Real Option In The IT Project Evaluation

Every day, in the society in which we live, there are all kinds of various IT projects for investment in, or is about to plans to invest. We often see the new computer software and hardware products production. But for the IT project investment, we didn't invent a relatively perfect IT project risk management system and evaluation system.In China, since the 1980 s, under the help of United Nations Industrial Development Organization (UNIDO), International Bank for Reconstruction and Development, etc. State Planning Commission work out China's economic evaluation methods and the corresponding parameter for construction project, this method theory core is the Net Present Value (NPV) method, this kind of method in China's IT project evaluation still in use. But IT project with more uncertain factors, in real application, net present value (NPV) method for assessment of the IT project is not accurate, only suitable for smaller and simple IT project, so in most time the result come out from the net present value (NPV) method, only as IT project decision-making reference basis, more is from the experience of managers or expert estimates suggest as basis for decision-making, which made our IT project investment decision has high subjectivity and blindness.This paper begining from the traditional NPV method, and find out the net present value method flaws in the IT project evaluation decision, draw out the real option theory.In the later chapter,we find out a real IT project, use real option theory analysis this IT project. In the use of the traditional method of net present value (NPV) the project is not worth to investment, but through the real option method to calculate out of the managers flexible management value, and construct the decision tree for project.provides decision-making basis for project managers.Finally,we summarized the work, and find out the limitations of the study, puts forward the research direction in the future.