Business Administration

1Robert Zmud was the accepting senior editor for this paper. 2While working on this project, Markus Feurstein was supported by the Austrian National Science Foundation in SFB 10, Adaptive Models in Management Science. In recent years, the use of option pricing models to support IT investment decisions has been pro-posed in the MIS literature. In this paper, we discuss the practical advantages of such techni-ques for the selection of a software platform. First, we argue that traditional quantitative approaches to a cost-benefit analysis give only a partial picture of such decision situations: due to the long planning horizon required because of the time-con-suming and resource-intensive implementation process, it is not possible to exactly predict which applications will, in fact, run on the system over time. Thus, the investor is faced with the problem of valuing “implementation opportunities. ” We then compare different valuation techniques for this task and discuss their respective advantages and draw-backs. The practical advantages of employing such models are demonstrated by describing a real-life case study where option pricing models were used for deciding whether to continue employing SAP R/2 or to switch to SAP R/3