Journal of Management Information Systems

Volume 3 Number 2 1986 pp. 22-32

Financial Impact of Information Processing

Bender, Donald H

ABSTRACT: The economic evaluation of information processing systems has been frustrating in that objective analysis has become extremely difficult. At best cost-benefit is determined "post facto." The current emphasis on management information systems and decision support systems further obscures the early evaluation process because it is difficult to pre-determine the benefits that are expected. Research conducted in the life insurance industry, using data collected from many companies, reveals: —that the economic benefit of automated systems might be evaluated best by measurements involving a company's entire expenditure for information processing as opposed to the economic benefits derived from individual systems; —that too little spent for information processing could have a negative impact on the total expense position of a company relative to other companies; —that expenditures for some components of information processing have a greater impact on the total expense position of a company. While continued attempts to measure the benefits of individual systems are encouraged, the results suggest that economic benefit should also be measured based on the composite of all expenditures for information processing. Perhaps other companies of different industries should be motivated to pursue this approach.

Key words and phrases: information processing costs, life insurance information processing, expense/ income ratios, return on assets, value of information systems