Costing the true costs of IT/IS investments in manufacturing: a focus during management decision making

Companies are increasingly reporting their inability to justify their investment in IT/IS because of the nature of costs and benefits associated with its adoption. The reason for this is that many capital budgeting procedures rely on financially orientated appraisal techniques as an integral part of the decision‐making process. The use of traditional appraisal techniques is considered to be no longer appropriate in appraising investments in IT/IS because of the nature of non‐financial and intangible benefits, together with the complexity of direct and indirect cost factors. The authors of this paper identify the range of cost implications associated with the adoption of IT/IS, with a particular focus on the manufacturing industry. These costs are then developed into a taxonomy of direct and indirect factors, which clearly need consideration during the investment decision‐making process.