Valuating IT Governance Strategies With Real Options in a Decision Making Framework

Information Technology Governance (IT Governance) is an integral part of enterprise governance which aims at controlling the formulation and the implementation of strategic objectives of an organization. The implementation of IT governance strategies generates goals and projects whose achievements are subject to the availability of IT resources. In order to monitor the achievement of these strategies, the authors propose to extend the traditional Real Option Analysis (ROA) framework to valuating governance strategies and illustrating them as classical governance notions. A decision-making framework aiming at generating the best investment decisions and responding to governance constraints is developed. In their simulation model, the authors consider control elements associated with quality, resources and time. This modeling approach stands out by opening the way to new decision-making models based on ROA and compliant with IT governance activities.