The uncertainty decision-making of ERP investment

Abstract

Investment in ERP projects has become a dominant part of IT investment of many enterprises. Traditional approaches used for such project evaluation are mainly based on Internal Rate of Return (IRR) and Net Present Value (NPV). However these approaches completely lack the ability to deal with the uncertainties in decision making process of the ERP investment. On the base of risk and uncertain analysis, this study employs a mathematical model to design an ERP decision analytical model based on real option. The model has accounted for the uncertainties and management flexibilities, it is more appropriate to evaluate ERP project investment in uncertainty. © 2008 by Springer Science+Business Media New York.