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The Business Value of IT: A Conceptual Model for Understanding and Selecting Valuation Methods

The Business Value of IT: A Conceptual Model for Understanding and Selecting Valuation Methods

A.J. Gilbert Silvius
Copyright: © 2011 |Pages: 10
ISBN13: 9781605663463|ISBN10: 1605663468|ISBN13 Softcover: 9781609600303|EISBN13: 9781605663470
DOI: 10.4018/978-1-60566-346-3.ch007
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MLA

Silvius, A.J. Gilbert. "The Business Value of IT: A Conceptual Model for Understanding and Selecting Valuation Methods." Enterprise IT Governance, Business Value and Performance Measurement, edited by Nan Si Shi and Gilbert Silvius, IGI Global, 2011, pp. 102-111. https://doi.org/10.4018/978-1-60566-346-3.ch007

APA

Silvius, A. G. (2011). The Business Value of IT: A Conceptual Model for Understanding and Selecting Valuation Methods. In N. Shi & G. Silvius (Eds.), Enterprise IT Governance, Business Value and Performance Measurement (pp. 102-111). IGI Global. https://doi.org/10.4018/978-1-60566-346-3.ch007

Chicago

Silvius, A.J. Gilbert. "The Business Value of IT: A Conceptual Model for Understanding and Selecting Valuation Methods." In Enterprise IT Governance, Business Value and Performance Measurement, edited by Nan Si Shi and Gilbert Silvius, 102-111. Hershey, PA: IGI Global, 2011. https://doi.org/10.4018/978-1-60566-346-3.ch007

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Abstract

The relation between IT and value is a complex and often disputed one. Researchers and practitioners have created numerous models and valuation methods to capture this value, yet the advanced methods they have developed are hardly used. While these sophisticated instruments are based on scientific methods and empirical evidence, managers reject them, preferring to use methods they intuitively understand. What is missing that causes this mismatch? This chapter aims to add to the understanding of valuation methods by providing a comprehensive selection model for selecting the valuation method that fits the characteristics of the investment. The authors provide a categorized overview of valuation method and identify the qualities of and issues with each method or approach. They analyze how these methods can be combined in an investment selection process and identify the characteristics of an investment that determine the applicability of a given method. They conclude the paper by combining these characteristics in a decision tree shaped selection model to select the appropriate valuation method for any given set of characteristics.

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