IT/IS projects selection using multi‐criteria utility theory

Abstract

In recent years, there has been a growing awareness that most decision makers are not only concerned with the financial implications of information technology/system (IT/IS) projects, but they are also concerned with other objectives such as competitive advantage, market share and future growth. Nowadays, multi‐criteria decision‐making methods are gaining importance due to their inherent ability to judge different alternative scenarios for possible selection of the best alternative. This paper provides a decision‐making framework for senior executives when selecting innovative IT/IS projects. The proposed framework is based on the multi‐criteria utility theory (MCUT) combined with information economics principles to select IT/IS project(s) based on “business value” and “risk” criteria. MCUT has the advantage of taking into consideration the decision maker’s preferences in the form of utility functions defined over a set of tangible and intangible criteria. To illustrate the application of the proposed framework, a hypothetical case study is provided, where input elicited from four engineering professionals is used to develop utility functions for a predefined set of selection criteria.