Strategic Analysis of Application Framework Investments

The brief history of application frameworks has been focused primarily on technical issues. That is changing today, as more and more organizations are recognizing the potential of application framework investments to improve their strategic position in the markets they serve. But to realize this potential, an approach firmly grounded in the disciplines of business strategy is needed. Value Based Reuse Investment (VBRI) integrates principles drawn from Value Based Management (McTaggart, Kontes, & Mankins 1994)--which has been adopted by many of today’s most successful companies-with concepts drawn from recent thinking on capturing information technology business value. The VBRI approach was developed for investments in reusable software in general, but is especially wellsuited to investments in application frameworks, due to their role in the acquisition of organizational reuse capability. An essential premise of VBRI is that the principal source of value of investment in organizational reuse capability is in the strategic options it generates. Through the introduction of principles drawn from the field of option pricing theory, these strategic options are linked to an established discipline of economic value. This explicit linkage between strategy and economic value supports an approach to strategic planning whereby management is actively involved in the continuous formulation, evaluation, and implementation of strategic options.