Measuring and Modeling the Business Value of Information Technology, Chapter 4.

• Main Authors: KAUFFMAN, Robert John, Kriebel, C.H.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 1988
• Subjects: Computer Sciences
• Online Access: https://ink.library.smu.edu.sg/sis_research/2791
• Institution: Singapore Management University

Determining the 'business value' of information technology (IT) requires managersto choose performance measures which are well-suited to capturing the economic impacts of theapplication they are evaluating. In this paper, the authors discuss a promising approach for bridgingthe gap between a theory for rational decisions and management practice in evaluating investmentsin IT: Data Envelopment Analysis (DEA). The referent discipline for the discussion isproduction economics, and the authors review basic concepts concerning performance measurement,efficiency, productivity and economic contribution or value-added from an economist'sperspective. DEA's promise lies in its ability to handle multiple input and output production environmentsand its management action orientation. As an illustration of this potential, DEA isapplied to assessing the performance of an automated teller machine (ATM) network, an ITwhich creates economic impacts at various organizational levels of a commercial bank.