Valuating Business Process Flexibility achieved through an Alternative Execution Path

Abstract

In this paper we contribute to the research on the valuation of business process flexibility. Thisflexibility provides the ability for companies to select the most appropriate execution path for eachprocess instance at runtime from alternative execution paths. Therefore, we introduce a model tocalculate the value of flexibility, which a company gains by embedding an external service providerthat can execute arriving process instances. It is the flexibility to choose whether it is more lucrative toexecute a process instance internally or externally depending on the current work load in the process.We determine the value of this flexibility and present the results of a simulation by an example takenfrom the claim handling process of a German Insurance company. Besides practical implications, ourresults contribute to research on business process flexibility as they show a way to monetarily valuateflexibility.