These are two of my favorite topics: open-source software and real options!

I was sifting through my Time Capsule and found a deck I used several times for high-level discussions about strategy for an IT transformation to (mostly) open-source investments. Truth is, it can be applied to just about any transformation project. You can find the full deck on GoogleDocs, but here are the basics:

The problem....
Research and experience point to Open­Source as a disruptive trend in competitive cost structure, but the transformation costs and benefits are uncertain.

Drivers of uncertainty include Switching Costs, End-User Adoption, and Software Capabilities (of the tools under consideration.)

A Real Options approach will...

• Focus discussions about transformation strategy
• Allow you to invest a little now to preserve flexibility for the future
• Enable learning so you can act quickly later
• Build capabilities now for opportunities that may emerge later
• Frequent small failures (and wins) provide opportunities to test assumptions, try out new ideas, and learn quickly

A transformation roadmap is critical for setting priorities (see the pretty diagram in the attached deck)

Bottom line....

• Transformation decisions happen over time in stages.
• The most complex projects can be broken down into smaller stepping stones.
• Mapping a portfolio of options serves as a roadmap for phased investment.
• Organizational learning on both IT and end­user sides is essential.
• It’s acceptable to let options expire if a particular technology won't work.
• The biggest risk is doing nothing at all.