Lally School Researcher Discovers Secret to IT Investing

At a time when many companies are losing money on their investments in information systems and technology, one Rensselaer researcher has discovered the key to making information technology (IT) initiatives pay off.

Thiagarajan Ravichandran, associate professor in Rensselaer’s Lally School of Management and Technology, has found that organizations that invested in IT to enhance their core competencies (the areas where they are already strong) have been successful. Those that have spent broadly on IT have not seen significant returns.

Ravichandran also determined that funneling money into developing internal information systems capabilities and improving the “intangible aspects” related to IT—such as management skills or supplier relationships—are just as critical to implementing IT as purchasing the hardware to do the work.

But it takes a while for a corporation to experience the benefits of pumping up its IT systems, Ravichandran says. That’s why companies must think long-term when investing in the area.

“Based on a study of more than 120 large companies in the U.S., these findings are critical today when firms are seriously thinking of cutting costs and reducing their IT budgets,” he says. “Our results can guide organizations on how to allocate their scarce IT dollars.”

Ravichandran presented the paper on his findings at the International Conference on Information Systems in Barcelona, Spain. The paper is co-authored by Chalermsak Lertwongsatien ’00, of Thailand’s Ministry of Finance. Lertwongsatien earned a Ph.D. in management from Rensselaer’s Lally School in 2000.