Paper Info
Title
Prioritizing a Portfolio of Information Technology Investment Projects
Abstract
Although the use of real options for valuation of information technology (IT) investments has been documented, little research has been conducted to examine its relevance for valuing and prioritizing a portfolio of projects. Complexities of IT projects along with the effect of project interdependencies raise several challenges in applying real options for prioritization of IT investments. We examine a large U.S.-based energy utility firm in a deregulated environment that is considering investment in a portfolio of 31 projects to provide a range of Internet-enabled energy services to customers. Using real data on expected project benefits and costs for different competitive scenarios, we develop a nested options model that extends prior research by incorporating the impact of project interdependencies to calculate the option value of all projects. Our nested options model provides a better understanding of project interdependencies on valuation and prioritization decisions, and provides insights into the business value of IT infrastructure projects that provide the managerial flexibility to launch future projects. We present a real options portfolio optimization algorithm for dynamic multiperiod portfolio optimization by incorporating the project values based on real options analysis in a portfolio management model with budget constraints.
Year
DOI
Venue
2004
10.1080/07421222.2004.11045803
J. of Management Information Systems
Keywords
Field
DocType
project interdependency,nested options model,real option,real options analysis,real options portfolio optimization,IT infrastructure project,dynamic multiperiod portfolio optimization,expected project benefit,future project,portfolio management model,Information Technology Investment Projects
IT portfolio management,Business value,Application portfolio management,Project portfolio management,Computer science,Knowledge management,Risk analysis (engineering),Portfolio,Portfolio optimization,Information technology management,Finance,Valuation (finance)
Journal
Volume
Issue
ISSN
21
2
0742-1222
Citations 
PageRank 
References 
80
2.58
15
Authors
3
Name
Order
Citations
PageRank
Indranil R. Bardhan141221.36
Sugato Bagchi231141.10
Ryan Sougstad32119.48