Information Systems Investment Evaluation through Simulation: the Case of E.d.i

The evaluation and appraisal of investments in Information Technology is one of the earliest problems of IS/IT management and continues to be one of the most puzzling ones. This paper briefly reviews the inherent difficulties of evaluating IT investments and identifies measurement as one of the most important. We focus on the quantitative measurement of the expected benefits of Information Systems and argue that this is almost always possible, albeit at a potentially very high cost. We suggest that simulation techniques can be an effective tool in accomplishing this task and set out some general requirements for such a simulation system. A recent pilot implementation of this idea on the potential improvements in inventory management introduced by Electronic Data Interchange, confirmed most of our expectations. Finally, the directions for further research and development of such simulation systems in an economically feasible way are discussed.