Effects of Information Technology Maturity on the Adoption of Investment Evaluation Methodologies: A Survey of Large Australian Organizations

Very little research has been conducted to examine the effects of information technology (IT) maturity on the use of the evaluation methodologies and the management of electronic commerce (EC) benefits. One survey and two in-depth case studies were carried out to examine these practices and processes in large Australian organizations. A key contribution of this research is to extend the Limits-to-Value model to examine the relationship between the levels of IT maturity and the adoption of IT investment evaluation and benefits realization methodologies as well as its effect on the management of business-to-business (B2B) EC benefits. The finding indicates that IT maturity has a positive impact on the adoption of these methodologies. A number of managerial issues and problems have also emerged from the analysis of the data collected. These findings will assist organizations in making better business decisions. Managerial implications and future research directions are also provided. 1 Introduction Investment in information technology (IT) is one of the major factors determining the success or failure of organizations in implementing electronic commerce (EC) projects [18,19,36]. However, senior IT managers have found it increasingly difficult to justify rising IT expenditures [8] and are often under immense pressure to find a way to measure the contribution of their organizations' IT investments in relation to the performance in EC, as well as to find reliable ways to ensure that the business benefits from IT investments are actually realized [I]. Therefore, it is not surprising to see that the term "productivity paradox" has gained increasing notoriety as many studies have suggested relatively static productivity and rising IT expenditure [4,24]. The productivity paradox is die notion that despite large investments in IS/IT over many years, it has been difficult to determine where the IT and B2BEC benefits have actually occurred, if indeed there have been any [26, 31]. There are many researchers who argue that such productivity paradox may be attributed to, among other things, the inappropriate use of IT evaluation methodologies (e.g., [29]) and, moreover, it is unclear whether the ability to evaluate IT investments in EC has something to do with the organizations' levels of IT maturity [H]. There are two types of methodologies that organizations need to undertake in order to ensure that IT investments in EC are properly planned, evaluated, and monitored, and that expected benefits are eventually realized. An IT investment evaluation methodology is concerned with making investment decisions about IT projects [2]. In other words, the domain of concern is more about selecting the project or projects that at the outset seem to offer the greatest returns or benefits for the outlay. On the other hand, an IT benefits realization methodology can be seen to extend investment evaluation further into the project life cycle by ensuring expected benefits are realized once a decision to invest has been taken [6]. This involves planning how and when benefits will be realized and deciding who will be responsible for achieving benefits as well as actually overseeing the realization of benefits [34]. Given the above analysis, it can be concluded that, in general, organizations that employ IT benefits realization methodologies would be likely to also employ IT investments evaluation methodologies but the converse would not necessarily be the case. Behind this assertion however, is a more fundamental observation concerned with the underlying IT maturity' of an organization in terms of its willingness and cultural capability to use formal or semi-formal processes explicitly as part of its decision-making. In other words, it will be asserted in this paper that organizations that are more mature in IT are more likely to display more willingness to use evaluation processes. Closely connected with this is this notion that it is possible to define and record an organization's IT maturity against some predefined benchmark or benchmarks and in so doing provide a basis for organizations to plan to towards greater IT maturity. …