Modeling and Measuring the Business Value of Information Technology

26 Pages Posted: 31 Oct 2008

See all articles by Robert J. Kauffman

Robert J. Kauffman

Singapore Management University; Singapore Management University - School of Information Systems

Charles H. Kriebel

Carnegie Mellon University - David A. Tepper School of Business

Date Written: March 1988

Abstract

Determining the 'business value' of information technology (IT) requires managersto choose performance measures which are well-suited to capturing the economic impacts of theapplication they are evaluating. In this paper, the authors discuss a promising approach for bridgingthe gap between a theory for rational decisions and management practice in evaluating investmentsin IT: Data Envelopment Analysis (DEA). The referent discipline for the discussion isproduction economics, and the authors review basic concepts concerning performance measurement,efficiency, productivity and economic contribution or value-added from an economist'sperspective. DEA's promise lies in its ability to handle multiple input and output production environmentsand its management action orientation. As an illustration of this potential, DEA isapplied to assessing the performance of an automated teller machine (ATM) network, an ITwhich creates economic impacts at various organizational levels of a commercial bank.

Suggested Citation

Kauffman, Robert J. and Kriebel, Charles H., Modeling and Measuring the Business Value of Information Technology (March 1988). NYU Working Paper No. IS-88-24, Available at SSRN: https://ssrn.com/abstract=1289710

Robert J. Kauffman (Contact Author)

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore
65-6828-929 (Phone)

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

Charles H. Kriebel

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

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