India Economy

Investment evaluation

D. MURALI | Updated on August 04, 2012 Published on August 04, 2012


Among the many examples in ‘ The evaluation of investments in information technology (IT)’ ( www.ssrn.com) is this one about Volvo. By the mid-nineties, the company invested $100,000 in developing and marketing a Web site to connect with potential clients and collect demographic data, the paper notes. But the system failed almost immediately and had to be redesigned because it did not support sales objectives, add the authors Carlos Piñeiro Sánchez, Pablo de Llano Monelos, and Manuel Rodríguez López.

A case in contrast is that of Barrabes.com, “a successful site where users can find most of the facilities required to practise almost any winter sport.” The research paper focuses on investments in corporate information systems. While such projects are critical for organisations and societies, and account for a big chunk of public and private annual investment, the performance of current evaluation schemes is doubtful, given the financial evolution of the e-businesses and the very nature of the investments, the authors fret.

“Most of the classic performance indicators depend on the nominal value of the investment. However, IT is a facilitating resource, hence the real impact over performance depends not on the investment itself, but on the ability to successfully address business needs or exploit emerging opportunities,” they reason.

Valuable insights.

IT benefits to SMEs

The adoption of IT promises significant returns to SMEs, write G. S. Popli and Megha Jain, in ‘Blending of information & communication technology with the international business techniques of small and medium enterprises in India’ ( www.ssrn.com). They observe that the use of technologies both within enterprises and across the supply chain could provide a real opportunity, not only for operational improvement but also for innovative strategic positioning. One learns, however, that the fear of risk comes in the way of potential investment in these technologies.

The paper highlights ‘one of the most peculiar organisational structures characterising the way small and medium sized enterprises manage their relationships with partners,’ namely, industrial ‘district’ or ‘cluster,’ generically defined as a network of enterprises located in a limited geographical area which share part of their processes, especially production and logistics (Marshall, 1922; Williamson, 1985).

Also cited, therefore, is the argument that the evolution of ICT and Internet-based technologies provides these networks with new opportunities to effectively support the management of supply chain activities, by supporting the flow of materials with a more efficient way of communicating and sharing information (Morrel and Ezingeard, 2002; Shapiro, 2001).

A reassuring line in the paper’s list of conclusions is that the size of an organisation appears not to be a factor for adoption of technology.

Suggested read.

Published on August 04, 2012
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