The Real Options Approach

The environment of companies is nowadays characterized by an increased level of uncertainty which affects the investment decision politics of company¿s management remarkably. Especially investments in information and communication technology (ICT) bear an inherent high uncertainty character. Companies are spending remarkable amounts in acquisition and developing ICT systems due to there is growing realization that ICT investments may feature significant competitive advantage. In this regard, effective management of ICT investment projects has become a relevant task for many companies. Research identified various options on ICT investments, but the costs and benefits of them seem hard to quantify. As a method to incorporate the value of flexibility and options in decision making to create a better basic concept for investment decisions under uncertainty, the Real Options Approach (ROA) finds one¿s way into the valuation techniques by adding a dynamic perspective to traditional valuation. With instant thesis the relevance of the ROA for investment decisions under uncertainty in multi-stage ICT investment projects shall be accentuated.