Examining Real Options Exercise Decisions in Information Technology Investments

Researchers have advocated real options thinking (ROT) for evaluating and managing risky IT investments to account for managerial decision flexibility. Effective ROT is a three-step process that requires managers to recognize, value, and exercise options embedded in IT projects. Prior research has illustrated the existence of managerial bias in the recognizing and valuing real options. However, little research has examined real options exercise decisions. Hence, we use prospect theory to examine whether IT managers demonstrate systematic biases while exercising real options in IT projects and portfolios. We also study whether one can control or mitigate such biases. We found evidence of biased (suboptimal) real option exercise decisions in IT projects and in IT portfolios. However, we found differences in biased decision making between a single project and a portfolio scenario. We also found that project scale and real option type influenced vulnerability of a project to biased decision making. In addition, simplifying the presentation of the net effects of real options exercise decisions can help reduce bias, especially for large project portfolios. We discuss the implications of these results on theory and practice

Flexibility – Designing for Optionality on Warehouse Modernization Projects

The Department of Defense relies upon a vast network logistics facilities and capabilities across the planet. Assets are largely sourced from the Defense Logistics Agency, which is considering a modernization project for their Eastern Distribution Center (EDC). It handles 25% of all materials that DLA supplies, and the facility is antiquated. In order to maximize their investment, flexible options for the modernization should be considered. This research was conducted as a case study of the EDC in order to develop a framework of flexibility for DoD decision makers going forward. This case study gathers subject matter expert knowledge from government and commercial decision makers to develop a framework for DoD managers moving forward into the future

Successful Management Strategies for Addressing Information Technology Project Scope Changes

Inadequate scope management strategies fail to prevent project failures. Information technology (IT) project leaders who lack strategies to prevent project failures negatively impact their business goals and delivery schedule. Grounded in the theory of constraints, the purpose of this qualitative single case study was to explore strategies IT project leaders use to manage project scope and prevent project failures. Data were collected through semistructured interviews and a review of company documents from 3 participants in a small IT consulting company. Data were analyzed using thematic analysis. Three themes emerged: understanding project scope changes, performance techniques, and communication. A key recommendation is that IT project leaders should use project performance techniques and communicate with stakeholders when identifying strategies to prevent project failures. Implications for positive social change include creating more local IT job opportunities, improving employee compensation, and investing in local communities