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INFORMATION TECHNOLOGY INVESTMENT Decision-Making Methodology 2nd Edition This page intentionally left blank INFORMATION TECHNOLOGY INVESTMENT Decision-Making Methodology 2nd Edition Marc J Schniederjans University of Nebraska–Lincoln, USA Jamie L Hamaker University of Nebraska–Lincoln, USA Ashlyn M Schniederjans Harvard University, USA World Scientific NEW JERSEY • LONDON • SINGAPORE • BEIJING • SHANGHAI • HONG KONG • TA I P E I • CHENNAI A-PDF Merger DEMO : Purchase from www.A-PDF.com to remove the watermark Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. INFORMATION TECHNOLOGY INVESTMENT (2nd Edition) Decision-Making Methodology Copyright © 2010 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher. For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher. ISBN-13 978-981-4282-56-7 ISBN-10 981-4282-56-1 Printed in Singapore. Sandhya - Information Technology Investment.pmd 1 2/10/2010, 9:00 AM To honour the memory of Mr. C. Wheaton Battey, this book is dedicated to Mr. Harold Andersen, Mrs. Marion Anderson (daughter) and Mr. and Mrs. Charles Battey (son). Their continued generosity and support for education has provided a nurturing environment for students and faculty. With their substantial contributions to higher education, they have helped to improve educational programs and advance the state of knowledge. Preface Late in 2008 and throughout 2009 the world plunged into a major economic downturn. Centering in the United States but expanding throughout the world, the downturn has created the need for both reductions in business budgets and a greater need for improved information coordination between businesses in a global environment. How can a firm reduce its information technology budgets while at the same time improve global information flow? The answer is to make wise information technology investments with a limited budget. To make wise investments decision-makers must fully utilize investment methodologies to conserve financial resources while maximizing information technology capabilities. Regardless of the economic environment an organization faces, it is always prudent to minimize costs and maximize investment in the choices of information technology. Regardless of one’s position in an organization, investing in information technology may be the most important decision business firm will face. Unfortunately, investing in information technology is not as easy as common financial investment decisions. Careful consideration of financial and non-financial criteria may have to be included in the analysis to render an optimal solution. To make good decisions on information technology today requires the use of a variety of investment methodologies. These investment methodologies must be able to integrate the complexity of decision criteria in such a way that a decision choice is clear and clearly supported b