Factors influencing the identification of it indirect costs: A case study

Abstract

Organizations expenditure on Information technology (IT) related investments continue to rise in the face of the fierce competition in the various marketplaces. Nevertheless, the problem of evaluating such investments remains a challenge to managers due to the inability of the evaluation techniques to accommodate the indirect costs associated with IT investments. This negatively affects the accuracy of the justification process and the investment decision. According to literature, indirect cost factors are not easily identified or quantified because they human and organizational dimensions. Indirect costs, proven to be problematic to accommodate within traditional appraisal techniques, make IT managers choose to ignore them and neglect to include them in IT investment budgets. The research suggests an alternative solution to the problem of quantifying such indirect costs by calling for a more accurate identification of those costs which would enable a more robust management and finally control of such costs. Using a case study the paper highlights the investment decision making process in an international resource company and confirms the call for a more robust identification process. In addition the paper maps each indirect costs factor to the lifecycle stage(s) in which it occurs and presents the factors that influence the quality of the identification process.