Costs of Information Services and Information Systems

Abstract

The large number of cost terms in use regarding information services contributes to confusion in discussion and cost analysis. This confusion can largely be resolved by focusing on decisions rather than on products and cost terms. This decision focus is consistent with the proper application of total cost of ownership approaches and a real options perspective for evaluating managerial flexibility. Information services also tend to display public good-like characteristics. The non-rivalrous nature of production (i.e., low marginal cost of production) and the perishability of services have critical implications for investments and complex pricing. In addition, some information services and other Internet-based services, can display network effects, which also have important implications for managing the life cycle of the service. Finally, the implications of big data for information services are briefly considered.