Economic analyses for the evaluation of is projects

Abstract

Information system projects usually have numerous uncertainties and several conditions of risk that make their economic evaluation a challenging task. Each year, several information system projects are cancelled before completion as a result of budget overruns at a cost of several billions of dollars to industry. Although engineering economic analysis offers tools and techniques for evaluating risky projects, the tools are not enough to place information system projects on a safe budget/selection track. There is a need for an integrative economic analysis model that will account for the uncertainties in estimating project costs benefits and useful lives of uncertain and risky projects. The fuzzy set theory has the capability of representing vague data and allows mathematical operators and programming to be applied to the fuzzy domain. The theory is primarily concerned with quantifying the vagueness in human thoughts and perceptions. In this article, the economic evaluation of information system projects using fuzzy present value and fuzzy B/C ratio is analyzed. A numerical illustration is included to demonstrate the effectiveness of the proposed methods.