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An Economic Perspective on the Flexibility of IT-Systems

An Economic Perspective on the Flexibility of IT-Systems
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Author(s): Michael Amberg (University of Erlangen, Germany) and Markus Hirschmeier (University of Erlangen, Germany)
Copyright: 2004
Pages: 4
Source title: Innovations Through Information Technology
Source Editor(s): Mehdi Khosrow-Pour, D.B.A. (Information Resources Management Association, USA)
DOI: 10.4018/978-1-59140-261-9.ch210
ISBN13: 9781616921255
EISBN13: 9781466665347

Abstract

Traditional capital budgeting models cannot appropriately capture the value of IT-systems. Real Option Pricing Theory provides a useful economic perspective on the valuation of IT-systems, although no comprehensive review of the state of the art of real option pricing models for IT-investments has been published to date. This paper provides an overview of the applicability of real option theory to IT-infrastructures investments. The suitability and the impact of real option pricing theory are analyzed and evaluated.

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