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A fuzzy goal programming model for strategic information technology investment assessment

Faramak Zandi (Industrial Engineering Department, Faculty of Technology and Engineering, Alzahra University, Tehran, Iran)
Madjid Tavana (Management Department, Lindback Distinguished Chair of Information Systems, La Salle University, Philadelphia, Pennsylvania, USA)

Benchmarking: An International Journal

ISSN: 1463-5771

Article publication date: 12 April 2011

1182

Abstract

Purpose

The high expenditures in information technology (IT) and the growing usage that penetrates the core of business have resulted in a need to effectively and efficiently evaluate strategic IT investments in organizations. The purpose of this paper is to propose a novel two‐dimensional approach that determines the deferrable strategy with the most value by maximizing the real option values while minimizing the risks associated with each alternative strategy.

Design/methodology/approach

In the proposed approach, first, the deferrable investment strategies are prioritized according to their values using real option analysis (ROA). Then, the risks associated with each investment strategy are quantified using the group fuzzy analytic hierarchy process. Finally, the values associated with the two dimensions are integrated to determine the deferrable IT investment strategy with the most value using a fuzzy preemptive goal programming model.

Findings

Managers face the difficulty that most IT investment projects are inherently risky, especially in a rapidly changing business environment. The paper proposes a framework that can be used to evaluate IT investments based on the real option concept. This simple, intuitive, generic and comprehensive approach incorporates the linkage among economic value, real option value and IT investments that could lead to a better‐structured decision process.

Originality/value

In contrast to the traditional ROA literature, the approach contributes to the literature by incorporating a risk dimension parameter. The paper emphasizes the importance of categorizing risk management in IT investment projects since some risk cannot be eliminated.

Keywords

Citation

Zandi, F. and Tavana, M. (2011), "A fuzzy goal programming model for strategic information technology investment assessment", Benchmarking: An International Journal, Vol. 18 No. 2, pp. 172-196. https://doi.org/10.1108/14635771111121667

Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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