CENTER FOR INFORMATION SYSTEMS RESEARCH

Abstract

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 should 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.

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