Information systems

CORPORATE FINANCE

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THE DIFFERENT APPROACHES TO TAKE IN TO AN ACCOUNT WHEN ESTIMATING THE RETURN ON INVESTMENT OF IMPLEMENTING INFORMATION SYSTEMS

1. Introduction

Information system implementations have changed the way companies operate. Through its implementation, business management have found the wayto create value, while applying them to the autoimmunization of process, decision taking, and in the generation of competitive advantages or the reduction of competitors. The old forms of organizational information systems implementations have changed with the entrance of the new economy. The conservative way of thinking in management that information systems should be targeted to main roles ofthe business process have been abolish with the new dynamic of the economy.

The need of implementing IS in organizations have changed from, the basic process of automate to make businesses more efficient and profitable, through sales order processing, inventory control, manufacturing planning, invoicing and so on, to the need of business to complement such of operations with the needs to gain newtrading relationships, innovative organisational structures, new forms of business model and ways of working. Then, the model, in which organizations use to calculate the return on investment to implement an organizational information system, under this new context, should also change. The object of this paper is to analyze how these new approaches that organizations are using when implantingIS, create in some how value and profits for the organization, all these in order to find the appropriate forms to calculate the return on investment model, that organizations should take in to an account when implanting an IS.

2. The importance of IS for the organization

In the neoclassic economy model, where the firm was a price taker, the price system suppose to be transparent andparametric, therefore this was the basic mechanism for resources assignment and decision making, leaving aside what was happening inside the firm, because the model supposed that the firm information was given and perfect, While, the economic reality is other, where the firm plays a roll in markets with imperfect, asymmetric and incomplete information. All these issues turn the firm into a continuousconsumer of information systems and technologies to treat that information. Those systems of information and technologies have a huge impact inside the firm, in the way in which they affect the activity chain of the firm, in its execution and control. Also, outside the firm, the information systems can have impacts by changing the bases in which the firm sets its competitive strategy (Porter 1985).COMMENTS [pic]

An IS enables organizations to make use of the information from and out site the company, with the appropriate use and direction of this information trough out an strategy, the organization can link and integrate all its stake holders in order to identify the value process. It enables the organisation to develop,produce, market and deliver new or enhanced products based on information (Walker 2009). Moreover, in the era of new economy, information has become valuable organizational assets just like human resources and inventories, because a good information system can facilitate direct communication between firms and, suppliers, manufacturers, dealers, and marketers. Together, they can create a valuechain as though they were in one organization.

3. Impacts of IS in the organization

The strategies that are set by an organization are difficult to identify. One of the best instruments is the concept of value chain, (Porter 1985). It permits to find out the bases where organizations set their strategies. By dividing the total activity of the organization into different categories, and...