Question

The text states that data should be worth its cost. Both cost and value can be broken into tangible and intangible factors. Tangible factors can be directly measured; intangible ones arise indirectly and are difficult to measure. For example, a tangible cost is the cost of a computer monitor; an intangible cost is the lost productivity of a poorly trained employee.

Give five important tangible and five important intangible costs of an information system. Give five important tangible and five important intangible measures of the value of an information system. If it helps to focus your thinking, use the example of the class scheduling system at your university or some other university information system. When determining whether an information system is worth its cost, how do you think the tangible and intangible factors should be considered?

Answer 1

Tangible costs of an information system

(a) Procurement and installation costs

(b) Periodic maintenance cost

(c) Operating cost ( electricity, internet service)

(d) Human resource cost ( salaries of operator)

(e) Cost of obsolescence ( depreciation)

Intangible costs of an information system

(a) Loss of productivity due to inefficiency of system

(b) Loss of goodwill due to wrong information delivered ( it causes bad name and hence loss of customers)

(c) Cost of timeliness. Delayed information may incur more cost in from of penalties or additional costs

(d) Cost of delayed decisions due to inefficiency of information system. This may lead to lost opportunities.

(e)Cost of inefficient service delivery to the customers ( students in university) causing dissatisfaction and a bad word of mouth.

Five tangible values of an information system

(a) Capability of managing the information for the university leading to competence development.

(b) Cost saving due to efficient communication and organisation wide visibility.

(c) Reduction of lead time of student admission, hence improvement of productivity.

(d) .Streamlining of processes and ease of management.

(e) Decision support for the management.

Five intangible values of information system

(a) Enhancement of satisfaction level and brand value of the university among the students.

(b) Reduction of risks and uncertainty owing to the information systems.

(c) Reduction of errors in processing owing to the accuracy.

(d) Contribution to the efficiency and productivity, thus adding to the profitability of the university.

(e) Enhancing co ordination among employees, thus improving the work culture of the organisation.

The cost and value factors need to be evaluated, not only with reference to the money, but also considering non monetary factors like goodwill, brand value and a good word of mouth publicity among customers. It should be judiciously evaluated if the cost incurred in procurement and maintenance of the information system is worth the value created, both tangibly and intangibly. The tangible factors can be readily evaluated in numeric forms, while the assessment of cost incurred and value realised intangibly is difficult to ascertain and requires experience and expertise for right estimation. Often, the intangible factors are more crucial and their impact is difficult to judge, so their relative importance and their risk quotient takes a place of higher importance while doing a cost - value analysis.