Value-at-risk in service-oriented systems: a framework for managing a vendor's portfolio uncertainties Online publication date: Wed, 03-Dec-2008
by Robert J. Kauffman, Ryan Sougstad
International Journal of Services Sciences (IJSSCI), Vol. 1, No. 3/4, 2008
Abstract: We present a method for analysing a vendor's exposure to uncertainties in IT services. These uncertainties arise in project portfolios with projects whose value covaries with managerial decisions about firm strategy, technology standards and platforms to be used. Past research involving information systems (IS) decision-making under uncertainty has focused on real options methods which inform a priori investment decisions. We explore methodologies associated with asset valuation theory in financial economics called value-at-risk (VaR), which measures the worst expected loss over a time horizon under normal market conditions at a given confidence interval. We show that VaR analysis informs management on how to leverage existing capabilities and risk exposures to inform the IT sourcing decision and ongoing IT services risk management. We explore information requirements, outcomes and limitations for VaR. We also present an evaluative framework to help a senior manager to bring these concepts into use in a real-world organisation.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Services Sciences (IJSSCI):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook