Improving IT investment assessment: Exploring the integration of flexibility based on discretionary-mandatory classification

No Thumbnail Available
Journal Title
Journal ISSN
Volume Title
School of Business | Master's thesis
Date
2024
Major/Subject
Mcode
Degree programme
Accounting
Language
en
Pages
73+3
Series
Abstract
In today’s evolving world, technology undeniably plays a critical role in organizational success. However, deciding on the most optimal information technology (IT) investment remains a significant challenge for most companies. This difficulty originates from the inherent intangible nature of IT investment, which makes traditional quantitative methods rather less useful. Therefore, an urgent need for an efficient assessment practice that is both easy to use and contributes to meaningful decision-making emerges. This thesis aims to propose actions to improve the assessment process of IT investment by examining how flexibility (“degree of choice”) is integrated into companies’ existing practices. Our recommendations were built based on a theoretical framework developed by Joshi and Pant (2008), which was not yet empirically tested. Our thesis strives to bridge the gap between literature and practice, offering useful insights to enhance both. To achieve this goal, we conducted a multiple case study of four mid-sized and large multinational corporations. To further strengthen our findings, we consulted a Big 4 consulting expert who also has extensive industry experience from working in various tech and Fortune 100 firms. Data was gathered through semi-structured interviews and companies’ public information. Our findings reveal that companies have incorporated the concept of degree of choice in their IT assessment practice to some extent, yet rather as an intuitive than a structured approach. Therefore, we propose to introduce the degree of choice concept as a structured framework, which will potentially streamline the process by reducing miscommunication between finance and IT departments and minimizing challenges in using quantitative approaches. Additionally, by establishing a common term to prioritize capital IT investment, firms are able to make more informed capital budgeting decisions which greatly contributes to long-term financial success. From a literature perspective, our research highlights a need to adapt the framework to different organizational contexts. Additionally, considering how best to integrate risk assessment and post-completion audit (PCA) aspects into the assessment process will increase its credibility and wider practical application.
Description
Thesis advisor
Sinha, Vikash
Keywords
IT investment, capital budgeting, evaluation methodology, flexibility, degree of choice
Other note
Citation