Many influencing factors are changing company attitudes toward

the role and importance of information resources.

IS Investment Priorities in
Contemporary
Organizations
Varun Grover, James T.C. Teng, and Kirk D. Fiedler

T
he productivity paradox, hyped in the gic tools to compete effectively in the marketplace.
general news media and by prominent The irony is that while the power of IT in the infor-
economists just a few years ago, ques- mation age is becoming readily apparent in the grow-
tioned the wisdom of corporations ing use of terms such as “cyberspace,” “electronic
going high tech when little impact commerce” and “paperless society,” the power of infor-
was observed on the bottom line. This was particu- mation system (IS) departments is not. And yet these
larly true in the service sector, involving white-col- are the traditional entities within organizations with
lar productivity, where more than 85% of the the expertise to control deployment of these very infor-
investments in information technology (IT) were mation resources. Today, IS departments deal with a
made [4]. Now, with an estimated one trillion dol- growing and often bewildering array of technological
lars invested in information technologies since choices, a more literate user group with many demands
1980 in corporate America, we are beginning to see and little patience, and pressure from executive levels
significant gains in productivity [3]. Confronted to expeditiously deploy and support critical organiza-
with a slowing economy, increasing global compe- tional needs. Further, a majority of firms still rely on
tition, and pressure to leverage investments in the financial criteria to evaluate new IS projects [2] and,
increasingly powerful myriad of information tech- according to a survey by the International Data Cor-
nologies, businesses have responded by undertak- poration, less than half the major U.S. companies have
ing fundamental change. These changes in both supported increases in IT investments over the past
structure and process, catalyzed by consultants and few years [3]. Therefore, making good investment
the media, and subsumed under banners like decisions for information systems and technology is as
reengineering and rightsizing, are finally reversing critical and as difficult as ever.
the productivity paradox. Data presented by a This article reports on an empirical study of IS
study commissioned by the U.S. National Research investments, presenting a snapshot of the investment
Council, involving researchers from MIT, does priorities of 313 contemporary U.S. organizations.
indicate that IT has an impact on productivity [6]. The objective of the study is simple—to observe how
Much of this impact is fueled by changing rather IT investments are being prioritized and to examine
than automating work in order to take advantage of factors that might affect the prioritization. Doing so
the capabilities of ever-improving technology. And facilitates evaluation of the deployment of critical
many of these technologies are being used as strate- information resources.

40 February 1998/Vol. 41, No. 2 COMMUNICATIONS OF THE ACM

IS Investment Priorities control of physical and monetary resources. This MIS
It can be contended that the level of organizational era (focus on information) elevated the impact of com-
impact of IS investments has evolved over the past puting to middle management levels, but often suf-
30 years. The evolution, however, has taken on a fered from a mechanical generation of information
cumulative nature with one layer of technology reports that no one needed. Both these eras saw the
investments being ultimately integrated in some beginnings of structured approaches to systems devel-
form with the next generation of investment. For opment, following life-cycle concepts, and involving
instance, traditional data processing still has its sig- extensive documentation and programming. Of
nificant place in the organization, as does the more course, dependency on the IS group for computing
contemporary executive information system. Today, needs was complete and many users had to deal with
the latter system, while retaining its unique objec- IS groups notorious for inexplicable delays. Top man-
tive, works together with the former system in order agement viewed IS as a cost center and as a utility, and

1960s: 1970s: 1980s: Mid-1980s: 1990s:

Electronic Management Decision Strategic Ubiquitous
Data Processing Information Support Information Information
(EDP) Systems Systems Systems (SIS) Systems (UIS)
Top (MIS) (DSS)
Management 1. Systems that
(focus on Strategic Systems that support
Flattening Planning/Resource Increasing Impact Level support competition in the
marketplace
of business Allocation) of IS Investments competition
structures in the
2. Manager-specific
Manager- marketplace software/hardware to
specific support unstructured 4. Infra-
Middle software/ decision making Structural
Mechanical Systems
Management hardware (Integrative)
Generation of
(focus on to support 3a. Mechanical
Information
management control, unstructured Generation of
Reports Information Reports
information) decision
making
Clerical and Operational Level
3b. Transaction
(where tasks get done) Transaction Processing 5. Process
Processing Re-
Organizational Levels engineering
6. Maintenance/ and New
Enhancement of System
Existing Systems Building

• More Integration with Top Management Agenda

• More Influence of User Groups in IS Project Selection

Figure 1. Evolution of
• More Diversity of Information Technologies
IS investment priorities
• More Involvement of Organizational Units in the
Management of Information Resources (i.e.,
Steering Committees)

to meet organizational needs. Therefore, tracing the would only take notice if the machines didn’t work—
impact of IS over time can yield a simple portfolio of the way we tend to notice the lights in a room only
contemporary IS investment areas. Figure 1 describes when they go off!
this evolution, illustrating the increasing visibility of The advent of the PC in the 1980s saw a paradigm
IS resources at higher organizational levels over time. shift in computing as the inflexible big box was bro-
The EDP era of the 1960s (emphasizing data) can ken down and put on the manager’s desktop. While
be best characterized as a centralized, efficiency ori- expertise still mainly resided in the IS group, control
ented era, where the focus was on large-scale transac- moved, albeit marginally, toward the user. Upper
tional processing. The inflexibility of the mainframe middle managers saw the investments in decision sup-
relegated it to a back room function with its major port systems (DSS) and executive information systems
impact on processing data at the clerical level. The (EIS) with user-specific software that could facilitate
early 1970s saw the movement of a lot of this data decision making. While the impact of computing had
(orders, customers, inventory) to middle managers reached a higher level, it was still focused on internal
involved in exception reporting, summarization and efficiency, and with PCs, individual effectiveness. The

COMMUNICATIONS OF THE ACM February 1998/Vol. 41, No. 2 41

mid-1980s saw many applications recognized as new technologies [9]. Ironically, aging technologies
strategic, in that they actually had a direct impact on and application portfolios also demand attention, as
competitive advantage. The bandwagon effect ensued decisions on how to leverage tight IS budgets are
and many anecdotes of strategic systems that “locked made. In some cases, accounting practices of expens-
in” customers or influenced competitors were touted. ing software takes it off the balance sheet altogether,
More recently, IS-based interorganizational alliances making it difficult to assess the extent of the aging
among both customers and competitors are being dis- problem.
cussed as strategic. In any case, the impact of IS Six fundamental IS investments are identified for
reached the top, and many organizations recognized purposes of this study, reflecting a hierarchy of invest-
the importance of including IS in any strategic ment objectives:
agenda. Meanwhile, a significant chunk of IS budgets
were (and still are) being spent for the maintenance of • Strategic systems: development of systems to sup-
the older legacy systems. Determination of priorities port and influence current strategy.
for IS seems to be increasingly influenced by user • Traditional development: those applications that
groups, often as a part of a formal mechanism such as support transaction processing and information
a steering committee. reporting.
While investments targeted at traditional transac- • Decision support systems: those systems that sup-

IS Deployment Factors in
Organizational Context

IMPORTANCE OF 6 INFORMATION
SYSTEMS INVESTMENTS

Strategic systems: development of systems to

support and influence current strategy.
Integration with
Traditional development: those applications that
Top Management's support transaction processing and information
Agenda reporting.

Decision support systems: those systems that

support managerial decision making, such as executive
information systems, group decision support systems,
Policy Committee and expert systems.
and
Infrastructure investment: investment in
User Influence Groups corporate-wide technology such as database or
network construction.

Business process redesign: those applications of IT

involving major changes to existing business processes.
Diversity of Information Technologies
Maintenance and enhancement of existing systems.

Figure 2. Factors Influencing IS investment importance

tional systems, DSS systems, and strategic systems port managerial decision making, such as execu-
still occur, the current “ubiquitous” era of computing tive information systems, group decision support
has two other major investment targets. First, along systems, and expert systems.
with the explosion of Internet, the 1990s are experi- • Infrastructure investment: investment in corpo-
encing the proliferation of telecommunications and rate-wide technology such as database or network
networking within organizations. Fundamental construction.
investments in IS infrastructures (intranets) are being • Business process redesign (BPR): those applica-
consolidated. Second, and not unrelated, IS technolo- tions of IT involving major changes to existing
gies are playing a significant role in organizational business processes.
restructuring and process reengineering projects. The • Maintenance and enhancement of existing
traditional hierarchical structure is flattening and systems.
more collaboration and coordination of groups are
being effectively accomplished through powerful As shown in Figure 1, IS investment priorities

42 February 1998/Vol. 41, No. 2 COMMUNICATIONS OF THE ACM

evolved over the past few decades up the organization’s environment upon which higher levels of IS deci-
management hierarchy—with operational support at sions are based. For the middle-level IS decisions,
the bottom, managerial decisions in the middle, and three factors are identified. First, IS departments
strategic planning at the top [1]. Viewed from this have evolved from an era when they controlled infor-
perspective, the six IS investments can be mapped to mation resources to an era when they must account
the three management levels. Traditional develop- for the growing user influence in IS investment deci-
ment and maintenance/enhancement correspond to sions. Users might control information resources or
transaction processing and operational support. While users might have significant influence in the selec-
DSS clearly targets managerial decision making, infra- tion of technology and projects. Second, with the
structure investment involves corporate-wide technol- growing importance of IS investment, formal inte-
ogy. The latter (infrastructural) developments often grating mechanisms representing the information
transcend transaction processing and managerial sup- needs of the organization are being implemented in
port, as investments such as network construction and the form of steering committees. Unlike traditional
systems integration provide the basis for systems that environments, in which IS reacted to user proposals,
improve coordination and ultimately organizational contemporary organizations often have policy groups
effectiveness. Finally, investments in strategic systems of managers and users to set priorities and allocate
and business process redesign clearly have strategic resources. And finally, for top IS management there
significance for the organization and should be is growing realization that corporate management no
planned and executed by top decision-makers. longer views IS as a back room utility. In many cases
It should be emphasized that this classification is they now see IS as a resource that could contribute
based on the business objectives of the IS investment, significantly to corporate effectiveness. To do so,
rather than the system’s characteristics per se. The however, involves integration of IS with top manage-
essential question is therefore one of the target of the ment’s agenda for the organization.
investment. Are systems investments targeted to sup- These organizational trends reflect the growing
port competitive strategy, transaction processing, pervasiveness of IS by integrating the IS group with
managerial decision making, corporate-wide integra- its larger organization, using an increasing number of
tion, major business process change, or to enhance technologies. However, while these trends are general,
existing systems? Considering the primary purpose of they vary in degree across contemporary organizations.
the investment can alleviate overlap between the cate- Even today, amid all the hype about the information
gories. For example, if a system for decision support is age, many organizations still follow a traditional
conceived specifically to support the organization’s model of IS, similar to those used in the 1960s. Many
current strategy, it would be classified as strategic sys- executives don’t perceive a need to change, or are sim-
tems, not DSS. Similarly, if the system’s primary focus ply uncomfortable with the newer environment. This
was to radically change a business process that requires study provides a descriptive perspective on the priori-
network development, it would be classified under tization of IT investments and their relationships with
BPR, and not infrastructure. In this study we will these changing organizational trends (see Figure 2 for
evaluate the importance of these six IS investments to the relationships being investigated).
contemporary U.S. organizations. A total of 855 senior IS executives received question-
naires aimed at soliciting responses on their IS invest-
Factors Influencing IS Investment ment priorities (see the sidebar “How the Data Was
Importance Collected”). Of these, 313 provided usable responses.
As seen in Figure 2, four factors have been identified About half of the responding corporations were in the
as potentially exerting powerful influence on these manufacturing or financial sectors. Over half had over
investment decisions. These factors relate to the 2,500 employees, and about one-third had over 5,000.
technological and organizational deployment of IS
within the organizational context. Consistent with General Results
prior discussion, these factors are related to the three- The mean ranking for each of the six investments is
level hierarchy of management and decision making described in the second column of Table 1. The
in organizations. First, the diversity of technologies remainder of the table provides an indication
used in organizations seems to be growing. From the whether these mean rankings are statistically differ-
single mainframe, we have evolved toward a plethora ent across investments. Correspondingly, Figure 3
of individual, group, organizational, and interorgani- provides a pictorial depiction of the percentage of
zational technologies [8]. For IS management, this respondents ranking each investment from 1 (high-
technological diversity represents a basic operational est) through 6 (lowest).

COMMUNICATIONS OF THE ACM February 1998/Vol. 41, No. 2 43

 It is interesting to note that the development of organizational structure, necessary to cope with the
systems influencing or shaping competitive strategy current environment of continuous change. The role of
clearly has the highest average rank among the sam- information technologies in the radical transformation
ple. This indicates that, on average, U.S. corporations of business processes has been well documented [8].
are trying closely to tie their IS investments to their Many of these fundamental changes involve the
ability to compete in the marketplace. We suspect compression of inefficient sequential processes by
that a majority of these systems are interorganiza- eliminating hand-offs across departmental units,
tional in nature, facilitate better relationships of firms reducing redundancy, and making participants aware
with their customers and suppliers, and provide prod- of the entire process and its deliverables rather than a
specialized task.
Telecommunications
technologies and their
Rank 1 42.1 15.8 8.7 ability to enable cross-
functional interaction
Rank 2 15.5 13.9 18.8 among process partic-
ipants have played a
major role in process
Rank 3 12.6 13.5 18.8
reengineering efforts.
Also, information
Rank 4 9.4 18.1 19.1 technologies that
allow sharing of
Rank 5 8.1 21.9 20.7 resources such as data-
bases and expert sys-
Percentage of Respondents

Rank 6
tems allow process
12.3 16.8 13.9
participants to work
Strategic Systems Traditional Development Decision Support Systems
asynchronously and
leverage holistic infor-
mation using exper-
Rank 1 14.2 19.4 6.8
tise from the shared
resource. This allows
Rank 2 22 24.3 13.6 more independence
from the rigid input-
Rank 3 27.2 19.1 12.6 output sequence that
characterizes processes
in traditional organi-
Rank 4 16.8 17.5 15.2
zations. Clearly, the
larger infrastructure
Rank 5 15.9 9.7 17.8 of the organization, as
reflected by the back-
Rank 6 3.9 10 34 bone network and the
repertoire of group-
Infrastructure Business Process Redesign Maintenance ware, databases, and
Each column adds up to 100% processing structures,
is closely intertwined
Figure 3. Ranked importance of IS investment with reengineering. The current importance of these
two IT investments is supported by the data in this
uct- and service-based alliances with competitors. study.
Investments in business process redesign and IS The data also suggests that more traditional invest-
infrastructure also have high rankings among the sam- ments like DSS and transaction processing/informa-
ple respondents. While the mean rankings of these two tion reporting, are lower investment priorities. While
investments are not significantly different, more rank these investments might still require a significant
BPR as their first or second priority as can be seen in portion of the IS budget, they are not a high invest-
Figure 3. Nevertheless, they both cumulatively reflect ment priority. Individual systems in these categories
recent trends toward the newer, flexible, and flatter could be important and even strategic to individual

44 February 1998/Vol. 41, No. 2 COMMUNICATIONS OF THE ACM

 Table 1. Ranking of IS investments

Decision Business
Mean Strategic Traditional Infra- Process Maintenance
Rank1,3 Systems Support
Development structure Redesign
Systems

Strategic
Systems 2.63 (1)

Traditional
Development 3.67 (5) p<0.0002

Decision Support 3.66 (4) p<0.000 N.S.

Systems

Infrastructure 3.10 (3) p<0.000 p<0.000 p<0.000

Business Process 3.04 (2) p<0.000 p<0.000 p<0.000 N.S.

Redesign

Maintenance 4.26 (6) p<0.000 p<0.000 p<0.000 p<0.000 p<0.000

1
Numbers in parenthesis indicate overall ranking
2
Significance levels are indicative of the significance of the difference in mean rankings based on Bonferroni multiple comparisons
3
Kendall's Coefficient of Concordance for Rankings = 0.10

corporations, but in general they are not. These inter-

change to object-oriented standards, and more flexible
nal support systems could be equated to the concept of
client-server architectures, maintenance and enhance-
an information utility—aspects of the informationment will be easier and less expensive to maintain
function that are very essential for but not critical to
and of course, necessary to cope with dynamic
organizational performance. Somewhat related, butenvironments.
lower in priority, is investment in maintenance and The data suggests that U.S. corporations would like
enhancement of existing systems. We would expect to invest in information systems to compete more
that while maintenance of legacy systems and older
effectively. Also, from a long-term perspective, invest-
programming standards is not an investment priority,
ing in changing outmoded processes and building a
it is necessary, given the magnitude of prior invest-
corporate-wide infrastructure is viewed as important.
ments in traditional platforms. As organizations More traditional support applications, while necessary,
are not viewed as very important to the
How the Data Was Collected organizations represented.
Data was gathered from 313 senior IS executives (VP or Director level) in for-
profit organizations with over $50 million in revenue. A questionnaire was devel- Factors Influencing Investment
oped that included carefully designed measures for the variables illustrated in Priorities
Figure 2. Specifically for investment priorities, respondents were asked to rank The four factors we considered to have
the 6 IS investments in terms of their “importance to your organization.” Doing the potential to influence IS investment
so forced respondents to prioritize and make trade-offs among the various sys- priorities are described in the first row of
tems. IS vs. user influence and integration with top management’s agenda were Table 2. The strength and direction of
measured using validated 7-point Likert scales. IT diversity was assessed through a the relationship with rank (Spearman’s
raw count of adopted technologies from a list of 20 hardware/software technolo- rank correlation) is depicted in the indi-
gies (EDI, email, imaging) provided. An assessment of the degree of penetration vidual cells for each type of investment.
was made by asking respondents to indicate what percentage of employees for As shown in the second row of the
which each IT was targeted were actually using it. The average response across table, corporations in which top manage-
the 20 technologies was 55.86%, with the lowest penetration for Expert Systems ment understands the strategic role of IS
(at 25.2%). This indicates that all the technologies had significant penetration. and corporations in which IS and corpo-
Finally, the existence of a policy committee was assessed by asking the respon- rate planning are integrated tend to give
dent to indicate whether they have an IS policy committee (steering committee) higher priority to investments in strategic
comprised of managers and users from various functional areas to set priorities systems. Greater recognition of the role of
and/or allocate resources for systems development. The instrument was refined IS as a contributor to organizational objec-
through feedback from 12 IS executives in different metropolitan areas. Seven of tives, rather than a back-room support
these executives were interviewed in person for over one hour and their feed- function, creates an environment that fos-
back incorporated. For those interested, more details on the methodology and ters the recognition of investments in sys-
measures are provided at http://theweb.badm.sc.edu/grover/journal/cacm. tems that facilitate organizational

COMMUNICATIONS OF THE ACM February 1998/Vol. 41, No. 2 45

 Table 2. Factors related to the importance of six IS investments

IS versus Integration With Top IT Diversity Policy Committee

User Influence Management's Agenda

Strategic No Significant Moderately Strong No Significant No Significant

Systems Relationship Relationship (p<0.05) Relationship Relationship

Companies that have higher

IS integration with top
management's agenda also
tend to give higher priority to
strategic system investments

Traditional Weak Relationship Weak Relationship (p<0.10) Strong Relationship Moderate Relationship
Development (p<0.10) (p<0.01) (p<0.05)

Companies in which IS Companies in which IS has Companies that have Companies without IS
has greater influence in less integration with strategic less diversity regarding policy committees tend
project selection tend agendas tend to rate the number of Information to rate traditional
to rate traditional traditional development Technologies tend to rate development
development investments investments as more traditional development investments as more
as more important important investments as more important
important

DSS No Significant No Significant No Significant No Significant

Relationship Relationship Relationship Relationship

Infrastructure No Significant No Significant Moderate Relationship No Significant

Investment Relationship Relationship (p<0.05) Relationship
Companies that have
more diversity regarding
the number of Information
Technologies tend to rate
rate infrastructural
investments higher in
importance

BPR No Significant No Significant Strong Relationship No Significant

Relationship Relationship (p<0.01) Relationship
Companies that have
more diversity regarding
the number of Information
Technologies tend to rate
reengineering investments
higher in importance

Maintenance No Significant Strong Relationship Strong Relationship No Significant

and Relationship (p<0.01) (p<0.01) Relationship
Enhancement
Companies in which IS Companies that have
has less integration with less diversity regarding
strategic agendas tend to the number of Information
rate system maintenance Technologies tend to rate
investments as more system maintenance and
important enhancement investments
as more important

competitiveness. This IS “culture” at the top echelon the factors in the model. These results are particularly
of the organization might be fostered through a proac- interesting. In general, companies with less IT diver-
tive need to leverage IS competencies in the industry sity (fewer but more homogeneous technologies), do
or (as is often the case) a reaction to a visible IS inno- not have policy committees involving organizational
vation in an information intensive industry. In either representatives for determining IS priorities, do not
case, we presume that active recognition of IS impor- integrate IS with top management agendas, and per-
tance to the company, manifested through cooperative mit IS to play a dominant role over users in influenc-
integrative planning mechanisms, is the best enabler ing IS decisions are the ones that rank investments in
of strategic system investments. Domination of IS or traditional systems as important. Alternatively stated,
user groups in the company, establishment of policy companies typified by more traditional environments,
committees, or diversity of information technologies prioritize traditional transactional and reporting sys-
adopted are not significant factors in this IS invest- tems. It is possible these corporations are in less infor-
ment. mation-intensive environments, where the pressure of
Traditional development priority is related to all of the information revolution is lagging, and where

46 February 1998/Vol. 41, No. 2 COMMUNICATIONS OF THE ACM

established technology platforms managed and con- user or IS groups, or the existence of broad representa-
trolled to a large extent by the IS function prevail. We tion in a policy committee. The results do indicate,
suspect that in many organizations the IS department however, that more traditional organizations that are
deliberately attempts to hold on to vestiges of the less integrated with the strategic level of the organiza-
familiar environment it built and sustained over the tion, and with less sophisticated IT would tend to rate
years. Correspondingly, companies that solicit more these investments as more important.
user input on IS investments are integrated with top
management agendas, and invest in diverse technolo- Implications for Practice
gies, tend to rate these traditional investments as Decisions on IS investments are more critical today
unimportant. than ever before. Corporations are undergoing major
With respect to DSS investment priority, none of change, and in many cases information technologies
the factors exhibited significant relationship. This is are the dynamic underlying catalyst. The rapidly
somewhat surprising since we would suspect that these evolving nature of IT and the increasing dispersion
investments might be tied to those of traditional devel- of responsibility of the information function makes it
opment. It is possible, however, that these internal difficult to make these investment decisions. This
information support systems could be implemented at article reports an empirical study of how IT invest-
any level in an organization, and could well be insti- ments are being prioritized in contemporary U.S.
gated by top managers or by user groups using power- organizations and examines factors that might affect
ful PC-based software in a networked environment. their prioritization.
Infrastructure investments, however, exhibit a The results indicate that IS investment priorities
moderately strong relationship with IT diversity. This today seem to be consistent with the evolution of IS
might be reflective of the “chicken and egg” syn- and its related technologies over the years. On average,
drome, where diversity of technologies creates and is more traditional development, along with mainte-
created by a broader technological platform. It does nance and enhancement, is ranked lower today than
indicate, however, that investments in infrastructure systems reflective of more recent trends. The top
increase an organization’s ability to deploy newer investment priority is in strategic systems, perhaps
applications. A similar but stronger relationship holds reflective of the pressure to compete effectively in an
true for BPR investment priority. Companies that increasingly global, competitive, and consumer-ori-
have more diversity in the number of information ented environment. BPR investment is a top priority
technologies deployed tend to rate BPR investments with many corporations as they modify and streamline
higher in importance. As indicated earlier, a wide set older bureaucratized processes and invest in coordina-
of technologies that facilitate communication and tion-intensive technologies. Similarly, infrastructural
coordination among process participants facilitate investments are also a high priority with corporations as
BPR. IT diversity might also reflect a general proac- they bridge the gap between more effective processes
tiveness to invest in and deploy newer technologies and more effective organizations.
and newer trends such as BPR. What is surprising, While the results describe the status of contempo-
however, is the lack of relationship between both rary organizations, they do not provide direct insight
infrastructure and BPR investment priorities and the into how firms can leverage every dollar invested in IS.
other factors. We would have expected integration However, the results do describe four factors that can
with top management agenda in particular to have a be controlled to some extent by organizations. Evalu-
relationship with the ranking of both these invest- ating these factors that might influence priorities
ments.1 This might indicate that many organizations reveal interesting implications for practice. Examin-
are investing in or upgrading IT infrastructure, ing Table 2 vertically, we can infer the importance of:
regardless of whether IS is linked at the strategic level.
Finally, the prioritization of investments in mainte- • User Influence: It is important to recognize that IS
nance and enhancement demonstrates relationships is no longer the sole domain of highly specialized
similar to those found with traditional development. experts. Users are increasingly literate, often have
These investments are often contingent on changes in their own IS budgets, and can take advantage of
the environment. Often considered necessary evils, skills prevalent in a competitive vendor market.
they are not unduly influenced by a domination of Organizations that recognize and cultivate the
influence of users in IS project selection will find
1The relationship between BPR investment priority and integration with top man- it easier to migrate from traditional development
agement’s agenda is somewhat misleading. It is only concerned with BPR as an IS
investment priority. It may not accurately reflect BPR endeavors that are initiated and
projects. This can be accomplished through pol-
funded as a part of a corporate reengineering program. icy/steering committees that debate the viability of

COMMUNICATIONS OF THE ACM February 1998/Vol. 41, No. 2 47

 IS investments from an organizational perspective, investment, and does not favor more traditional sys-
cognizant of the trade-offs involved. tems. This might suggest the need to build a strong
infrastructure that can facilitate a diverse application
• Top Management Buy-In: Firms that want to portfolio to satisfy the disparate information and
push systems that directly add value in the mar- communication needs of various users and processes
ketplace require top management to “buy into” in the organization.
the concept of strategic IS. This might be partic- More importantly, the need to manage a rapidly
ularly difficult for management (including IS changing resource such as IT requires effective man-
management) that have always treated IS as a cost agement of change. No longer can we rely on IS func-
center, focusing on internal information flows and tional expertise to manage every element of a myriad of
transaction processing. However, selling top man- technologies. IS investments have to be prioritized and
agement on the concept of strategic IS is becom- made from a holistic organizational perspective, in the
ing easier with the pervasiveness of technology in face of dynamic technological change. As aptly said by
the marketplace. The results of this study suggest David Snyder at a conference of the World Future Soci-
that the greater the integration of IS with top ety: “In the past decades, people (and corporations) had
management’s agenda, the lower the importance a choice concerning social and technological change.
of maintenance and enhancement investment, tra- They didn’t necessarily have to be the ones risking it all
ditional development investment, and the higher by being pioneers. But now we are all enveloped in the
the importance of investment in strategic sys- future…with no choice but to be innovators and pio-
tems. Firms evolving from a “factory” view of IS neers in the face of constant change.” c
to a more strategic view require treatment of IS as
a resource that needs planning and organization, References
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opportunities and risks. Firms that avoid single (1994).
5. Huber, G.P. and Power, D.J. Research notes and communications retro-
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of the organization. These include challenging 7. Premkumar, G., and King, W.R. An empirical assessment of informa-
existing processes by placing high priority on tion systems planning and the role of information systems in organiza-
tions. J. Management Info. Syst. 9 (1992), 99–125.
reengineering related investments. Also, integrat- 8. Straub, D.W., and Wetherbe, J.C. Information technologies for the
ing diverse technologies on common infrastruc- 1990s: An organizational impact perspective. Commun. ACM 32, 11
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Varun Grover (vgrover@darla.badm.sc.edu) is an associate
professor of Information Systems at the University of South
Conclusion Carolina.
One theme that emerges from this study is that envi- James T.C. Teng (fsujteng@darla.badm.sc.edu) is an associate
ronments where IS is relegated to a support role and professor of Information Systems at the University of South Carolina.
where there is little involvement of the larger orga- Kirk D. Fiedler (fiedler@darla.badm.sc.edu) is an associate
professor of Information Systems at the University of South
nization in IS investments tend to nurture tradi- Carolina.
tional transaction processing and information
This research has been supported by a grant from the Center for International Business
reporting systems. Corporations elevating the status Education Research (CIBER), College of Business Administration, University of South
of IS and integrating the IS function into the larger Carolina.
organizational superset through formal mechanisms Permission to make digital/hard copy of part or all of this work for personal or class-
tend to rate traditional investments lower. Further, room use is granted without fee provided that copies are not made or distributed for
profit or commercial advantage, the copyright notice, the title of the publication and
an IS planning culture at the top of the organization its date appear, and notice is given that copying is by permission of ACM, Inc. To copy
seems to facilitate recognition of the importance of otherwise, to republish, to post on servers, or to redistribute to lists requires prior spe-
cific permission and/or a fee.
strategic system investments. Further, diversity of
IT representation favors BPR and infrastructural © ACM 0002-0782/98/0200 $3.50

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