On the Sound Financial Valuation of Flexibility in Information Systems

Flexibility often represents the key area of value added by investing into an information system (IS) but also carries significant costs. Therefore, its quantitative financial valuation is of vital importance to make economically informed decisions about flexibility. This is challenging due to varying flexibility definitions and the complexity of the flexibility construct in itself. To address this challenge, this paper analyzes the scientific literature concerned with the financial valuation of flexibility in information systems (FIS). In the first part, it introduces fundamental requirements for a proper financial valuation, discusses the characteristics of FIS that are driving its economic value and identifies suitable financial valuation approaches. In the second part, a structured review of literature focusing on the application of FIS valuation analyzes to what extend the existing literature supports economically informed decisions within flexibility design. Further research is indicated with regard to dependencies between flexibility and the existing IS landscape as well as to a more structured and comprehensive approach to examine all interacting features of an IS enabling flexibility in the first place. In summary, joining the theoretical basis and the application of FIS valuation, this paper gathers all necessary fundamentals for a sound financial valuation of FIS and reveals the need for further development within this stream of BISE research

On the Ex Ante Valuation of IT Service Investments - A Decision Theoretical Perspective

The paradigm of service orientation and its incarnation in the form of service-oriented architecture (SOA) and information technology (IT) services play a crucial role in enabling companies to achieve considerable competitive advantages. However, to be able to leverage the opportunities of SOA and IT services, companies need to gain a thorough understanding of the business value of IT service investments. Nevertheless, research on IT services has focused mainly on technical questions so far; the economic perspective largely has been neglected. Therefore, the authors aim to contribute to the ex ante valuation of IT service investments from a decision theoretical point of view. Using decision theory as a theoretical base, the main aim is to identify and discuss specific challenges regarding the financial ex ante valuation of IT service investments, which arise from the inherent flexibility of IT services and the various interdependencies within a company’s IT service portfolio. The authors thereby emphasize that the application of common methods from financial theory for valuating IT service investments has to be treated with caution, as these methods are often tied to rather restrictive assumptions based on the specifics of capital markets. By analyzing different clusters of IT service investment decision problems using decision theory, the authors identify and discuss pitfalls that might occur when applying financial valuation methods to capture the flexibility and interdependencies of IT service investments. The decision theoretical considerations are intended to help build a solid basis for future multi-criteria valuation approaches, of which an essential component is a theoretically well-founded financial valuation

Benefits Quantification in IT Projects

The probability of IT project failures can be mitigated more successfully when discovered early. To support an early detection, transparency regarding a project’s cash flows shall be increased. Therefore, an appropriate analysis and calculation of a project’s costs, benefits, risks and interdependencies is inevitable. Until today, however, a method that appropriately considers these factors when estimating the ex ante project business case does not yet exist. Using the Action Design Research approach, we designed, applied and tested a practicable and integrated method of determining the monetary value of IT projects to generate generalized insights to benefits management. This method was conjointly developed by practice and academia, to ensure practical applicability while upholding scientific rigor. Furthermore, to support understandability of the method, we provide an application example

Modell für das nachhaltige Immobilien-Portfoliomanagement betrieblicher Büro-Bestandsbauten

Als einer der größten Ressourcenverbraucher und Schadstoffemittenten rückt der Gebäudesektor verstärkt ins Interesse der Nachhaltigkeitsdiskussion. Informationen zur ökologischen, sozialen und ökonomischen Qualität von Gebäuden werden unablässig. Ziel dieser Arbeit ist es deshalb, ein Modell für das nachhaltige Immobilien-Portfoliomanagement international tätiger Großkonzerne mit einem entsprechend umfassenden und heterogenen Büro-Bestandsbautenportfolio zu entwickeln

Toward IT Value Mapping - An Approach to Value-Based IT Management

Recent research has shown that companies face considerable difficulties in implementing a value-based management of their IT portfolios. This paper therefore presents an approach for measuring and managing the business value of IT investments. To ensure practicability, our approach is derived from a set of practice-based requirements extending previous empirical work. In our conceptual model we distinguish between capital budgeting and ongoing value management. For capital budgeting we propose to assess IT investments according to their expected business value by using net present value analysis and a scoring model. For ongoing value management we recommend to keep track of a set of project specific key performance indicators to ensure that the desired benefits are realized. In order to link these two fundamental processes, value drivers and measurable performance indicators have to be identified. Thus we combine established evaluation for an integrated IT Portfolio assessment considering financial, non-financial and risk effects as well

Systemic Risk in IT Portfolios – An Integrated Quantification Approach

Recent trends in digitalization, combined with continuous innovation pressure, have led to an increasing number of IT projects that are often accomplished within huge IT project portfolios. Although numerous IT project and portfolio evaluation and planning approaches have been developed and applied in companies all over the world, approximately 25% of IT projects still fail, which may result in a global value destruction of approximately 900 billion USD. One main reason for the numerous failures is the lack of transparency concerning dependencies within IT portfolios. This paper draws on graph theory to present a rigorous assessment of systemic risk that is based on different types of direct and indirect dependencies within IT portfolios. Based on this assessment, an integrated, novel, and quantitative approach to IT portfolio evaluation is presented that strives to mitigate IT project failures as it helps decision makers to evaluate their IT portfolios more adequately

Reifegradmodelle für das IT-Projektmanagement

Informationstechnologie (IT) ist im heutigen Marktumfeld für viele Unternehmen längst zu einem erfolgsrelevanten Faktor geworden. Den Management- und Controllingprozessen von IT-Projekten ist somit besondere Aufmerksamkeit zu widmen, da sie die IT-Fähigkeiten der gesamten Organisation maßgeblich beeinflussen. Um diese Prozesse zu bewerten und zielgerichtet weiterzuentwickeln, sind Reifegradmodelle (Maturity Models) ein effektives Instrument. Für den speziellen Bereich des IT-Projektmanagements und -controllings existiert bereits eine Vielzahl von Reifegradmodellen. Obwohl einer der meistgenannten Nutzenaspekte von Reifegradmodellen in der Verbesserung der Prozesse liegt, ist die Erfolgsquote von IT-Projekten gering. Die Gründe hierfür sind vielfältig, liegen jedoch in erster Linie in einer unzureichenden Planung, Steuerung und Kontrolle des Projektverlaufs, zu geringer Beachtung von Projektinterdependenzen sowie einer fehlenden Ausrichtung der Prozesse an einer übergeordneten Strategie (Business-ITAlignment). In der vorliegenden Arbeit werden daher einige weit verbreitete Reifegradmodelle analysiert und gegenübergestellt. Es wird unter anderem untersucht, inwiefern bestehende Reifegradmodelle zum IT-Projektmanagement die wichtigen Teilaspekte des IT-Projektcontrollings sowie des Business-IT-Alignments abbilden. Die Untersuchung zeigt vor allem zwei Schwachstellen: Zum einen fokussieren viele Modelle bei der Prozessbetrachtung lediglich auf die operative Ebene und vernachlässigen strategische Aspekte des IT-Projektmanagements und -controllings. Zum anderen liefern zwar alle Modelle eine Beschreibung der Ist-Situation, können aber kaum konkrete Hinweise oder Handlungsanweisungen zur Verbesserung der Prozesse bereitstellen. Aufgrund dieser Erkenntnisse wird ein Ansatz für ein Reifegradmodell entwickelt, welcher die identifizierten Problembereiche adressiert. Besonders die Verknüpfung strategischer und operativer Elemente des Einzel- und Multiprojektcontrollings, die Beachtung spezieller Merkmale von IT-Projekten sowie der Vorschlag konkreter Maßnahmen und Controllinginstrumente zur Prozessverbesserung können einen erheblichen Mehrwert zu bereits vorhandenen Modellen erzeugen. Das entwickelte Modell trägt somit zum Verständnis der Relevanz eines erfolgreichen IT-Projektcontrollings bei, hilft durch seine Spezialisierung die entsprechenden Prozesse genauer zu analysieren und gibt praktische Hinweise zur gezielten Verbesserung. Für eine empirische Validierung und Weiterentwicklung sind jedoch weitere Studien notwendig