Research of Decision-Making in Information Technology Investment under Uncertainty

IT projects are featured by high risk whose benefit and cost are with great uncertainty. And traditional methods such as Discounted Cash Flow (DCF) are not suitable for decision-making of IT projects, because they can not correctly evaluate the risk of IT investments. In light of the limits and deficiency of current IT investment evaluation method, this paper first studies the characteristics of IT projects; then describes the variation of benefit and cost of IT investment with proper stochastic processes which explain the reason and manner of value change; finally a model with two stochastic variables for IT investment decision is established by applying the method of Dynamic Programming which provides the decision maker with a more rigorous approach to evaluate IT investment projects under uncertainty.