Valuating Business Process Flexibility achieved through an Alternative Execution Path

In this paper we contribute to the research on the valuation of business process flexibility. This flexibility provides the ability for companies to select the most appropriate execution path for each process instance at runtime from alternative execution paths. Therefore, we introduce a model to calculate the value of flexibility, which a company gains by embedding an external service provider that can execute arriving process instances. It is the flexibility to choose whether it is more lucrative to execute 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 taken from the claim handling process of a German Insurance company. Besides practical implications, our results contribute to research on business process flexibility as they show a way to monetarily valuate flexibility.