SOA investment decision-making using real options analysis

Abstract

Service-oriented architecture (SOA) is still among the top priorities in IT investment planning. However, selecting proper evaluation methods to capture for flexibility and uncertainty associated with SOA implementations remains a major issue. This paper investigates investment methods and analyses the application of real options models in a particular SOA context. We explore and classify key criteria and embedded options for evaluating multi-stage SOA investments as sequential compound options. The determinants and value drivers for SOA platform acquisition and SOA application development projects are examined and general conclusions with regard to SOA investment decision-making are drawn. In this paper, we identify both the limitations of commonly used techniques as well as the concept’s importance. A visualisation of the analysis is presented through a SOA management decision-framework explaining the relations between the steps of this framework and serving as guidance for SOA investment decision-makers.