Justifying information technology investments: balancing the need for speed of action with certainty before action

Technological innovations create an increasing sense of strategic uncertainty. Executives are concerned about failure to implement the infrastructure that they might need and the opportunity costs that this might entail as a result of missed market opportunities. They are equally concerned with avoiding any unnecessary investments in technology infrastructure in support of market opportunities that do not arise. The trade-off between the desire for speed and the desire for certainty before acting requires a methodology for justifying contingent investments in assets that may be required and for enabling rapid deployment of these assets when required. We develop a general functional form for an investment decision that permits numerical computation of the value of an investment that enables the future deployment of a strategy under a range of conditions.