241 15 th International Research/Expert Conference ”Trends in the Development of Machinery and Associated Technology” TMT 2011, Prague, Czech Republic, 12-18 September 2011 A SIMULATION BASED OPTIMIZATION METHODOLOGY for INFORMATION SYSTEM PROJECT SELECTION PROBLEM Ceyda Güngör Şen Yildiz Technical University, Department of Industrial Engineering, Besiktas, Istanbul, Turkey, +90-212-3832920, cgungor@yildiz.edu.tr Erkan Can Gürsoy Yildiz Technical University, Department of Industrial Engineering, Besiktas, Istanbul, Turkey, +90-212-3832918, ecgursoy@yildiz.edu.tr ABSTRACT Information system (IS) project selection is a strategic decision problem discussed by many researchers for more than 40 years. Prior IS project selection approaches are considered this problem as a very complex decision making process since it is affected many selection criteria, limited resources, and one or more corporate objectives. In addition, there is a high level of risk for the uncertainty when determining the different input data such as weights of evaluation criteria and performance values of candidate projects. However, little attention has been paid so far to take into account these uncertainties in the IS project selection process. In this paper, considering possible uncertainties in the input data of IS project selection problem, a methodology that incorporates simulation optimization linked to a multi-criteria approach into the selection process for the best IS project alternative is presented. An illustrative example is provided in order to demonstrate the application of the proposed methodology. Keywords: IS project selection, simulation based optimization, multi-criteria decision making, uncertainty. 1. INTRODUCTION In the project selection problem, a decision maker has to allocate limited resources to a set of alternative projects by considering multiple, conflicting, incommensurate criteria and one or more corporate goals or objectives [1,2]. Due to the complexity of the problem, project portfolio selection has been the topic discussed by many researchers for a long period of time [3]. Selecting the right information system (IS) project from a pool of potential ones is a significant resource allocation decision that can enhance operational competitive advantage of a business [4]. By reason of the strategic importance of IS project selection for enterprises, the research on the project selection has also been applied to this area for more than 40 years. According to Chen and Cheng [4], IS project selection problem is difficult, because there are lots of quantitative and qualitative factors to be considered in the candidate projects such as business goals, benefits, project risks and available resources. Hence, in the literature, numerous integrated methodologies that use various methods such as goal programming, analytic hierarchy process (AHP), analytic network process (ANP), quality function deployment (QFD), data envelopment analysis (DEA), balanced score card (BSC) have been developed to address this problem, see [5] for a recent literature review on methods and tools supporting IS project selection. IS project selection takes place in an incomplete, intangible and uncertain information environment. In addition, it is very common to require multiple decision makers before making a IS project selection decision. There is a high level of risk for the uncertainty or incompleteness of the problem when