A framework to support service-oriented architecture investment decision

Noyan Ilk, Paulo Goes, J. Leon Zhao

Research output: Chapter in Book/Report/Conference proceedingConference contribution

3 Scopus citations

Abstract

Service-oriented architecture (SOA) is a system paradigm that structures business functions as loosely coupled services to enable business agility. SOA requires significant up-front investments, and in return, promises a vast array of benefits. Unfortunately, in contrast to the costs of the investment, monetary benefits associated with SOA are more difficult to measure. For one reason, benefits such as increased agility or improved flexibility are elusive in nature, making it harder to define metrics for their calculation. For another, SOA value is realized in long term under uncertainty, and traditional capital budgeting methods often fail to capture uncertainty when valuing investments. In this paper, we provide a decision framework to analyze the monetary impact of SOA investment in an organization. Combining traditional NPV analysis with option pricing models, our framework accounts for operational and strategic costs and benefits of SOA and proposes an extended investment value to support managerial investment decision.

Original languageEnglish (US)
Title of host publicationICIS 2010 Proceedings - Thirty First International Conference on Information Systems
StatePublished - Dec 1 2010
Event31st International Conference on Information Systems, ICIS 2010 - Saint Louis, MO, United States
Duration: Dec 12 2010Dec 15 2010

Publication series

NameICIS 2010 Proceedings - Thirty First International Conference on Information Systems

Other

Other31st International Conference on Information Systems, ICIS 2010
CountryUnited States
CitySaint Louis, MO
Period12/12/1012/15/10

Keywords

  • It investment
  • Option pricing models
  • Real options
  • Service-oriented architecture

ASJC Scopus subject areas

  • Information Systems

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    Ilk, N., Goes, P., & Zhao, J. L. (2010). A framework to support service-oriented architecture investment decision. In ICIS 2010 Proceedings - Thirty First International Conference on Information Systems (ICIS 2010 Proceedings - Thirty First International Conference on Information Systems).