Evaluating business process‐integrated information technology investment

Abstract

Because of increasing competition and limited capital budgets, firms need to carefully assess every information technology (IT) opportunity to ensure that their resources are spent judiciously. Conventional wisdom holds that IT has enormous potential. However, organizations continue to question the benefits of IT in conjunction with new corporate initiatives such as business process re‐engineering, e‐commerce, and enterprise resource planning. Despite the potential benefits derived from IT investment, traditional capital budgeting models have failed to estimate true IT values due to their inability to measure complex interactions between IT and organizational performance. This paper presents a business process integrated IT evaluation methodology that integrates business strategy, business process design, and supporting IT investment. The evaluation methodology consists of four phases: strategic analysis; business process design; IT configuration; and performance evaluation. The empirical evidence and computational study strongly suggest that measuring cycle time impact on customers' repurchasing decisions is critical in evaluating the potential value of business‐process‐driven information technology investment.