Elsevier

Information & Management

Volume 25, Issue 4, October 1993, Pages 193-205
Information & Management

Research
Information technology and organizational performance: A critical evaluation of Computerworld's index of information systems effectiveness

https://doi.org/10.1016/0378-7206(93)90068-5Get rights and content

Abstract

Justifying and demonstrating the effectiveness of information systems is increasingly becoming critical as firms look to become more competitive and efficient. This study takes a detailed look at the ranking criteria and the overall effectiveness index developed by Computerworld. Researchers have alluded to this index as a significant development and Computerworld claims that it is useful for justifying information systems to top management. The broader objective of this study is to contribute to the measurement of the business value of information technology (IT). Towards this goal, a conceptual model of IT measures is developed.

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      The principal factors include differential efficiency in the development of IT and levels of customer switching costs. Sethi et al. (1993) carefully examined the ranking criteria and overall effectiveness of the index developed by Computerworld. Organizational strategic and economic performance measures such as sales by employee, return on sales, sales by total assets, return on investment, and market to book value were affected by IT investment measures such as IT budget, revenue percentage, the percentage of IT budget spent on employee training, the number of PCs per employee, and IT value as a percentage of revenue (Mahmood and Mann, 1993).

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    We are grateful to Nahmoud Abu-Ali and Burke Nail for assistance with data collection and analysis. We also wish to thank the senior editor for encouragement and comments that vastly improved the paper.

    a

    Vijay Sethi is Assistant Professor in the Division of Management, College of Business Administration, University of Oklahoma. He earned his Ph.D. from the Katz Graduate School of Business, University of Pittsburgh. Dr. Sethi's articles have appeared in MIS Quarterly, Decision Sciences, Journal of Management Information Systems, Journal of Business Strategy, Long Range Planning, INFOR, Interfaces, Database, Information Management Review, Datamation, and Computerworld. His research interests are strategic planning for information systems, business value of information systems, and global information systems.

    b

    K.T. Hwang received his Ph.D. in information systems from the School of Management, State University of New York at Buffalo. He earned his M.B.A. from George Washington University and his B.A. in applied statistics from Yonsei University, Korea. He is currently teaching at several universities in Korea. His research interests include business value of information technology, telecommunications, and EDI.

    c

    C. Carl Pegels, Ph.D., is currently a Professor of Management Systems in the School of Management, State University of New York at Buffalo. During the 26 years in this position he has been engaged in a variety of teaching and research activities in such diverse areas as strategic management, management information systems, and operations management. His consulting activities have been in general manufacturing and business, and also in such areas as blood banking, health maintenance organizations, hospitals, educational institutions, and other organizations. Professor Pegels has published 12 books and over 60 papers in academic and professional journals. He received his doctorate from Purdue University.

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