Analyzing the Cost-Effectiveness of Corporate IT Investments

Antoine Chaya earned a PhD in information technology (IT) management from the Georgia Institute of Technology (GT). During his studies, Antoine Chaya collaborated with GT professor Sabyasachi Mitra to publish a paper on analyzing the cost-effectiveness of corporate IT investments in 1996. Their study assessed the IT budgets of more than 400 large and medium-sized businesses in the United States.

The study showed that since the 1970s corporate IT investments had increased dramatically. However, it was difficult to quantify the benefits derived from these IT investments. In fact, some research showed a drop in productivity for information workers as companies ramped up their IT investments. Nonetheless, the 1996 GT study found that higher IT investments correlated to lower average production costs as well as total costs. In addition, the GT study determined that large companies typically spend more on IT as a percentage of revenues when compared to smaller firms.

IT continues to be a major area of investment for businesses of all sizes today. A recent survey of IT executives found that more than 40 percent of those surveyed expected their budgets to grow in 2015.

Early Research on Link between IT Investment and Financial Performance

Antoine Chaya leverages his extensive expertise in information technology to serve as the senior director of strategic accounts for Oracle Corporation in Redwood Shores, California. While working on his PhD at the Georgia Institute of Technology, Antoine Chaya co-authored a paper for the 29th Hawaii International Conference on System Sciences, which was titled Exploring the Relationships between IT Investments and Organizational Performance: Preliminary Empirical Evidence.

As noted in the paper’s abstract, businesses invested nearly a trillion dollars, or 50 percent of capital expenditures, into their IT capabilities during the 1980s. Firms made these outlays despite the fact that there were no data quantifying the return on investment (ROI) for doing so. The researchers attempted to determine whether there was a connection between a company’s information technology (IT) expenditures and its financial performance.

The study evaluated five years of financial and IT data from more than 600 large and mid-sized U.S. businesses. The researchers determined that greater IT investments were linked with lower average total costs and production costs, but higher average overhead expenses. Additionally, the authors concluded there was generally a delay between IT-related spending and ROI. A subsequent publication on the topic by Antoine Chaya and his co-investigator found that larger corporations typically allocate a greater percentage of their revenue to IT than smaller companies.