Decision-making models for evaluating investments in information technology

Iztok Setnikar (2008) Decision-making models for evaluating investments in information technology. MSc thesis.

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Abstract

Nowadays only few firms and other formal social units (further on: firms) can do business without using modern information technologies (IT). Computer equipment has become an important working tool or even a basic tool, which enables firms to develop and survive in an increasingly competitive environment. The decisions on acquiring or modernising IT are therefore gaining importance as they enable (or hinder!) the uninterrupted functioning of firms. This master's degree thesis considers the process of decision making in firms which invest in IT. The first chapter of this thesis presents what decision making actually is by placing it in a scientific framework and by presenting the contents of decision making, the process of decision making and its application in firms. It continues with a presentation of recent expert articles from the field of decision making when acquiring IT. The second chapter presents different methods of decision making, decision support software and the formation of decision models when investing in IT. The subject of the practical analysis in this master’s degree thesis (the fourth and the fifth chapter) are the seminar papers of postgraduate students at Faculty of computer and information sciences, in which a lot of knowledge on decision making about investing in a firm's IT is accumulated. These papers are divided into those considering decision making about investments in computer hardware and decision making about investments in computer software of a firm. In both parts, I compare the individual seminar papers and study the differences and similarities of practical decision making cases. I attempt to establish the key criteria which could be helpful in the future cases of similar decision making. The thesis also discusses individual circumstances in which a decision is made, as the circumstances have a big impact on reaching a decision. I compare the decisions in each category to each other and at the same time I also collect important aspects, which need to be taken into consideration in decision making. These aspects combine extensive knowledge taken from the analyzed seminar papers and can therefore contribute to better decision making. I have found that there is a huge gap between the theory and the practice of decision making about investments in IT. Recent expert literature views the problems in decision making from a very broad perspective, while in reality decision makers often limit themselves too much in bringing their decisions. In our case, many students have thus dedicated a lot of attention to technical characteristics of IT, while frequently overlooked an "intangibles" – intangible characteristics of an investment, which have been more difficult to measure.

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