Real Options and Decision-Making for ICT Projects
Glen Alleman MSSM
Vietnam Veteran, Applying Systems Engineering Principles, Processes & Practices to Increase the Probability of Program Success for Complex Systems in Aerospace & Defense, Enterprise IT, and Process and Safety Industries
Traditional methods of quantitative cost-benefit analysis, like Net Present Value (NPV) or Discounted Cash Flow (DCF), either ignore or cannot properly capture management's need for flexibility to adapt and revise later decisions based on the uncertainties found on all IT projects. Real Options can address the gap found in traditional capital budgeting methods. Real Options give management the flexibility to take action in the presence?of uncertainty that emerges over time.
The term flexibility?in the Real Options paradigm refers to the capability of responding to a change or new situation. This is the same?paradigm of Agile software?development where?responding to change?over following the plan is part of the original manifesto.
The notion from the #NoEstimates post that estimation locks down choices early and NOT estimating is the solution, and then somehow connects #NoEstimates with Real Options demonstrates?the lack of understanding of how Real Options is based on estimating the choices that can be made?as options in the presence of uncertainty.
Instead of providing how Real Options is applied to decision-making in the presence of uncertainty for ICT (Information Technology and Communications), here's a reading list. Where there is a public link, it's included. Some require memberships (IEEE, ACM), which any credible project manager should have anyway. Here's a sample. If you google "Real Options software development" or "real options ICT," you'll find these and many dozens more.
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Here's a Public?Folder on BOX with 123 papers on using Real Options to make software development project decisions.?
Real Options is about using estimates to make decisions in the presence of uncertainty, by assesing the?options and the impact of those options of the possible choices to deliver the?best value for the?investment.?
Retired
8 个月What is an estimate? It’s a prediction or forecast, based on a set of assumptions, bounded by constraints, of the time, staffing, cost, and quality of a product, with some probability of achieving the desired results. One of the assumptions is the development method(s) that will be used—agile, waterfall, agile+waterfall, or something else. An estimate isn’t a contract; it’s a performance envelope in which project managers manage and direct work. It’s also a tool to help managers make the business decisions on how to proceed.