Analyzing cost-effectiveness of organizations: the impact of information technology spending
Journal of Management Information Systems - Special section: Strategic and competitive information systems
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Businesses invested around a trillion dollars in information technology (IT) in the 1980s, and the trend continues into the nineties. Although investments in IT have reached 50% of capital expenditures, their impact on the bottom line has not been clearly established. The pay-off from information technology (IT) has eluded both managers and researchers.This paper reports some preliminary results of an on-going research effort to better understand the relationship between a firm's investments in IT and its financial performance. The study covers a period of 5 years, with sporadic IT and financial data on 609 large US companies. The results show a strong inverse relationship between investments in IT and the operating expenses of a firm. They also support the notion that there is a lag between the time IT investments are made by an organization and when the benefits are derived from them.