The notion of general value in economics is described in (Aityan 2013). It is compared to energy in physics due to having a similar role and hence is perceived as “economic energy” for it constitutes a more comprehensive economic foundation since it comprises not only monetary value as proposed by classical and neoclassical approaches. The main difference is therefore a distinction of monetary value and non-monetary value. Both these components represent two perceptions on value. This general value concept introduced by (Aityan 2013) provides an economical foundation for analysis by also emphasizing the role of utility, the main concern of IT artefacts in context of DSR. Another conceptualization of value is presented in (Normann and Ramírez 1993) which states that value is a set of products and services that are combined into activity-based “offerings” from which customers can create value for them. This perception is relevant for us when we examine the expected stakeholder benefits when they consume an EA service.
Business value is generally considered as a type of economic value (or general value in economics). Business value as a concept has no commonly accepted definition. For several decades, business value and more recently value-add are buzz words in literature and especially industry. The main question is what needs to be done to increase business value as this will
increase revenue and profit. Simply put, business value is the sum of contributions to firm performance that yield monetary and non-monetary benefits to the firm.
The business value of IT or IT business value (ITBV)1 has been investigated in research
extensively over the last decades. Still, there is no actual theory on ITBV in literature (Schryen 2012). ITBV can be defined as the impact of investments in particular IT assets on the multidimensional performance and capabilities of economic entities at various levels, complemented by the ultimate meaning of performance in the economic environment (Schryen 2012). Thereby, economic impact can be examined on firm level, industry level, and economy level.
Looking back, a major outcry in industry and literature was caused by the famous IT productivity paradox (Brynjolfsson 1993). Despite major investments in IT, the projected value could not be leveraged to increase productivity, especially in the service industry. In other words, IT is perceived everywhere but in productivity statistics. As argued, the reasons for this are measurement errors (Smith and McKeen 1991), lag effects, redistribution, and mismanagement. For the first wave of research on computerization and productivity, it can be postulated that computerization does not automatically increase productivity but is an enabler for comprehensive enterprise transformations that yield an increase in productivity (Brynjolfsson and Hitt 1998). The rather provoking question “Does IT pay off?” (Farhoomand and Huang 2009) was elaborated in a study by investigating the financial sector, or more precisely two large banks. The conclusion was that the question must rather be “How does IT pay off?” as the actual impact of IT on investments is still not entirely understood (Dehning and Richardson 2002). Also, the question how to view IT as an asset in a traditional sense was not explored in detail for it is largely considered as an intangible (Brynjolfsson et al. 2002). Meanwhile, the common opinion in literature leaves no doubt about the operational and strategic relevance of IT to deliver business value. IT investments are considered to have a substantial and statistically significant contribution to firm output (Brynjolfsson and Hitt 1996). (Dehning et al. 2003) find empirical evidence that IT investments result in positive returns when aligned with the strategic level transformation. (Chatterjee et al. 2002) provide empirical evidence that investment in IT infrastructure establishes a platform for generating firm growth and revenue. Literature reviews on ITBV support the conclusion of IT providing benefits to firm performance (Kohli and Grover 2008; Schryen 2012). The productivity paradox apparently
has been resolved on firm level due to evolved measurement, data analysis, and improved IT management (Dedrick et al. 2003).
To better understand the reality of ITBV, several models have been proposed in literature (Dedrick et al. 2003; Dehning and Richardson 2002; Melville et al. 2004). From an industry perspective, (Smith et al. 2006) define a ITBV model that is based upon the business aspects of demand management, supply management, and support services for which it provides a set of indices to assess business value. Based on academic literature, a synthesized ITBV model is presented in (Schryen 2012) and is illustrated in Figure 3-4. This ITBV model serves as basis for our EABV research and therefore constitutes the boundaries of our high-level concept of EABV (cf. Sec. 3.7).
Figure 3-4: IT business value model (cf. (Schryen 2012))
As pointed out in literature, performance is influenced by several factors (Melville et al. 2004). From a macro perspective, we need to regard country factors such as rules and regulations specific to particular regions or countries respectively. A firm operating globally must adhere to the laws of the country it operates in. For example, there are major differences in taxations in every country. In addition, the region’s technological infrastructure can impact a firm’s performance. Industry factors mark influences typical for a particular competitive environment which also includes market characteristics. In order to predicate a firm’s performance in relation to its competition we need some form of benchmarking capabilities. Firm factors include all
relevant practices and functions that deliver performance and can be additionally examined at an organizational level to allow for more detailed measurements. Examples for firm factors are cultural topics, adoption of new practices and technologies, corporate strategy, organizational capabilities and practices, as well as management practices. One of the most important and often discussed firm factors is the alignment of business and IT or business-IT alignment respectively (BITA) (Henderson and Venkatraman 1993; Luftman 2000; Versteeg and Bouwman 2006).
Lag effects are impacts on performance that are only visible after a certain time and are not always possible to capture. Usually, shortcomings in the employed business value assessment methodology result in a faulty or inaccurate measurement that does not reveal delayed effects on performance (Brynjolfsson and Hitt 1996; Brynjolfsson 1993). Lag effects can occur due to learning and adaption and hence were one of the major reasons to postulate the IT productivity paradox.
Firm performance comprises market performance, accounting performance, and organizational performance which is all achieved by process performance, apart from context/environmental factors and lag effects. Positive effects on accounting performance, such as returns on sales, investments, or assets can be found in (Dehning et al. 2005; Dos Santos et al. 1993; Tam 1998).