Digital Transformation and Real Options: Evaluating the Investment in Cloud ERP

José Miguel Lozano-Almansa; Jorge Tarifa Fernández; Ana María Sánchez-Pérez

doi:10.5755/j01.ee.34.4.30678

Authors

José Miguel Lozano-Almansa Department of Economics and Business, University of Almería, Spain
Jorge Tarifa Fernández Department of Economics and Business, University of Almería, Spain
Ana María Sánchez-Pérez Department of Economics and Business, University of Almería, Spain

DOI:

https://doi.org/10.5755/j01.ee.34.4.30678

Keywords:

Cloud ERP, digital transformation, real option, option to defer, financial engineering

Abstract

The purpose of this research is to explore and advance the knowledge regarding digital transformation. Toward this end, this paper is focused on the valuation of the assessment methodologies of cloud ERP projects. The investment in digitalization systems entails high levels of uncertainty, which gives these investment projects a high strategic value. The importance of emergent digitalization in ERP systems has made it necessary to use assessment tools that consider strategic information as well as financial information. In this paper, the real options methodology, specifically the option to defer, is proposed to account for the strategic value of investment projects in digitalization. In this sense, an empirical study is conducted by applying the binomial option pricing model to real data on the costs and revenue of investing in cloud ERP to study its viability.

Author Biographies

José Miguel Lozano-Almansa, Department of Economics and Business, University of Almería, Spain

José Miguel Lozano-Almansa received a bachelor’s in management and business administration from the University of Almería (Spain). He also holds a Master's in Auditing from the University of Granada (Spain). His main interests include supply chain, financial operations, and public accounting.

Jorge Tarifa Fernández, Department of Economics and Business, University of Almería, Spain

Jorge Tarifa-Fernández is an Associate Professor of Operations Management at the University of Almería, Spain. His research is focused on supply chain management, digital technology, and equal opportunities. His research interest has mainly focused on supply chain integration and the development of strategic capabilities and has appeared in journals such as the International Journal of Logistic Management or Business Process Management Journal. He is also interested in digital technologies management and skill-biased technology. In addition, he is currently developing new approaches to the intersection between disability and employability to grow diversity in the workplace.

Ana María Sánchez-Pérez, Department of Economics and Business, University of Almería, Spain

Ana María Sánchez-Pérez is an Associate Professor in the Department of Economy and Business of the University of Almería (Spain). Her research field is focused on the valuation of financial-random operations. The results of her research work are particularly noteworthy: the precise and manageable expressions that introduce the binomial method in the valuation of different real options. Likewise, the models developed have been applied to assess the value of the flexibility of projects framed in Industry 4.0. These contributions are published in scientific international journals with high impact, books, and international conferences.