Evaluating future IT-investment options through technology debt -A case study and theory testing approach on Company AB

Abstract: Background and problem: Due to the increasing investments in Information Technology (IT) a larger portion of companies experience consequences of past decisions. IT-systems are not always easily replaced due to their critical functions. This causes path dependency and potential lock-in(s), which causes problems for a future decision-maker. A recently proposed theory takes this into account and proposes a method for evaluating technology related investments. This thesis aims to provide a theory test through a case study in order to identify its possible applicability on future investments, regarded as realoptions. The thesis is thus guided by the following research question (RQ): RQ: How can technology debt be used when a company evaluates future IT-investment options? Objective: The objective with this thesis is to test the theory of technology debt on future IT-investments in a company, and evaluate its usability. Three clear questions arose that needed research to carry out the objective: How can technology debt be applied to future IT-investment options? How can technology debt support the choice between future IT-investment options? How is technology debt relevant to decisionmakers when facing IT-investment options? Method: In order to answer the three questions above, three studies were carried out. The purpose of study 1 was to answer: How can technology debt be applied to future IT-investment options? In order to accomplish this, an expansion of the original framework was conducted. Study 2 operationalized the results from study 1 through a case study on a company’s two possible future IT-investments. The purpose of the case study was to examine if technology debt could be used to support the choice between future IT-investments option. The case study involved nine qualitative interviews on a company’s staff in order to pinpoint the consequences on future decisions. The results from study 2 were subsequently evaluated through study 3. A discussion with the company’s CFO/CIO was conducted with the purpose to see if technology debt is relevant to decision-makers when facing IT-investment options. Results: Study 1, the theory of technology debt can be applied on future IT-investments through categorization and measurement of future lock-ins. Study 2, different future IT-investments can be compared using real-option theory, where each IT-investment’s technology debt is measured. The option that gives the highest future maneuverability should be recommended because this option results in the lowest amount of future (switching-) costs. Study 3, technology debt is relevant to decision-makers as it is able to capture the long-term effects in terms of future lock-ins for a future decision-maker, and serve as a complement to other measurements, such as implementation costs etc.