Problems Associated with Cost/Benefit Analysis for Strategic Information Systems

Abstract

A lot of attention is devoted to the development of strategic information systems. Developing such systems is expensive and quite risky since competitor's reactions have to be considered. Moreover, sustainability that guaranties longer lasting competitive advantages has to be achieved. Not surprisingly, methods to evaluate project proposals are quite rare. In this paper we analyze the decision problem in the context of an oligopolistic market structure with homogeneous goods. In such markets strategic information systems may help to cut costs and/or to reduce uncertainty. It is indicated how the analysis may be carried over to the case of heterogeneous products, where product differentiation provides another strategic option.