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The Valuation of Information Technology

What kinds of problems can your book help me solve?
What valuation method do you use?
How can I make a suggestion about the book?
I think I found an error in your book, what should I do?
Where can I get a copy of your book?
Are there any other books on the subject you recommend?

Q: What kinds of problems can your book help me solve?

The simplest way to think of the book is as a measuring tool, designed to assess the value of an information technology system. The problems the book can help solve are therefore those where a measurement of the value of an information technology system is of interest, and there are many examples of this. A measurement can be made:

• before a system is built, to make an investment decision.
• while a system is being built, to guide the development effort.
• after a system is built, to learn from experience.
• of alternatives, to decide which to pursue or to manage them as a portfolio
• to determine the degree of importance of a system
• to reveal critical success factors
• to weigh whether to make or buy
• of the benefits of merging or divesting a system.


The measurement process itself, described in the book, can be incorporated into the strategy, operations, and organization of a company, to instill more economic discipline applying information technology. The measurement process establishes

• what questions to ask
• what the answers should look like
• how to do the analysis to get the answers whenever a system needs to be evaluated.


Q: What valuation method do you use?
The discounted cash flow method is used to assess the value of an information technology system. There is a large body of evidence that strongly supports the reliability of this approach to measuring shareholder value, and for this reason it has been adopted. The economic profit (or EVA) approach is more appropriate for tracking operational performance so it was not used. Real options have been incorporated by examining prospective investments, and providing visibility into entry and exit costs.  The benefits of this technique have been realized this way, while minimizing its complexity.


Q: How can I make a suggestion about the book?

Suggestions, comments, and criticism are welcome, factual or otherwise. They can be sent to me by clicking the "Contact the Author" button on the homepage of this website

Q: I think I found an error in your book, what should I do?
Though every effort has been made to eliminate errors, unfortunately, a book such as this probably contains some. Please bring them to the author's attention by clicking the "Contact the Author" button on the homepage of this website. Corrections will be posted on this website and incorporated into future printings of the book. Thanks for your help.


Q: Where can I get a copy of your book?

The book is available from any bookstore, though you may have to order it. Amazon, Barnes & Noble, Borders, the Harvard/MIT COOP, Stanford University Bookstore, University of Chicago Bookstore, Yale Bookstore, etc., carry it. It is distributed worldwide. Free copies are available to qualified institutions. A limited number of copies have been donated to groups who can make use of the book, but are poor or  in some way disadvantaged.


Q: Are there any other books on the subject you recommend?

An extensive bibliography can be found in the back of the book. It covers each of the main topics, and is organized by chapter. That said, the book was written because there was a gap in the literature. There is nothing in the current literature on business and technology, of which the author is aware, that addresses the subject of this book in a quantitative way. This book starts with an initial information system concept and carries it all the way through to a quantitative determination of the actual effect the information system has on the share price of a company. It integrates techniques from three different disciplines-market research, computer science, and corporate finance-to show how to maximize the chances for an economic success in applying information technology. It is a disciplined, rigorous book, not a casual read.

A major flaw of most books on the management of technology is that they do not treat their subject in a multidisciplinary and quantitative fashion. The focus is usually on one aspect of the management of technology such as marketing, finance, manufacturing, or research and development, which is discussed in a prolix style.  The result is a book that provides a partial view of the problem and does not get specific about economic impact. The books that do provide a quantitative approach unfortunately do not focus on information systems. Yet business executives and technical professionals are expected to be able to judge the impact their information system decisions have on a company's share price. Today, most rely on their experience and intuition to sort through this problem, which is often faulty as their track record shows.