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Measuring the business value of information technology: the case of financial electronic data interchange (EDI) in Canada

University of British Columbia

Why and how much should we invest in this information technology (IT)? The difficulty to formulate well-justified, convincing answers to those questions asked by corporate decision-makers has been identified as a major impediment to one rapid adoption of IT innovations by the business community. This study investigates the fundamental construct underlying these questions by performing a formal assessment of the business value of financial electronic data interchange (EDI) technology for corporate adopters in Canada. Three major Canadian financial institutions, seven cross-industry financial EDI user organizations (originators and receivers), several reference firms and more than fifty individuals actively participated in this study which follows a triangulation data collection approach. Within a cohesive financial EDI value measurement framework based on the theory of capital budgeting, a set of realistic and flexible models for measuring the business value of financial EDI was developed from a rigorous, item-by-item analysis of the data. Following a scenario-based approach, the data and models were used to estimate the magnitude of potential net benefits of financial EDI to corporate adopters. A formal evaluation of the expected and actual costs and benefits of financial EDI to participating user firms was conducted using the models. Several major conclusions were drawn from this in-depth study of financial EDI investments including, among others, the substantiated observation that from a payment process perspective, financial EDI is potentially more beneficial to corporate receivers than originators. Compared to non-financial EDI applications, potential economic gains from reduced payment cycles accrue primarily to the supplier community, rather than the initiators of financial EDI systems. Major contributions of this study include first, the development of a theory-based value measurement framework, and second, the presentation and application of a structured, iterative methodology for the evaluation of financial EDI investments. The proposed financial EDI cost/benefit models also offer a useful, practical set of tools to potential and actual user firms in evaluating the organizational value of future or current financial EDI programs. Finally, the study is also intended to assist Canadian financial institutions in their financial EDI diffusion effort.

Thesis/Dissertation

application/pdf

2009-06-04

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http://hdl.handle.net/2429/8752

Business Administration

University of British Columbia

UBCV

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