Application of Real Options Theory to DoD Software Acquisitions
Abstract
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 customer's 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, therefore, guide the software acquisition decision-making process.
Document Details
- Document Type
- Technical Report
- Publication Date
- Aug 01, 2009
- Accession Number
- ADA530674
Entities
People
- Albert Olagbemiro
- Johnathan C. Mun
- Mantak Shing
Organizations
- Naval Postgraduate School