Measuring performance of IT investments: Implementing the IT Contribution Model

Abstract

The pressure to remain competitive in a dynamic, global economy forces organizations to consider the results-based approach when deciding on investments in information technology (IT). Senior IT managers are convinced that they do create value and believe that if measured properly and with adequate support, they would be significant profit centers for their organizations. However, without adequate performance evaluation systems they have difficulties proving the value-adding role of IT and find themselves continually fighting for and justifying the resources that are needed. The article provides a model and a methodology for evaluating performance in IT to help chief information officers (CIOs) better justify and evaluate their initiatives and aid CEOs and CFOs in making better resource allocation decisions. The IT Contribution Model and the subsequent IT Payoff Methodology is illustrated by and empirically tested in Istrabenz Group, an international group engaged in food, investments, tourism, and energy. The study shows that the methodology's requirement for active employee involvement in the identification of the critical drivers of success, the expected outputs of the IT initiative, in particular, substantially facilitates the IT initiative implementation by increasing the level of understanding and acceptance.

Citation

Epstein, M.J. and Rejc Buhovac, A. (2008), "Measuring performance of IT investments: Implementing the IT Contribution Model", Epstein, M.J. and Lee, J.Y. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 17), Emerald Group Publishing Limited, Leeds, pp. 43-79. https://doi.org/10.1016/S1474-7871(08)17002-2