Using Economic Value to Justify IT Investments

November, 2005


For a new IT investment to be approved, the CIO must be able to write a business case that speaks directly to executive management in the language of shareholder value. For many companies, this means understanding the basic concept of Economic Value Added (EVA)–a powerful tool for calculating the business value of an IT investment. This report is an “EVA primer,” providing a simple example of the EVA calculation for a fictitious company and the improvement in EVA from a proposed IT investment. The report also provides insights into why improved asset turnover is often the best path to improving the economic value of an IT investment. (5 pp., 3 figs.)
[Executive Summary]