Information-System Investment: An IS-Commons Market-Failure

Abstract

While investment in Information Systems (IS) is an area of vital strategic concern to most organizations, there is little understanding of how to measure real returns of IS to business. This measurement problem has persisted from the 1990s to the present -- where managers are under increasing pressure to adopt new technology or face being left behind. In the current competitive climate, senior managers seek practical techniques to manage their current IS investments and to help them to decide where best to allocate uncommitted company resources. The model in this paper should help firms understand and respond to the process behind the persistent underperformance of IS investments. Specifically, the responses of other market participants must be factored into estimates of IS-investment returns -- cooperation and coordination may yield higher long-term returns for all.