Linkage' Framework
38 Pages Posted: 31 Oct 2008
Date Written: August 1991
Senior management's ability to gauge the business value of investments in information technology (IT) hasbeen seriously hampered by a lack of analytic tools to conduct sound performance assessment. In thispaper, we present a conceptual framework called a "business value linkage" that is used to represent theprocesses by which the direct outputs of an IT are transformed within the firm and its operatingenvironment into enhanced revenues, reduced costs and new strategic opportunities to increase marketshare. Utilizing appropriate modeling and econometric methods, we illustrate our approach by analyzingseveral hard-to-measure aspects of the business value of automated teller machines (ATMs) in retailelectronic banking. The results show that the hardest to measure impacts in some cases can have thegreatest business value.
Keywords: Automated teller machines, ATMs, banking, business value, business value linkage, electronic banking, electronic funds transfer, EFT, information technology investment, IT investments, investment evaluation, retail payment systems, strategic information systems
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