The major problem’s research in this report is the need for achieving the desired business performance by focusing on optimal costs through engineering IT resources. This is needed in view of the existing methodology does not consider the causal relationship between the superior performance and the optimal cost, yet current approaches have concerned to analyze the relationship between IT resource and firm performance. Essentially, this study is continuing the previous researchers confirming that there has been a positive IT’s role to bring a business up in performance. Nevertheless, this study does the different paradigm of the previous studies, namely, it configures its research block diagram in a combination of series and parallel or hybrid to engineer the resources in accomplishing the IT value. This construction refers to an IT value engineering concept, which recommends a systems engineering methodology associated with IT inclusion in an organization to create a superior performance at optimal costs.
Consequently, to solve the problem, a number of propositions direct the research as follows: 1) the procedure for testing the IT value model can be developed to verify and validate the model, so it is reliable as a basic concept to solve the problem of this research; 2) the model structure consists of several subsystems, namely IT resources, firm capability, firm core competence, and firm performance in a hybrid configuration; 3) the relationship between the subsystems on the structure of the resulting model can be reorganized in order to facilitate the compliance of the desired performance criteria and optimize the cost; 4) it is able to optimize the ITVEF in minimizing costs or maximizing revenues; and 5) the framework should be internally and externally stable. For that understanding, the applied research design is using systems engineering through an engineering design process by defining the problem, generating alternative solutions, selecting a solution, detailing the aim, and validating the model. Additionally, this methodology works together with the meta-analysis approach to help analyze the correlation between IT resources and performance. Likewise, another tool is the Partial Adjustment Valuation (PAV) theory that helps to be as a valuation method between the desired output (input) and the realized output of each subsystem (output). This is running for both dynamic and static speeds of adjustment of PAV.
Moreover, the eight IT-based firms’ data, namely Telkom, Indosat, XL, BTEL, Smartfren, Mandiri, BRI, and BNI function to examine the model. The experiment and validation outcomes exhibit that the model has shaped as desired although several anomalies have appeared. Nonetheless, the experiment and further studies have already resolved the above propositions where the IT value model procedure facilitates to disclose that IT values are real; the IT value model contains four subsystems: IT resources, firm capability, firm core competence, and firm performance, in which their relationship is in a hybrid configuration; the relationship among the subsystems is positively reorganized with considering IT business ecosystem to realize the desired performance criteria and optimize the cost; the ITVEF is an optimal framework; and the framework is internally and externally stable.
Subsequently, the study results release a hybrid fashion model that is structuring the IT resource, the firm capability, the firm core competence, and the firm performance in a hybrid configuration to construct an IT value engineering framework (ITVEF). The framework carries out an engineering process methodology, whereas the input is the desired output (y* ) exemplified by the Cobb- Douglas production function. In addition, this production function input consists of regular capital (K), labor expense (L) and IT spending (I) that spread among four subsystems above. Meanwhile, the output of the framework is the firm’s gross operating revenue (yt).
Additionally, this research contributes to scientific developments from several perspectives, namely 1) the IT value assessment has been carried out among the subsystems; 2) the research generates a passion in IT value study due to interdisciplinary of fields (systems engineering, meta-analysis, and PAV), whereas it did not happen before in IT value research; 3) a novel approach to capital allocation by the hybrid configuration, whereas its allocation considers many system’s variables and indicators; 4) this research also launches a novel term: IT value engineering in studying the IT values; 5) this study resulted in the ITVEF, which is not only to remodel the patterns of the IT value study but also to result in the concrete estimation of the IT spending and the firm performance in their units, and 6) this research has applied two types of speed of adjustment, which is a coefficient between the change in real output of a production process and the desired output alteration. Nevertheless, there are several weaknesses found in this research, such as revenue separation between the model with IT inclusion and without it; therefore, it needs to do future studies to complete the research.
Keywords: optimal cost, IT value engineering, regular capital, labor expense, IT
spending, hybrid, operating revenue.