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Business Intelligence Applied: Implementing an Effective Information and Communications Technology Infrastructure by Michael S. Gendron

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Technology Justification Models

Technology justification models can be divided into three approaches: financial-accounting, economic utility, and statistical. Financial-accounting will undoubtedly be the most readily understood by senior management. Economic approaches are based on the utility or benefits that something gives; they are more abstract than financial-accounting models but allow “soft” indicators of systems value to be analyzed (in this context, a soft indicator is something other than financial or quantifiable data, such as customer perception or produce utility). Economic models are often used to represent factors such as consumer satisfaction. Statistical approaches take the view that ICT value should be shown using statistical analysis.

Financial-Accounting Approach

Two common types of the financial-accounting approach to valuing technology investments are return on investment and cost-benefit analysis. These can be modified and expanded to cover practically any case of infrastructure implementation.

Return on Investment

Return on investment (ROI) is an accounting valuation method. It is useful to compare the rate of ROI options, including ICT investments.1 In its simplest form:

equation

However, ROI can be calculated in a number of ways, including

equation

It is possible to modify ...

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