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The Evaluation of IT Investments through Real Options

The Evaluation of IT Investments through Real Options
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Author(s): Maria Alice Frontini (University of São Paulo, Brazil) and Fernando José Barbin Laurindo (University of São Paulo, Brazil)
Copyright: 2006
Pages: 3
Source title: Emerging Trends and Challenges in Information Technology Management
Source Editor(s): Mehdi Khosrow-Pour, D.B.A. (Information Resources Management Association, USA)
DOI: 10.4018/978-1-59904-019-6.ch123
ISBN13: 9781616921286
EISBN13: 9781466665361

Abstract

As Information Technology (IT) evolves, it becomes increasingly complex investment decisions upon it. The technological uncertainties make it difficult to estimate the value that IT solutions can bring. Therefore, Chief Information Officers (CIO) face prejudice from top management, which is skeptical about the real benefit that IT can bring up to business. Hence, this conservatism can lead companies to a lack of investments in IT projects that establish the foundation for future opportunities in products and services innovation. This article intends to, through a bibliographic review, apply into IT a relatively new methodology, called real options, used into corporate strategy for evaluating and deciding about new investments. Particularly, this methodology is highly recommended when either there is a considerable level of uncertainty about the benefits to be achieved, or when the investment does not create value directly to the business but enables a platform for future impacts

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