1999/01/01 by Alfred Taudes, Taudes, Alfred, Markus Feurstein +3
Business, Management and Accounting · Decision Sciences · Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #Financial Reporting and Valuation Research #Innovation Diffusion and Forecasting
paper · pdf · doi:10.57938/f020a6f4-bee6-4a8c-94ab-0d0f9c222137
openalex publication_date 1999/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
In recent years, the use of option pricing models to support IT investment decisions has been proposed in the MIS literature. In this paper, we discuss the practical advantages of such techniques for the selection of a software platform. First, we argue that traditional quantitative approaches to a cost-benefit analysis give only a partial picture of such decision situations: due to the long planning horizon required because of the time-consuming and resource-intensive implementation process, it is not possible to exactly predict which applications will, in fact, run on the system over time. Thus, the investor is faced with the problem of valuing "implementation opportunities". We then compare different valuation techniques for this task and discuss their respective advantages and drawbacks. The practical advantages of employing such models are demonstrated by describing a real-life case study where option pricing models were used for deciding whether to continue employing SAP R/2 or to switch to SAP R/3.