PROCEEDINGS

International Conference on Economic

and Information System Management

October 17 – 18, 2014

STMIK/STIE MDP Building

Jl. Rajawali No.14 Palembang, Indonesia

STIE Multi Data Palembang

Proceedings of International Conference on Economic

and Information System Management

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The conference is organized by STIE MDP in collaboration with STMIK GI MDP, AMIK MDP Palembang-Indonesia and Dayeh University of Taiwan.

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Proceedings of ICE-ISM 2014 Palembang, October 17 – 18, 2014

189

Information Economics Cost-Benefit Analysis

on Automatic Billing System Implementation

at Ogan Central Electronic Trisnadi Wijaya#1, Rika Kharlina Ekawati#2

#1Management Department, STIE MDP

Jl. Rajawali No. 14 Palembang, Indonesia #2Accounting Department, STIE MDP

Jl. Rajawali No. 14 Palembang, Indonesia

1trisnadi@stie-mdp.ac.id

2rika@stie-mdp.ac.id

Abstract— Information technology plays an important role for

the ease and smoothness of the system in the company. More and

more companies use information technology in their activities.

The purpose of this research is to analyze the feasibility of

automatic billing system implementation in the Ogan Central

Electronic use the cost-benefit analysis method of Information

Economics. The results of the identification and analysis of

Tangible and Quasi Tangible benefits of the application

Automatic Billing System financially Enhanced ROI values

obtained by 58.0207% so it can be concluded that the benefits of

this application is large enough for the Ogan Central Electronic.

Keywords— cost benefit analysis, information economics,

automatic billing system

I. INTRODUCTION

Information Economics is a method for measuring a

difficult project mentioned in the nominal money so it can be

calculated costs and benefits in the application or in the future

development of the project. The project is intended to be a

technology implementation in the company. As known that

intangible benefits of technology are difficult to define and

measure its magnitude. As an example of the network

technologies continue to be needed for the business. Prior to

the use of such technology is applied, it must first calculate

the economic value that financial planning can be calculated

accurately and does not cause any harm.

Application of the technology in the company is an

investment for the future viability of the company to face the

changing times. This investment cost is not small and often

very large losses due to errors in the calculation of the initial

implementation process. To that end, information economics

is needed so that all costs to be incurred are not wasted.

Because this method will help the accurate calculation applied

technology.

Automatic billing system is one example of the application

of the technology used by the company. Previously, there will

be a calculation of the costs and benefits of what is perceived

by the company management before and after implementation

is applied. Therefore, in this study using a case study on the

implementation of the Electronic Central Ogan automatic

billing system in order to analyze the cost benefit that is

perceived by management using Information Economics.

II. LITERATURE REVIEW

The theory used in this research include theories

concerning the conduct of research and its foundation in the

previous research.

A. Information Technology Investments

The development of information technology has forced

companies to invest which does little to progress the company.

According Ranti (2006) in the Bhisma and Rahayu (2010)

there are four types of benefits of IT investments called

Benefit Matrix IT, are: (1) Easy-to-Quantify Tangible (EQT)

or Hard Benefit, the benefits of IT that directly affect the

profitability of the company and the effect can be measured

directly and objectively. Examples of benefits: reduced costs

and increased revenues. (2) Hard-to-Quantify Tangible (HQT),

the benefits of IT that directly affect the profitability of the

company, but the exact effect can not be measured directly.

Examples of benefits: better information and increased

security company. (3) Easy-to-Quantify Intangible (EQI), the

benefits of IT can be measured but the effect does not affect

directly and need for profitability. Examples of benefits:

increased customer satisfaction and increased staff satisfaction.

(4) Hard-to-Quantify Intangible (HQI) or Strategic / Soft

Benefits, the benefits of IT that the effect does not affect

directly and need for profitability.

In the application of information technology investments,

many architectures to be built. According to Gartner (2002)

quoted from Indrajit (2004) there are three concepts of

thinking for information technology investment management

strategies, are:

Proceedings of ICE-ISM 2014 Palembang, October 17 – 18, 2014

190

1. Companies that can integrate with the corporate business

plan development strategy of information technology

(strategic planning) will have a much better performance

than companies that fail to make such integration;

2. Companies that have clear information technology

architecture (enterprise information technology

architecture) will be able to improve the operational

performance of 30% better compared to other companies

that do not have it - especially with regard to the

demands of the external environment changes due

dimanis from time to time; and

3. Companies that apply the principles of project portfolio

management in a variety of information technology

managed to save 10-30% of the expenditures of each

project is done (mostly due to a reduction in the activity

of resource allocation redundancies).

B. Information Economics

Information Economics (IE) is a method developed by

Parker et al. to assess the feasibility of implementation

projects of information technology. The things to be taken into

account, among others, to analyze the perceived costs and

benefits when deciding to use technology in the enterprise.

According Tjahjono (2002) in Tjahjono (2007),

Information Economics, is a methodology to quantify the cost

(the cost) and value (value) to justify information technology

projects. Of all the existing methods, Information Economics

is considered as one of the most comprehensive manner and

assessed can answer a number of factors and unique

characteristics, and the issues and challenges faced. Indrajit

(2004), in his book also said that Marilyn M. Parker, Robert J.

Benson, and H.E. Trainor is one of the information technology

practitioners who do break through the theory of "information

economics" as one of the ways that until recently was rated

"most accurate" in relation to the process of analyzing the

costs and benefits of information technology implementation.

IE method using two approaches in the analysis of the

benefits of IT. The first approach is applied to the financial

benefits that are tangible and quasi. The second approach was

applied to non-financial benefits that are quasi. The technique

used to analyze the tangible benefits is the Traditional Cost-

Benefit Analysis in the form of a simple ROI (Bhishma and

Rahayu, 2010). Parker (1998) in Indrajit (2004) mentions the

concept of value in information economics which consists of:

1. Value Linking

Value Linking is the benefit obtained by increasing the

performance of one or a number of business functions or

organization because of the implementation of information

technology.

2. Value Acceleration

Value Acceleration evolved as a logical consequence of

the nature or characteristics of the technology that has the

dimension of "speed" or speed up the creation of a benefit

for organizations such as companies.

3. Value Restructuring

A direct or indirect benefits enjoyed by the company due

to the restructuring of a number of business processes.

4. Innovation

What is meant in this framework is the ability of

information technology to help give birth to the products

and new services that can be offered to the market.

Source: Parket et.al., (1987) in Indrajit (2004)

Fig. 1 Value Consept

Information economics methodology classified the

benefits of IS / IT into three parts (Parker, 1998) quoted from

Yulia (2006), namely:

1. Tangible benefit

The real benefit or a direct impact on corporate profits. For

example, increase productivity, reduce the use of

paper, and so on. Analysis of the tangible benefits or uses

quantitative calculations using simple ROI- Traditional

Cost-Benefit Analysis (TCBA)

2. Quasi benefit

The benefits are in the "gray", or a direct effect on profits,

but difficult to be calculated or otherwise, does not impact

directly on profitability but can be calculated. For example,

to improve the planning process, improving decision

making, and so on.

3. Intangible benefit

Or intangible benefits that can be seen to have a positive

impact for the company, but does not directly affect profits.

For example, enhance the corporate image, increase

employee morale, and so on. Analysis of the intangible

benefits of using two assessment are:

a. Business Domain

Assessment components of the business domain, among

others:

− Strategic match: the benefits of information

technology is measured by how much the support of the

achievement of the strategic objectives of the

organization or the contribution to the operations

activities to achieve these goals.

− Competitive advantage: the benefits of information

technology is measured by its contribution to the

Proceedings of ICE-ISM 2014 Palembang, October 17 – 18, 2014

191

achievement of organizational competitive advantage.

The use of information technology is the potential to

create obstacles competition. Thus, technology projects

that support inter-organizational systems (inter-

organizational systems) have higher benefits.

− Management information support: This category

assesses the contribution of information technology

projects to the need for information management in

decision making.

− Competitive response: the benefits of information

technology projects is measured by how much the risk of

competition if the project is delayed or not implemented.

The more the project can not be delayed, the higher the

benefits.

b. Technology Domain

The components of the assessment domains include:

− Strategic IS architecture: project benefits the IS / IT is

measured through the level of conformity of the project

to the planning of the IS / IT as a whole.

− Defitional Uncertainty: project benefits / IT measured

by how much uncertainty due to the change of the target

− Technical Uncertainty: project benefits / IT measured

by how much dependence on the expertise of the project,

the hardware, software and systems.

− Infrastructure Risk: project benefits the IS / IT

investment is measured by how important nonproject to

accommodate this project.

Source : Ranti (2005) quoted from Yulia (2006)

Fig 2. Information Economics Framework

Figure 2 above explains that, information economics refers to

a form of assessment scores show the figures for the economic

value of an investment in IS / IT are done. The formula set by

Parker (1998) are as follows (Bhisma and Rahayu, 2010):

Formula 1. Project Score Project Score = Enhanched ROI + Weight of business areas

+ weighting field of technology

Formula 2. Enhanced ROI Enhanced ROI = Traditional ROI + value linking + value

acceleration + value restructuring + innovation valuation

C. Business Value of Information Technology

Based on the information technology implemented in the

company, has some business value. Ranti (2008) says that

there are 13 categories of Business Value consisting of:

1. Reducing Cost of (travelling cost,

staff/operator/employee cost, meeting cost, service

failure cost, application development cost, delivery cost,

training cost per employee, returning cost for incorrect

delivery, cost of money, office supplies and printing

cost, subscription cost of certain reading materials or

subscription cost per employee, space rental cost, device

rental cost, inventory cost, research failure cost).

2. Increasing Productivity caused by (restructuring job

function, accelerating mastering product knowledge,

ease of analysis, increasing employee satisfaction).

3. Accelerating Process of (production process, stock

procurement process, report making process, data

preparation process, order checking process, debt

payment process, transaction process, decision making

process).

4. Reducing Risk of (price miscalculation, unrecoverable

claim, inventory lost, rejected goods, data lost, incorrect

data, penalty, losing potential employee, forgery,

administration fraud, incorrect payment, asset

mismanagement).

5. Increasing Revenue caused by (increasing business

capacity, increasing report quality, increasing customer

Proceedings of ICE-ISM 2014 Palembang, October 17 – 18, 2014

192

trust, widening market segment, increasing other

incomes).

6. Increasing Accuracy of (billing, analysis, data,

planning, decision).

7. Accelerating Cash-in caused by (accelerating billing

dispatching).

8. Increasing External Services of (reducing order

cancellation, knowing customer’s problems, adding point

of services, personalized services, customer satisfaction).

9. Increasing Image caused by (increasing service quality,

offering substantial discounts, complying with

regulations, using branded systems).

10. Increasing Quality of (better supplier/vendor

management, work result, services, products).

11. Increasing Internal Services of (shared services,

matching employee’s right and responsibility, employee

services, proper schedule and training material).

12. Increasing Competitive Advantage caused by

(forming business alliances, accelerating the execution of

new business opportunities, increasing switching cost).

13. Avoiding Cost (ACO) of (reserved fund, maintenance

cost, lost and delay cost).

III. PROBLEM ANALYSIS

A. Problems in Ogan Central Electronic

Ogan Central Electronic is one of the growing trading

company which sells electronic goods either by cash or credit.

Ogan Central Electronic focus on the sales region of Indralaya.

The company currently has regular customers amounted to

1,427 people, and about 65 percent of its customers buy goods

on credit.

The credit sales of electronic goods will have an impact on

the increasing number of corporate accounts receivables. The

increase in accounts receivable on the one hand resulted in

increased interest income from loans. However, the company

also must face the risk of bad debts and the rising costs

associated with the management of these receivables.

The problems that are often faced by the company is

currently associated with these receivables is a problem that is

often done late payment by customers. Companies must

always remind regular customers one week before the due

date of payment via the phone for about five minutes. The

company is also working on some debt collectors for accounts

receivable payments mengihkan customers. Administrative

personnel who handle specific accounts given high salary

considering the importance of bookkeeping accounts-

receivable customers.

Another problem that is not less important is doubtful

accounts. Based on the experience of the owner of the

company about 20 percent of customers who make purchases

on credit bad credit status even become bad debts. A customer

will be given a bad credit status if ever installment arrears

exceed 60 days twice in the same period.

Late payment of accounts receivable made by the customer

will have an impact on the working capital turnover Ogan

Central Electronic. Enterprises should also be willing to lose

the opportunity to benefit from the accelerated payment of

accounts receivable, other than fines received. Thus, the delay

in the payment of customer accounts receivable will not be

profitable for a company may cause the company even failed

to gain a greater loss.

The books of accounts receivable company also is still done

with the concept of accounting without following the rules of

general accounting. Company only records the amount of

receivables the company, due date, the amount of installments

per month and the number of bills that have been paid. The

company does not know the amount of net profit earned per

month from the sales made on credit or cash. Companies only

know the size of the amount of turnover or gross profit earned

each month. Recording the amount of losses resulting from

credit sales is not available.

B. Features and Benefits Automatic Billing System

Automatic Billing System can provide several benefits that

can be described as follows:

Bookkeeping neat receivables in accordance with standard

accounting rules

It has a reminder feature payment due receivables that can be sent via SMS or email to the customer

Able to recapitalize receivables customers who have paid and unpaid

Prepare various reports related to the accounts receivable customers

Calculated total payments receivable customer acceptance.

Automatic Billing System program will be made in the

Visual Basic 6.0 programming language with SQL Server

2000 database. Visual Basic 6.0 programming language until

now still a popular programming language that is often used to

support an interface that is easy and simple programming

language.

IV. EVALUATION AND ANALYSIS OF BENEFITS

AUTOMATIC BILLING SYSTEM

The results of the evaluation Tangible and Quasi Tangible

benefits for Automatic Billing System can be seen in Table 1

and Table 2.

Proceedings of ICE-ISM 2014 Palembang, October 17 – 18, 2014

193

TABLE 1

TANGIBLE BENEFITS

Benefits Value

Reduce Telecommunications

Costs Rp 5.417.000

Reduce Costs Document

Delivery Rp 592.000

Reducing the Cost of Printing

Documents Rp 370.000

Reducing Number of

Employees Rp 5.200.000

Total Rp 11.579.000

TABLE 2

QUASI TANGIBLE BENEFITS

Benefits Value

Value Linking Rp 6.353.000

Value Acceleration Rp 4.698.000

Value Restructuring Rp 2.434.000

Economic Impact Worksheet generated by Tangible and

Quasi Tangible benefits can be seen in Table 3.

TABEL 3

ECONOMIC IMPACT WORKSHEET

Benefits Year 1 Year 2 Year 3

Value Investing 73.000.000 - -

Tangible 12.447.425 13.380.982 14.384.556

Value Linking 12.829.475 13.513.686 14.692.312

Value

Acceleration 13.150.300 13.629.126 14.836.311

Value

Restructuring 13.416.550 13.812.791 15.125.751

Simple ROI

Tangible Benefits 55,0863%

Simple ROI Value 56,2130%

Linking Benefits

Simple ROI Value

Acceleration

Benefits

57,0079%

Simple ROI Value

Restructuring

Benefits

58,0207%

The result of Enhanced ROI from Tangible benefits, Value

Linking benefits, the benefits of Acceleration Value and

Value Restructuring is equal to 58.0207%.

V. CONCLUSIONS

Based on the identification and analysis of Tangible and

Quasi Tangible benefits from the application of Automatic

Billing System financially Enhanced ROI values obtained by

58.0207% so it can be concluded that the benefits of this

application is large enough for the Ogan Central Electronic.

The implementation of Automatic Billing System will provide

many benefits for Ogan Central Electronic both Tangible and

Quasi Tangible benefits.

REFERENCES

[1] Bhisma, Ajeng Vrika Nerissa and Flourensia Sapty Rahayu, “Analisa

Manfaat Implementasi Electronic Customs Clearance System (ECCS) di Chevron Indonesia Company Balikpapan dengan Metode Information

Economic”, Jurnal Buana Informatika, Vol. 1 No. 2, Juli 2010: 119-128.

[2] Indrajit, Richardus Eko, Kajian Strategis Analisa Cost-Benefit Investasi Teknologi Informasi, Penerbit Andi: Yogyakarta, 2004.

[3] Ranti, Benny, “The Generic IS/IT Business Value Category: Cases in

Indonesia”, e-Indonesia Initiative 2008 (eII2008), Konferensi dan Temu Nasional Teknologi Informasi dan Komunikasi untuk Indonesia, Jakarta,

2008.

[4] Tjahjono, Budi, “Analisis Cost Benefit Dengan Metode Information Economics Dalam Pengembangan Teknologi Jaringan Pada PT. Indo

Super Kencana”, Jurnal FASILKOM Vol. 5 No.2 Oktober 2007.

[5] Yulia, “Kajian Kelayakan Investasi Proyek Teknologi Informasi Dengan Menggunakan Metode Information Economics”, Jurusan Teknik

Informatika, Fakultas Teknologi Industri – Universitas Kristen Petra,

http://puslit.petra.ac.id/journals/informatics, 2006.

STIE Multi Data Palembang Jl. Rajawali No. 14 Palembang, Indonesia http://www.stie-mdp.ac.id

ISBN: 978-602-71513-0-7