Abstract
The motivation for business change is either to improve the quality of products or services or decrease the costs of current operations that create those products or services. Since implementation of an information system causes business change, that implementation should demonstrate some explicit value in improvement of quality or decreased costs (or both). Quantifying the value provides justification for information systems implementation. Through a case study of four real-world examples, this article shows how activity-based costing determines costs associated with a set of business activities prior to a business change and then again after the implemented system. Four separate municipal organizations’ business activity models were built prior to implementation of web-based electronic payment systems and then after the implementation. Activity-based costing analysis demonstrated benefits of reduced costs in a range from 15% to 28% in three cases. However, costs actually increased by 7% in a fourth case.
Recommended Citation
Orwig, Richard; Baker, James; and Flather, William, "Marrying Business Activity Modeling with Activity-Based Costing for Measuring Systems’ Cost Savings" (2012). AMCIS 2012 Proceedings. 12.
https://aisel.aisnet.org/amcis2012/proceedings/StrategicUseIT/12
Marrying Business Activity Modeling with Activity-Based Costing for Measuring Systems’ Cost Savings
The motivation for business change is either to improve the quality of products or services or decrease the costs of current operations that create those products or services. Since implementation of an information system causes business change, that implementation should demonstrate some explicit value in improvement of quality or decreased costs (or both). Quantifying the value provides justification for information systems implementation. Through a case study of four real-world examples, this article shows how activity-based costing determines costs associated with a set of business activities prior to a business change and then again after the implemented system. Four separate municipal organizations’ business activity models were built prior to implementation of web-based electronic payment systems and then after the implementation. Activity-based costing analysis demonstrated benefits of reduced costs in a range from 15% to 28% in three cases. However, costs actually increased by 7% in a fourth case.