What value does IT deliver to an organisation? This week I will look at the theoretical development in this area as it will provide useful background to later discussion and specific opportunities and challenges. This is a bit dry but stick with me. In March 2010 Saggi Nevo and Michael Wade* published the best explanation of how internal use of IT within an organisation provides value (or not) that I have ever read. In summary, they combine systems theory and the resource-based view of a firm to argue that IT assets when created/purchased have a potential to benefit the organisation. These IT assets are then combined with other IT and non IT organisational assets/resources and if the combination is effective they create a synergy that can provide benefits to the organisation including potentially operational improvements or strategic advantage. Note that these combinations of assets/resources can also fail to generate a synergy or even form a negative synergy that harms the organisation. The diagram below shows these relationships.
I particularly like this explanation because it shows that an IT asset does not automatically deliver any benefit. To deliver a benefit it must be used and often it needs to be used in combination with other IT assets and organisation resources such as people and processes. Also it only provides a benefit if the combined effect creates a positive synergy. The model also shows that a range of benefits are possible, strategic advantage being just one of them, it is also possible for the assets to generate nil or negative benefits to the firm.
* Nevo, S. & Wade, M, 2010, “The formation and value of IT-enabled resources: Antecedents and consequences of synergistic relationships” in MIS Quarterly, Vol. 34, No. 1, pp. 163-183
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