Using Real Option Theory On Analysising Information System Projects Investment Decision

In the recent 20 years, the information technology developed rapidly, and so many information system projects are ready to develop. But it has some shortcoming such as large investment, high-risk venture, and unidentifiable and lagging benefit in the information system project, so it is much important to anglicizing the information system project and the investment decision. The traditionally used discounted cash flow (DCF) method is localized by its own limitations. In addition, information system investment has its own specialty characterizes different from other kind of investment, such as massive investment, long period for investment, many managerial flexibilities and so on. All these make it difficult to solve the problem of information system investment with traditional investment decision method. As concerned as that, I want to find a more suited and effective method to make information system investment decision, so I try to apply the real option method to the IS investment decision making.The real option method utilizes the ideas of financial option, tread the investment project as option, and to correctly price the managerial flexibilities, which is hard to price with traditional method and is critical to the investment project. The utilization of the real option method can consider all kinds of characteristics of IS investment comprehensively, and objectively appraise the value of project. Even more, it can help IS owners to avoid the eyeless information system investment for the reason of lacking the analytical tools.This dissertation consists of six chapters. The first chapter is the preface, which introduces actuality and direction of the field, the purpose of research, content and method. The second chapter illuminates the real option theory, it explain the concept and pricing model of real option, the process and character of it. In the third chapter, the author aims to study the construction of information system, it includes the develop method and style, the cost and benefits of information system. In the following chapter, the author labors the core question that why we can use the real option to analysis the information system projects investment deciding., and anatomy the option characters of information system. In the fifth chapter, two examples are used here to expound the real option theory. At the last chapter, the author draws the conclusion that the application of real option method is much effective and scientific than other methods.