Information Technology Investment Appraisal Practices in Ethiopia with Particular Reference to the Financial Sector

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Date

1999-06

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Addis Ababa University

Abstract

We live in an era of information where the growth and fate of organizations, individuals and others is determined by the degree of their access to and control over information resources. For this reason, information technology has become a strategic and competitive weapon of the information age. Because of their awareness of its power and potentials, therefore, more and more organizations are spending considerable amount of resources in IT projects. However, such expenditures many not yield the desired results unless they are evaluated in a systematic and formal way. To this end, a number of traditional and new methods have been designed to evaluate the viability of IT and non-IT projects and to help the concerned policy makers arrive at the right investment decisions Of the available methods, the traditional financial techniques have been in use for a very long period of time but they are now being criticized for their inadequacy in evaluating [T projects. Some of the newly proposed methods seem to be practical while others look a bit theoretical and Incomplete In spite of the availability of alternative evaluation methods, many organizations do not seem to evaluate the viability of their IT investments properly. The study addresses the foregoing issues and explores how IT projects are evaluated in the Ethiopian financial sector - the sector which is characterized by its information-intensive activity. It also provides a brief account of the results of the survey. The study indicates the prevalence of less systematic, highly subjective, and informal evaluation practices. Lack of skilled and experienced manpower in the area of IT evaluation is considered to be the most serious problem in the sector. The use of various techniques including the Payback Period, Net Present Value and Information Economics are recommended. There is a need for more emphasis on and coverage of IT evaluation in computing and information science training; for organization of workshops and short-term training. Further research in this area is also recommended in order to improve the overall evaluation practice in the financial sector.

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Keywords

Information Science

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