Application of Real Options Theory to DoD Software Acquisitions
Technical rept. Oct 2007-Dec 2008
NAVAL POSTGRADUATE SCHOOL MONTEREY CA DEPT OF COMPUTER SCIENCE
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The traditional real options valuation methodology, when enhanced and properly formulated around a proposed or existing software investment employing the spiral development approach, provides a framework for guiding software acquisition decision-making by highlighting the strategic importance of managerial flexibility in managing risk and balancing a customers requirements within cost and schedule constraints. This article discusses and describes how an integrated risk management framework based on real options theory, could be used as an effective risk management tool to address the issue of requirements uncertainty as it relates to software acquisition and guide the software acquisition decision-making process.
- Administration and Management
- Information Science
- Operations Research