Title

Rental Software Valuation In It Investment Decisions

Keywords

Application service providers; Capital budgeting; Information technology investment; Options; Risk analysis; Stochastic processes

Abstract

The growth of application service providers (ASPs) is very rapid, leading to a number of options to organizations interested in developing new information technology services. The advantages of an ASP include spreading out payments over a contract period and flexibility in terms of responding to changes in technology. Likewise, newer risks are associated with ASPs, including pricing variability. Some of the more common capital budgeting models may not be appropriate in this volatile marketplace. However, option models allow for many of the quirks to be considered. Modification of the option pricing model and an analytical solution method incorporated into a spreadsheet for decision support are described and illustrated. The analytical tool allows for better decisions compared to traditional value analysis methods which do not fully account for the entry and exit options of the market. © 2003 Elsevier B.V. All rights reserved.

Publication Date

10-1-2004

Publication Title

Decision Support Systems

Volume

38

Issue

1

Number of Pages

115-130

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/S0167-9236(03)00081-2

Socpus ID

4243109597 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/4243109597

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