A Value-Chain Based Model for Supporting Information Technology Investments

20 Pages Posted: 31 Oct 2008

See all articles by Vasant Dhar

Vasant Dhar

New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Information, Operations, and Management Sciences

Date Written: October 1991

Abstract

Business organizations are thinking increasingly in terms of informationtechnology solutions to business problems, as opposed to dataprocessing for supporting the business. Information technology is nowviewed as an important means for achieving competitive advantage.For firms in hardware/software business it is therefore becoming increasinglyimportant to provide clients with the means to do an analysisof business needs and strategies and to think in terms of providingglobal IT solutions that address these needs.The value-chain model articulated by Porter (1985) attempts tolink IT solutions to business strategy. It is based on a simple economictheory: a firm remains competitive by virtue of being a lowcost producer or differentiating its products/services; accordingly itsstrategies must be based on countering forces (such as new entrants,substitute products, bargaining power of buyers and suppliers) thaterode these advantages . Information technology is considered a keyfactor in being able to deal with these forces Accordingly, how much tospend and where to spend on information technology is determined byhow well it enables the firm to deal with its dominant forces (threats).Porter's model has found widespread appeal among practitioners(notably information systems executives) due to its simplicity and intuitiveappeal. Several methodologies have been designed around thismodel that encourage executives to "think through" this model in orderto identify technologies that could provide competitive advantage.However, there are no existing formalizations of the value-chain modeleither by industry, market structure, or organizational structure. Wehave been developing such a model for a specific industry (insurance)with the objective of building an executive support tool that can showinteractively, how a proposed technology or organizational change canimpact specific metrics/values of interest of business processes definedat various levels of abstraction, and thereby the bottom line. By usingsuch a model, an executive can also analyze technology and resourcerequirements required to transform one set of business processes intoanother, more desirable state.

Suggested Citation

Dhar, Vasant, A Value-Chain Based Model for Supporting Information Technology Investments (October 1991). NYU Working Paper No. IS-91-29, Available at SSRN: https://ssrn.com/abstract=1289059

Vasant Dhar (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://www.stern.nyu.edu/~vdhar

New York University (NYU) - Department of Information, Operations, and Management Sciences

44 West Fourth Street
New York, NY 10012
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
504
Abstract Views
2,741
rank
65,013
PlumX Metrics