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Abstract:
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Traditionally, most firms? IT capital investment decisions have been based on
business cases estimating financial returns on individual applications. Infrastructure costs were
often bundled with applications, although disruptive technologies, such as desktop computing
and Internet protocols, led to occasional large lump sum investments. In this paper, we argue that
firms should make four distinct types of IT investments: transformation, renewal, process
improvements, and experiments. Transformation initiatives create significant, long-term
infrastructure that enables major changes in organizational processes. Renewal initiatives
improve the efficiency or effectiveness of existing shared IT platforms. Business process
improvement initiatives increase the net value of business activities, products or services by
leveraging, not building, shared infrastructure. Experiments are business applications focused on
identifying and developing opportunities afforded by IT. We describe these four types of
initiatives and illustrate them using evidence from field research and case studies. We conclude
that firms sho uld be investing in all four types of initiatives in order to address both short-term
profitability and longer-term survival and growth and to develop the robust IT environment and
business applications that are needed to support their desired business model. |
