Seabelo Mathswenyego, Rembrandt Klopper and Sam Lubbe
and benefits of ICT, and properly assess the payoffs of investments in ICT. The ICT contribution model can be applied with equal effect to both for‐profit and non‐profit organisations. The following model illustrates the inputs, processes, outputs and outcomes of ICT contributions within an organisation.
The balanced scorecard concept, developed in the early 1990s, recognises the incompleteness of many business measurement processes( Atzeni and Carboni, 2008). They are thus unbalanced measures taking a particular view of a situation. They suggest where things are going wrong, but often fail to highlight where things are going well. In order to analyse causes, managers may be required to sift through significant amounts of data. This inevitably means that some critical issues will not be identified, and this may also mean that by the time causes are identified, it is too late to make changes before the next measurement and reporting cycle.
An organisation ' s ICT success is dependent on various ICT learning and growth‐related elements, such as appropriate resources( capital and people), suitable corporate systems( training, information, performance measurement and incentive systems, organisational culture and climate), and behavioural effects. ICT learning and growth affect ICT internal processes, such as standardisation, integration and consolidation, security, and overall quality of ICT processes, and services( Epstein and Rejc, 2005).
2.4 Models for ICT investment decision‐making
In order to test the validity of statements made by authors such as Weill and Olson( 1989) and Harris and Katz( 1991) in the literature, as well as to justify decision making with regard to ICT investments, suitable models were required for this study. Eleven such models for ICT investment decision‐making were found in the literature. These models are: computerisation index( CI), operating leverage( OPEL), return on ICT assets( R) organisational factor, revenue stability, stochastic process simulation( SPS), IT expense ratio( ITEX), operating cost efficiency ratio( OPEX), IT cost efficiency ratio( ITCE), the probability of making an ICT investment when organisational risk is affected positively / negatively when making an ICT investment, and cost‐benefit analysis ratio( CBA). A brief description of each of these models is provided below.
The aim of Kwong and Mohamed’ s( 1985) study was to quantitatively measure the impact of computerisation on profitability and, in the process, develop an indicator of the extent and sophistication of computerisation. They proposed a Computerisation Index( CI) for this purpose, which is constructed according to the following formula:
CI = V 1( W 1) + V 2( W 2) + V 3( W 3)
2.5 Presentation of formulae used to do the calculations for CI Kwong and Mohamed’ s( 1985) CI was constructed as follows:
CI = V 1( W 1) + V 2( W 2) + V 3( W 3) where
CI = Computerisation
V 1 = Variable affecting the degree of computerisation W 1 = Weight applied to Variable V 1
Ten variables( V 1 up to V 10) were selected by Kwong and Mohamed( 1985) to collectively represent the computerisation index.
2.6 Preparation of the formulae used to do calculations for organisations
The leverage models that were used in this study are the following: operating leverage( which affects EBIT), the expected return on IT assets, and the percentage risk factor. The following equations were used to calculate operating leverage( Brealey and Meyers, 1988):
Operating leverage = % change in EBIT + % change in turnover
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