INTEGRATING THE COSTS OF A MANUFACTURING IT IS INFRASTRUCTURE INTO THE INVESTMENT DECISION-MAKING PROCESS/

Due to the increasing level of organisational investment in Informatio n Technology (IT) and Information Systems (IS), significant amounts of capital need justifying. However, many companies are reporting their inability to justify their investment in IT/IS because of the nature o f costs and benefits associated with its implementation. The reason fo r this is that many organisational budgeting processes rely on financi ally oriented appraisal techniques as an integral part of the decision -making process. These accountancy frameworks are often used to assess the 'bottom-line' financial impact of an investment by setting tangib le project costs against those quantifiable benefits and savings predi cted to be achievable. However, traditional appraisal techniques are c onsidered to be no longer appropriate in justifying investments in IT/ IS because of the nature of intangible benefits, together with the com plexity of direct and indirect cost implications. Hence, the predictiv e value of using many traditional investment appraisal techniques is i ncreasingly being questioned The authors of this paper have identified and then classified a variety of appraisal techniques that are used d uring the justification of capital investments in IT/IS. The taxonomy developed provides a critique of characteristics for both traditional and non-traditional appraisal techniques. The authors then identify a range of cost implications associated with the adoption of IT/IS, with a particular focus on manufacturing applications. These cost implicat ions are then developed into a taxonomy of direct and indirect costs, which clearly need consideration during the investment decision-making process. (C) 1997 Elsevier Science Ltd. All rights reserved.