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Periods of business activity are often marked by and referred to
as agesin the historical development of the field of business.
According to mostbusiness historians we have advanced from the age
of information intothe age of knowledge. In both of these periods
of time, informationtechnology has been a determining factor in the
survival and success offirms competing with one another. Those f m
s that know how to bestinvest in information technology have been
and will continue to be thesuccessors in this and future eras of
business history.
Regardless of your position in an organization, investing
ininformation technology may be the most important decision you
willever face in business. Unfortunately, investing in
informationtechnology is not as easy as common financial investment
decisions.Careful consideration of financial and non-financial
criteria may have tobe included in the analysis to render an
optimal solution. To make gooddecisions on information technology
today requires the use of a varietyof investment methodologies.
These investment methodologies must beable to integrate the
complexity of decision criteria in such a way that adecision choice
is clear and clearly supported by the analysis. Today,just
generating a decision is not enough. Information
technologydecisions must be supported by comprehensive inclusion of
all relevantdecision-making criteria.
The purpose of this textbook is to provide an in-depth treatment
of awide-variety of decision-making methodologies focused on the
subject ofinvesting in information technology. The methodological
procedures aswell as computer solutions to basic financial and
advanced decision-
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viii Information Technology Investment: Decision-Making M
ethodology
making methodologies will be presented as tools for investing
ininformation technology.
This textbook has been designed for an upper-level
undergraduatecourse or a graduate business or engineering
management course relatedto technology management for university
students. Business faculty inareas of finance might also find this
textbook useful for an appliedinvestments course. Practitioners who
work in information systems canalso use this textbook if faced with
a technology investment decision-making problem. Other groups of
decision makers might include CEOs,vice presidents of information
systems and finance, general managers,plant managers, supervisors,
and industrial engineers. Other operationsmanagement and
engineering faculty, trainers, and graduate students willalso find
this textbook present a useful variety of methodologies formanaging
and aiding information system investment decisions.
This textbook assumes that the reader has had some exposure
togeneral mathematics and the terminology commonly found in
businessmanagement. The basic technology/operations management or
industrialmanagement, and basic finance course that undergraduate
studentstake for business degree programs, constitute sufficient
prerequisiteknowledge to satisfy the background to fully appreciate
the content ofthis textbook. You do not have to be a technology
manager or financialanalyst to benefit from using this textbook.
The terminology necessaryto fully utilize this textbook is actually
defined in the textbook. Also,throughout this textbook important
terms are italicized and are usuallyfollowed by a definition. The
location of the initial definitions can befound using the index at
the end of the textbook.
The basic contents of this textbook are organized into twelve
chaptersconsisting of four parts. In Part I, Introduction to
InformationTechnology Investment Decision-Making Methodology, three
chaptersare presented that help to define the basic subject and
terminology usedin the textbook, as well as briefly identifying the
major topics that makeup the rest of the textbook. In Part 11,
Financial Information TechnologyInvestment Methods, three chapters
are devoted to explaining how basicfinancial methods are used and
should be used in information technologydecisions. In Part 111,
Multi-Criteria Information Technology Decision-Making Methods, the
three chapters presented describe and illustrate a
