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RESEARCH PRODUCT

IS evolution benefit assessment: Challenges with economic investment criteria

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Maintenance and system evolution activities have a significant role in the information system (IS) life cycle. It has been estimated that approximately 80% of the total IT expenses are allocated for maintenance activities [20]. According to Lehman’s first law, maintenance is necessary, because software needs to be continuously improved or it will get out of date and cannot respond to the requirements of its environment [19]. Despite the importance of IS evolution investments, there is a gap between the IT related costs and company profitability [27]. Brynjolfssen [10] described this as a productivity paradox: information technology utilization has increased since the 70’s but simultaneously productivity has slowed down. The work effort of maintenance is generally proportional to the life time of a system. Therefore, it is more dominant in legacy information systems [7]. Besides being old, a legacy system is typically large at size and contains vital information for the user organization, uses out-of-date technology, and is laborious to maintain [3] [4]. There are three strategies to deal with a legacy system: 1) maintaining and using the system as it is, 2) developing or purchasing a new system to replace it, or 3) radically improve, i.e. modernize, the legacy system in order to meet the new business needs [4] [25, p 8-10]. IT investments can be roughly classified in two categories, acquisition projects and development projects [24]. In the context of IS evolution, acquisition project includes purchasing off-the-self software in order to replace the existing legacy system. Development investment refers to a project that aims at developing new or modernizing the existing system. Therefore, replacement can be either an