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.
