What are complementary assets and how does investment in them impact returns on technology investments?

Assets that are required to derive value from primary investment are called complementary assets. For example, to get real value from water resources requires investments in hydropower‘s, transmission lines, legal regulatory structures etc. Thus theses investments are complementary for getting real values from investments in water resources. In the same way investing just in IT may not give attractive returns to organizations.

Studies show that there are considerable variations in returns from investments in information technology. Some organizations invest great deal of amount and also able to achieve great deal of values from this investment. On the other hand some organizations invest great deal of

amount and are only able to achieve little value from this. Third variation is the organizations that invest little in information technology but able to get great deal of returns. The fourth types of organizations are those that invest little in IT and also get little and also get little returns from it. This clearly indicates that investing in information technology does not guarantee good returns. The reason behind this is the concept of complementary assets.

Investments in information technology alone cannot make managers and organizations more effective. Thus, to get proper returns from investment in IT, organizations needs to invest in complementary assets also. Some organizations do not invest in discovering new business model or seeks to preserve existing business model even after investing in new technology. Due to this organization may be unable to take advantages of new technology and hence unable to get returns from investment in new technology.

According to Kauffman et. al. complementary assets for investment in information technology are investment in new business models, new business process, management behavior, organizational culture, trainings etc. Organizations that do not invest in theses complementary assets can no get superior returns from investments in IT.

Main complementary assets for investment in information technology can be categorized into following three classes:

® Organizational Assets: It includes investments in selecting appropriate business model, efficient business process, decentralization, distributed decision making rights, supportive organizational culture that values effectiveness and efficiency, Strong team for developing information systems.

® Managerial Assets: It includes senior management that supports investments in new technologies and change, incentives for new management innovations, Collaborative work environment, Training programs to enhance skills of using information systems in decision making etc.

® Social Assets: It includes investments in establishing internet and telecom based infrastructure, conducting and launching IT-enriched educational programs, developing standards, laws and regulations etc.

Contemporary Approaches to Information Systems

When an information system is being developed, much importance should be given to the structure of the organization, culture of the organization, etc. But along with these, especial attention should also be given to the technical side of MIS. The various contemporary approaches to MIS development are: Technical Approach, Behavioral Approach, and Socio

Technical Approach.

The Technical Approach

Technical approach says that all business information systems were combinations of computer science, management science, and operations research. Computer science considers knowledge of subjects like Data structures and algorithms, Database Management Systems, Computer Networking, Theory of computing, Business data processing, Programming languages, System Analysis and design etc. was essential for

designing            any business            information system. Management science considers theories like motivation and leadership theories and models had their impact on the information system. Operation Research Techniques such as Linear Programming, Game theory, Transportation   Problem, Fuzzy logic etc helped to enhance capabilities of information systems. Business Management adopted Operation Research Techniques such as CPM & PERT for project management in the management process through information system.

Behavioral Approach

MIS also concerned with behavioral issues surrounding the development, use, and impact of information systems, which are typically discussed in the fields of sociology, economics, and psychology. Business Organizations are social economic groups wherein individuals work together with common motive. Every individual possesses certain values, beliefs and assumptions and have specific mind set. Therefore every individual have their influence on shaping up the information system. This social aspect influenced development of every information system and people in the world along with time e.g. e-Banking, e-Governance, e-Booking etc. Psychology refers to cognitive capability of human beings. The individual as well as group psychology has its own influence on the information system. People are still scared of e-Transactions like e-Payments. Study of economics plays vital role in planning and while designing of any information system. We can find out the ways for profit, growth and sales maximization as economics includes the study of labor, land, and investments, of money, income, and production, and of taxes and government expenditures.

Socio Technical Approach

In the socio technical view of systems, optimal organizational performance is achieved by jointly optimizing both the social and technical systems used in production. Adopting a socio technical systems perspective helps to avoid a purely technological approach to information systems. Technology must be changed and designed, sometimes even "de- optimized," to fit organizational and individual needs. Organizations and

individuals must also be changed through training, learning, and planned organizational change to allow technology to operate and prosper.

What are complementary assets in information technology?

What are the complementary assets required for information technology to provide value to a business?

What kinds of complementary investments are most important to derive value from information technology?

What are complementary assets examples?