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"How Much to Spend on Flexibility? Determining the Value of Information System Flexibility"

Franz Schober and Judith Gebauer


First Author :

Franz Schober
Professor Emeritus, Albert-Ludwigs-University Freiburg, Germany
Kollegiengebaude II
Platz der Alten Synagoge
Freiburg i. Br 79085


Second Author :

Judith Gebauer
Business Administration
Assistant Professor of Business Administration, UIUC College of Business
1206 S. Sixth Street
350 Wohlers Hall, MC 706
Champaign, IL 61820

217-244-7969 (Fax)

Abstract :
In the current paper, we outline several approaches to determine the value of information system (IS) flexibility, defined as the extent to which an IS can be modified and upgraded following its initial implementation. Building on an earlier theoretical model by GEBAUER and SCHOBER (2006), we calculate the value of IS flexibility for a numerical example with deterministic and stochastic model parameters. We compare the results of decision tree analysis and real option analysis and present the results of a simulation experiment. Besides practical implications, our results contribute to earlier research on IS flexibility as they highlight the need to include stochastic elements in the evaluation of IS flexibility.
Keywords :
decision tree analysis, information system flexibility, real option analysis, simulation experiment
Manuscript Received : 2008
Manuscript Published : April 2, 2008
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