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A critical review of cost-benefit analysis for business software investments

A critical review of cost-benefit analysis for business software investments Cost-benefit (C/B) analysis helps to determine the economic feasibility of business software investments. Research literature and published practices do not recognize substantial software maintenance costs in C/B analysis. Current analyses emphasize the benefits of an initial investment but do not consider the recurring benefits of each enhancement during the software lifecycle. Such analyses could lead to incorrect investment decisions and lost business opportunities. This article aims to review current research on software lifecycle costs and develop a theoretically sound C/B analysis.Design/methodology/approachThis article reviews current C/B analyses and discusses their shortcomings in treating the significant recurring maintenance costs. It analyzes the findings of various studies on software maintenance and synthesizes these findings to identify the nature of various maintenance costs and their benefits. Based on the synthesis, it theorizes various cost and benefit elements for inclusion in a revised C/B analysis.FindingsThis article identifies each recurring maintenance cost relevant to C/B analysis. It also identifies recurring benefits from each enhancement that hitherto have been omitted. Finally, this article discusses how these costs and benefits should be treated in the revised C/Bs analysis.Research limitations/implicationsThis is a conceptual paper proposing a new C/B analysis and requires an empirical validation.Practical implicationsThis article provides a revision of the C/B analysis that is long overdue. It will help to justify a software investment correctly, rank software projects that compete for limited funds and help create a sound software project portfolio. Since 20% of software products may incur 80% of software investment, this analysis will help to make correct software investments and avoid lost business opportunities. This article also describes a practical method to use the revised C/B analysis.Originality/valueThis article provides a revision of the C/B analysis that is long overdue. It will help to justify a software investment correctly, rank software projects that compete for limited funds and help create a sound software project portfolio. Since 20% of software products may incur 80% of software investment, this analysis will help to make correct software investments and avoid lost business opportunities. This article also describes a practical method to use the revised C/B analysis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Journal of Business Emerald Publishing

A critical review of cost-benefit analysis for business software investments

Sakthivel, Sachidanandam
American Journal of Business , Volume 38 (4): 19 – Oct 23, 2023
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References (42)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1935-5181
DOI
10.1108/ajb-09-2022-0145
Publisher site
See Article on Publisher Site

Abstract

Cost-benefit (C/B) analysis helps to determine the economic feasibility of business software investments. Research literature and published practices do not recognize substantial software maintenance costs in C/B analysis. Current analyses emphasize the benefits of an initial investment but do not consider the recurring benefits of each enhancement during the software lifecycle. Such analyses could lead to incorrect investment decisions and lost business opportunities. This article aims to review current research on software lifecycle costs and develop a theoretically sound C/B analysis.Design/methodology/approachThis article reviews current C/B analyses and discusses their shortcomings in treating the significant recurring maintenance costs. It analyzes the findings of various studies on software maintenance and synthesizes these findings to identify the nature of various maintenance costs and their benefits. Based on the synthesis, it theorizes various cost and benefit elements for inclusion in a revised C/B analysis.FindingsThis article identifies each recurring maintenance cost relevant to C/B analysis. It also identifies recurring benefits from each enhancement that hitherto have been omitted. Finally, this article discusses how these costs and benefits should be treated in the revised C/Bs analysis.Research limitations/implicationsThis is a conceptual paper proposing a new C/B analysis and requires an empirical validation.Practical implicationsThis article provides a revision of the C/B analysis that is long overdue. It will help to justify a software investment correctly, rank software projects that compete for limited funds and help create a sound software project portfolio. Since 20% of software products may incur 80% of software investment, this analysis will help to make correct software investments and avoid lost business opportunities. This article also describes a practical method to use the revised C/B analysis.Originality/valueThis article provides a revision of the C/B analysis that is long overdue. It will help to justify a software investment correctly, rank software projects that compete for limited funds and help create a sound software project portfolio. Since 20% of software products may incur 80% of software investment, this analysis will help to make correct software investments and avoid lost business opportunities. This article also describes a practical method to use the revised C/B analysis.

Journal

American Journal of Business – Emerald Publishing

Published: Oct 23, 2023

Keywords: Cost-benefit analysis; Economic feasibility; Software investment; Software lifecycle costs; Maintenance costs

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