This special report on the current state of the art in measuring the value of information systems (IS) is by two writers for the respected magazine I/S Analyzer. Their purpose, and the purpose of IS measurement, is to help people make wiser investment decisions and to uncover the benefits that a firm is receiving from its IS investments. They do a creditable job in 96 pages of presenting a balanced look at an IS management function that is not particularly well done.
The authors draw five conclusions: (1) IS management must have a formal process for reporting the value to the firm from its investment in information technology; (2) such processes will have to be designed for each line of business, since there is no common methodology; (3) developing such a process may take years; (4) firms faced with this problem increasingly want to share their experiences; and (5) major gaps in fundamental accounting procedures currently make comprehensive measurement impossible.
The evidence for and explanation of these conclusions are contained in nine sections, a reference list, and two appendices. The authors begin by describing a five-part measurement program developed by IBM that includes
summaries of the resources used,
the performance level of each systems department,
tracking and reporting on the contributions that information processing makes to improving business processes,
tracking the “health” of each information systems department, and
highlighting systems applications that influence competitiveness and have strategic significance.
Although they admit that part 5 is not yet fully developed, they describe approaches to the other four in some detail in a 24-page appendix. In the section titled “The State of the Art,” they explain the problems with current investment strategies (taking too short a view and seeing applications software and people as expenses) and explain seven investment strategies suggested by authors, researchers, and practitioners in the field. For example, one of the suggested strategies is Parker and Benson’s information economics approach using the enterprise-wide information management model [1]. They conclude the section with a lengthy discussion of six measurement approaches.
One section describes the attributes of a measurement program and explains how to get started. It then describes a model program using the five-part IBM approach mentioned above. Another section goes into more detail on how to measure each of the five components.
In the section on further work, the authors correctly admit the need for additional research. The current state of the art does not provide a single set of measurements for general use. They ask for new theoretical foundations, standard definitions, and more complete frameworks for analysis. Finally, they posit a larger role for those benefits formerly termed “intangible.”
Though this sounds like “Mission Impossible,” the book and the exercise it describes are worthwhile for any IS manager. Even an analysis with today’s suboptimal tools will at least provide a good foundation when better tools become available. At best, it may provide insights into benefits not previously recognized.
