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Business Value Assessment of IT Investments: An Evaluation Method Applied to the Electric Power
KTH, School of Electrical Engineering (EES), Industrial Information and Control Systems.
2007 (English)Doctoral thesis, comprehensive summary (Other scientific)
Abstract [en]

s the dependence of IS/IT has grown in modern organizations, IT investments have soared in the last couple of decades. Large amounts of money are spent with the hope that the investments will generate value for the business organizations using the systems. It is hence easy to understand the needs for methods to assess the business value of IT-investments. The investment decision is basically about selecting the best IT-system or the best combination of IT-systems, i.e. the system(s) that provides the most business value in dimensions that are important business-wise. However, a problem with many of the avail-able methods is that they often fail to concretely explain what technical characteristics the IT systems(s) should have to achieve the business value desired. A complicating aspect of IT-investment evaluations is also that the evaluations usually include a high degree of un-certainty.

In this thesis, an IT investment evaluation method is presented that indicatively assesses the differences in contribution to business value from IT-investment alternatives. The method provides, at a relatively low cost of investigation, indications of not only the technical differences between the IT-investment alternatives in a specific investment situation, but also an assessment of the differences in types and amounts of their business value. The presented method has been applied in a large case study at an electric power company. Furthermore, it also incorporates concepts found within Enterprise architecture (EA), particularly in how the information used in the evaluation is collected.

The presented thesis is a composite thesis that, besides an introduction, includes five papers (paper A-E). Paper A presents an outline of the method as well as its application in the case study. It also presents the theoretical fundaments for the criteria used for the technical evaluation and the business value assessment including the method’s applications in relation to Enterprise architecture. The following two papers primarily present necessary steps in the development of the method. First, paper B presents the process to develop a functional reference model (used for the functional assessments in the method), including its application in the case study. Second, a breakdown of the term business value into a set of IS/IT-affected value dimension is presented in paper C. The last two papers present the final steps, i.e. the technical evaluation of the investment alternatives (paper D) and the final business value assessment (paper E). The papers include the methods to perform these analyses as well as the application of the method in the case study and the results of the case study.

Place, publisher, year, edition, pages
Stockholm: KTH , 2007.
Series
Trita-EE, ISSN 1653-5146 ; 2007:50
Keyword [en]
IT-investments, IT-investment evaluation, Business value assessments, Enterprise architecture, Technical evaluation of IT systems, Electric power industry
National Category
Other Mechanical Engineering
Identifiers
URN: urn:nbn:se:kth:diva-4505OAI: oai:DiVA.org:kth-4505DiVA: diva2:12595
Public defence
2007-10-30, Sal F3, KTH, Lindstedtsvägen 26, Stockholm, 10:00
Opponent
Supervisors
Note
QC 20100608Available from: 2007-10-03 Created: 2007-10-03 Last updated: 2010-06-08Bibliographically approved
List of papers
1. An Assessment Framework for assessment of EA Scenarios
Open this publication in new window or tab >>An Assessment Framework for assessment of EA Scenarios
2007 (English)In: Information Systems and E-Business Management, ISSN 1617-9846, E-ISSN 1617-9854, Vol. 5, no 4, 415-435 p.Article in journal (Refereed) Published
National Category
Computer and Information Science
Identifiers
urn:nbn:se:kth:diva-7535 (URN)
Note
QC 20100608Available from: 2007-10-03 Created: 2007-10-03 Last updated: 2017-12-14Bibliographically approved
2. Business Value Evaluation of IT Systems: Developing a Functional Reference Mode
Open this publication in new window or tab >>Business Value Evaluation of IT Systems: Developing a Functional Reference Mode
2006 (English)In: Proceedings of the the Fourth Conference on Systems Engineering, 2006Conference paper, Published paper (Refereed)
Abstract [en]

In this paper an approach to develop and refine a functional reference model for IT-systems is presented. Such reference models form a fundament on which to evaluate the business value of IT systems. The approach involves scrutinizing the functional reference model with respect to correctness, completeness, granularity and measurability. In the particular case of this study, the functional reference model represents systems functionality needed to support asset management processes in industries such as electric energy production and distribution. It is based on the IEC 61968 standard and its Interface Reference Model, IRM, which has been refined in the process described in the paper. The refinement included a comprehensive field study, interviewing experts in the field of asset management at a large European energy company, as well as vendors of asset management systems.A general method for evaluating IT investment scenarios is outlined in the paper and the refined functional reference model is an important component in this method. Creation of this IT evaluation method is an ongoing research project, where the functional reference model forms a central part. The purpose of the IT investment evaluation method is to give decision makers a tool to evaluate potential investment scenarios with respect to the value the investment would generate to the business. The first part of the method consists of evaluating the technical quality of the system scenarios. Technical quality is divided into functional and non-functional attributes, where the functional reference model is used for the functional assessment. The second part of method consists of establishing the business value based on the evaluation of the technical qualities. This paper thus focuses on the first part, and in particular the development of the functional reference model which is a central piece in the IT investment evaluation method.

Identifiers
urn:nbn:se:kth:diva-7536 (URN)
Conference
CSER 2006
Note
QC 20100608Available from: 2007-10-03 Created: 2007-10-03 Last updated: 2010-06-08Bibliographically approved
3. A Categorization of Benefits From IS/IT Investments
Open this publication in new window or tab >>A Categorization of Benefits From IS/IT Investments
2006 (English)In: Proceedings of the 13th European Conference on Information Technology Evaluation, 2006Conference paper, Published paper (Refereed)
National Category
Computer and Information Science
Identifiers
urn:nbn:se:kth:diva-7537 (URN)
Conference
ECITE 2006
Note
QC 20100608Available from: 2007-10-03 Created: 2007-10-03 Last updated: 2010-06-08Bibliographically approved
4. Architecture scenario analysis - Estimating the credibility of the results
Open this publication in new window or tab >>Architecture scenario analysis - Estimating the credibility of the results
2007 (English)In: 17th Annual International Symposium of the International Council on Systems Engineering, INCOSE 2007 - Systems Engineering: Key to Intelligent Enterprises, The International Council on Systems Engineering (INCOSE), 2007, 750-764 p.Conference paper, Published paper (Refereed)
Abstract [en]

Good decision support requires good information. A key aspect of good information is that it is credible. Presently, architecture frameworks and methods within systems engineering often lacks support for mediating the credibility of the analyses made. This paper presents a method for enterprise architecture analyses that employs an evidential reasoning algorithm for multi-attribute decision analysis. By doing this, the quality of the analyses as decision support is demonstrated. The method includes an assessment framework, based on established theories, for evaluating architecture scenarios functional and non-functional qualities. The paper also presents a full scale case study where method has been employed at a large European power company.

Place, publisher, year, edition, pages
The International Council on Systems Engineering (INCOSE), 2007
Keyword
Architecture frameworks, Decision supports, Enterprise Architecture, Evidential reasoning, Multi-attribute decision analysis, Non-functional, Power company, Scenario analysis
National Category
Computer and Information Science
Identifiers
urn:nbn:se:kth:diva-7538 (URN)2-s2.0-84878030679 (Scopus ID)978-160560119-9 (ISBN)
Conference
17th Annual International Symposium of the International Council on Systems Engineering, INCOSE 2007; San Diego, CA; United States; 24 June 2007 through 28 June 2007
Note

QC 20100608

Available from: 2007-10-03 Created: 2007-10-03 Last updated: 2014-10-27Bibliographically approved
5. Evaluation of business value of IT-system scenarios: a case study at a large north European power company
Open this publication in new window or tab >>Evaluation of business value of IT-system scenarios: a case study at a large north European power company
2007 (English)In: PICMET '07: PORTLAND INTERNATIONAL CENTER FOR MANAGEMENT OF ENGINEERING AND TECHNOLOGY, 2007Conference paper, Published paper (Refereed)
Abstract [en]

This paper presents a method, the KTH1 IT Investment Evaluation Method, to assess the business value of IT-investments. The method aims at a priori and at a relative low cost of investigation assesses the business value of IT-systems scenarios, i.e. alternative combinations of IT-systems intended to support a particular business area. First, the scenarios are evaluated with respect to their technical quality. Second, the technical attributes used for this technical evaluation are related to business value dimensions, i.e. it is determined in what ways certain functions and non-functional attributes generate business value. Third, the business value dimensions are prioritized by the business managers. Finally, the business value of each scenario is established by combining the technical assessments with the relations to the business value dimension found in the second step and the prioritizations done by business managers. All parts of the method have been verified in comprehensive case study at a large European power company and the results are presented in the paper.

National Category
Computer and Information Science
Identifiers
urn:nbn:se:kth:diva-7539 (URN)10.1109/PICMET.2007.4349327 (DOI)000257655900016 ()2-s2.0-47849104725 (Scopus ID)978-1-890843-16-8 (ISBN)
Conference
Conference of the Portland-International-Center-for-Management-of-Engineering-and-Technology (PICMET 2007) Portland, OR, AUG 05-09, 2007
Note
QC 20100608Available from: 2007-10-03 Created: 2007-10-03 Last updated: 2011-07-13Bibliographically approved

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