Various Ways of Assessing the Value of Information

Various Ways Of Assessing The Value Of Information

The value of information is measured in terms of benefits to the organization. The

benefits may be tangible that can be easily quantified. For example, 5% increase in

sales is a tangible benefit, which corresponds to Rs. 50,000. If the cost of the

information that led to this additional profit is Rs. 20,000. Then the value of the

information is Rs. 30,000. Sometimes, the benefits may be intangible and cannot be

easily quantified. For instance, the information may help consumers to connect to a

company better. The employees may feel respected in an organization if more

information is shared with them. In both the cases, the attrition rate will decrease

and the corresponding benefit cannot be directly measured in terms of financial

benefit to the organization.

There are many methods to assess value of information system, which is explained below.

1) Cost-benefit analysis

IT project and investments has to take its place in the queue for all too scarce cash

resources, and the rules for justifying are the same as for any other project

A more sophisticated argument is that, because the risks inherent in decision about IT

are higher, the expected ROI needs to higher before an investment can be justified.

Because of high sum, IT investment has a high potential to damage the organization.

A new product is equally risky.

But fundamentally, decision makers are less comfortable about IT because of their

ignorance of the issues and they lack faith in the estimates presented to them. The

main points:

• IT is high risk, high cost; at the same time IT has potential for substantial benefits

• Managers are not conversant with all aspects of the decision - due to rapid pace

of change of technology.

• There is no trusted track record of benefits of IT investments

• IT decision should be made by IT professionals in consultation with general

management of the organization

• IT investment should get...