Business Commons^™

Valuing Information Technology Infrastructures: A Growth Options Approach, Qizhi Dai, Robert J. Kauffman, Salvatore T. March

Research Collection School Of Computing and Information Systems

Decisions to invest in information technology (IT) infrastructure are often made based on an assessment of its immediate value to the organization. However, an important source of value comes from the fact that such technologies have the potential to be leveraged in the development of future applications. From a real options perspective, IT infrastructure investments create growth options that can be exercised if and when an organization decides to develop systems to provide new or enhanced IT capabilities. We present an analytical model based on real options that shows the process by which this potential is converted into business value, …