Research On IT Project Evaluation And Investment Decision

How to evaluate an information technology (IT) investment project is an extremely important topic of an IT investment decision and management. In an IT investment project, there are many significant features that are big different from a general investment project. The features include that new and more efficient information technologies appear so soon, the investment under high uncertainty and competition, and an IT investment could be look as a sequential investment process. The current project evaluating approaches do not consider the features in an IT project, so they may lead to undervalue an IT project and make an incorrect investment decision. Based on the development and implementation process of varying IT project types, the dissertation makes a comprehensive research on the topic by applying real option theory, dynamic programming and game theory. A system theory framework and practical tools are developed for IT projects evaluation and investment decision. The study of the dissertation has theoretical significance and practical value to IT project investment decision and management.In the dissertation, first, the traditional project evaluation theory and approaches are reviewed. The theoretic fundamentals, assumed conditions and applying area of current models are deeply studied. Second, the definition of the IT project is discussed and the existing literature with the information technology economics are reviewed. The current IT project evaluation approaches are made anatomy, so their advantages and disadvantages are deeply analyzed. Third, the typical economic lifetime of an IT project is summed up from management and implementation process of an IT project. The reification targets and contents of an IT project investment decision are identified. The concept framework of an IT project evaluation and investment decision and the investment decision guideline are proposed. Fourth, the real options that may be embedded in the lifetime of an IT project are identified. In existing literature, the real option embedded in a project is valuated and the project is evaluated by using Black-Schole option pricing model, however, it may make mistake, so a Black-Schole extension model is proposed for figuring out the problem. Based on the features of varying IT developing projects, which are basic project, the systemintegration project, purchased project, etc. the models are proposed for IT projects evaluation and the real options valuating. Fifth, The benefits may be uncertainty but also the investment costs when a firm is adopting a new information technology. By using Poisson distribution model, the decision models of this type IT investment project are proposed and compared with NPV model. The decision critical values are solved and the relationships between the decision critical values and the factors of the IT project are deeply discussed. Sixth, by using timing game theory, it is discussed that under high uncertainty and competition two identical firms how to make decision on adopting a new information technology. The best adoption times of leader firm and follower firm are got in the open loop, feedback and perfect equilibriums. Finally, a real case is studied by using the evaluation approaches and models that are proposed in the dissertation.