Investing in Information systems

Information System’s (hereafter referred to as IS) main purpose is to create value. This is achieved through innovation and by measuring progress in a continuous manner.  But an organization must spend less time trying to prove their IS value and more time delivering meaningful results.  Information officers must learn to manage capital like a financial planner, balancing value, risk and costs to closely align the department with the company’s direction. Many organizations still regard technological properties as expenses, rather than seeing them as investments.  Business managers should understand what element of the budget are support expenses (the minimum needed to maintain existing service levels) or discretionary expenses (investments to enhance current services).


One can argue that computer management sees IS costs as an operating expense and so management aims on reducing costs for efficiency sake. Information management views information as a corporate resource that benefits from asset management.


IS projects are generally initiated to extend the oranisation’s IS capability. The prevailing view of IS, which seem to be driving IS investments, is as a tool to cut costs.  The top 3 priorities cited by respondents in a GMA study, all relate to cost cutting: increase internal efficiency, increase organizational productivity and increase the efficiency of trading partner transactions.


Previously, the majority of organizations associated IS projects with fixed costs and in their view, projects were once-off.  Rather than budgeting for software and services on a yearly basis out of a capital budget, it is far more cost efficient to account for it in a way that reflects its continual nature. 


Corporate managers have to determine how to maximize the effectiveness of their IT expenditures.  Total Cost of Ownership (TCO) is a measure often used to assess the effectiveness of an organization’s IT expenditures.  In order to maximize the value of IT expenditures, organizations have to simultaneously reduce their TCO and maintain or improve IT service levels.  Centralization and Standardization are two complementary methods for reducing TCO.  Centralization seeks to combine software access, software distribution and network administration in a few central locations.  Standardization seeks to minimize the hardware and software-configuration differences among individual workstations.  Thus, reduce IT costs by simplifying operations.