QUANTIFYING THE BUSINESS VALUE OF INFORMATION TECHNOLOGY: AN ILLUSTRATION OF THE 'BUSINESS VALUE LINKAGE' FRAMEWORK

Abstract

Senior management's ability to gauge the business value of investments in information technology (IT) has been seriously hampered by a lack of analytic tools to conduct sound performance assessment. In this paper, we present a conceptual framework called a "business value linkage" that is used to represent the processes by which the direct outputs of an IT are transformed within the firm and its operating environment into enhanced revenues, reduced costs and new strategic opportunities to increase market share. Utilizing appropriate modeling and econometric methods, we illustrate our approach by analyzing several hard-to-measure aspects of the business value of automated teller machines (ATMs) in retail electronic banking. The results show that the hardest to measure impacts in some cases can have the greatest business value.

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