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Part - VI

Some levers are more critical than others - with their importance varying by industry or sub-sector or even the business unit. For example, in the micro-processing industry, Intel focused on the lever - shift to higher value goods. It generated extraordinary productivity advances as microprocessors became exponentially more powerful though not costly by the same amount. IT played a vital role in this process - by enabling the company to design more powerful microprocessors through various tools like electronic design automation tools. This underscores the benefits of investments targeting specific levers.

However, taking the right decision requires one to understand the dynamics associated with the industry in which the company is operating and the broad business goals of the organization. A strategy employed by Wal-Mart cannot be mimicked by an apparel company on the pretext that both are operating in the retail business.

Evaluation of IT Investments

Well-managed IT investments can have a dramatic impact on the organization in helping to meet its business objectives. However, poorly managed ones can restrict or hinder its performance to the same extent. At the same time, increasing economic and competitive pressures are forcing many companies to cut costs and force them to scrutinize IT budgets more closely so as to allocate resources among competing projects.

But investing in IT can be a tricky business. It is not possible to estimate the absolute value of IT in an organization because it is just simply too integrated into most businesses to be isolatable. Though there are a lot of appraisal techniques for the justification of IT investments like IT budgeting, IT investment management, IT Project Planning, payback performance metrics and ROI, it is an inherently complex process. Unlike other investment opportunities, most of the benefits from IT are not easily quantifiable. There are a lot of intangible and non-financial benefits inherent in the implementation of IT. And most CEOs are not comfortable with the current tools and financial techniques used to justify IT investments because they fail to precisely capture the true value (Gunasekaran, Love, Rahimi & Miele, 2001).

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* Contributed by -
Mrugendra Shintre,
Manoj Kumar Gaddam,
II Year,
IIM Lucknow.