Abstract
The high failure rate of ERP implementation is due to a common pitfall that ERP projects are often enacted as merely investment into installation of IT infrastructure, rather than systematic planning of operation changes, business process re-engineering and a paradigm shift for the operation and management. To manage ERP investment in a changing environment for high payoff, this paper adopts a real option theoretic method. Fuzzy payoff valuation is introduced to deal with uncertainties in order to minimize the risk of failure. The proposed ERP evaluation model is geared towards small and medium enterprises. A case study is presented to validate the proposed fuzzy real options. The results indicate the potential of modeling ERP investment as "Expand", "Contain" and "Abandon" options in different scenarios. The fuzzy real option model bestows a novel ex-ante cost analysis for justifying ERP investment in the implementation cycle.
| Original language | English |
|---|---|
| Pages (from-to) | 47-61 |
| Number of pages | 15 |
| Journal | Journal of Engineering and Technology Management - JET-M |
| Volume | 29 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 1 Jan 2012 |
| Externally published | Yes |
Keywords
- Enterprise resource planning
- Fuzzy Logic
- Fuzzy payoff valuation
- Option valuation models
- Real Option Theory
ASJC Scopus subject areas
- Industrial relations
- General Engineering
- Strategy and Management
- Management Science and Operations Research
- Information Systems and Management
