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Understanding DSS value: an options perspective

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  • Kumar, Ram L.

Abstract

This paper examines an important source of the value of decision support systems (DSS), namely flexibility. It proposes the use of options theory for systematically analyzing, understanding, and possibly quantifying flexibility resulting from the use of DSS for a class of decision scenarios. A review of relevant literature on flexibility and options theory is provided. The flexibility resulting from DSS use is conceptualized as the change in value of a portfolio of options. Insight provided by options theory is compared with anecdotal evidence of DSS value that has been reported in the MIS literature. Examples of DSS valuation using options theory are provided. Managerial and research implications for the evaluation and justification of DSS as well as for the development of DSS are discussed.

Suggested Citation

  • Kumar, Ram L., 1999. "Understanding DSS value: an options perspective," Omega, Elsevier, vol. 27(3), pages 295-304, June.
    • Handle: RePEc:eee:jomega:v:27:y:1999:i:3:p:295-304
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    1. Sung-Byung Yang & Jee-Hae Lim & Wonseok Oh & Animesh Animesh & Alain Pinsonneault, 2012. "Research Note ---Using Real Options to Investigate the Market Value of Virtual World Businesses," Information Systems Research, INFORMS, vol. 23(3-part-2), pages 1011-1029, September.
    2. Didier Cossin & Benoît Leleux & Entela Saliasi, 2002. "Understanding the Economic Value of Legal Covenants in Investment Contracts: A Real-Options Approach to Venture Equity Contracts," Swiss Finance Institute Research Paper Series rp63, Swiss Finance Institute.
    3. Robert G. Fichman, 2004. "Real Options and IT Platform Adoption: Implications for Theory and Practice," Information Systems Research, INFORMS, vol. 15(2), pages 132-154, June.
    4. Eduardo S. Schwartz & Carlos Zozaya-Gorostiza, 2003. "Investment Under Uncertainty in Information Technology: Acquisition and Development Projects," Management Science, INFORMS, vol. 49(1), pages 57-70, January.
    5. G Angelou & A Economides, 2008. "A real options approach for prioritizing ICT business alternatives: a case study from broadband technology business field," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(10), pages 1340-1351, October.

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