3 options: 1. Custom built outsourced software 2. Implementation of a vendor pro

Question

3 options:

1. Custom built outsourced software

2. Implementation of a vendor provided business software app hosted at your company HQ

3. A Saas, Cloud, or ASP

600 employees at TC company where you work. Annual Gross revenue is $340 million. Finance VP would like to understand the long term (7 yrs) cost for each choice.

Which one is the best option for new accnting system?

Software Type | #ot top | Initial | Annual Vendor Vendor SW History Intellectual |implement 10 keyLicense License Time to Property Owner feature Cost covered by SW Cost Option 1 Apple 30 months 9/10 $1 mil 201k old with company co., 13 mill annual rev 19 yrsVendor Hosted at company HQ 16 mnths 8/10 920k 170k Option 2 Bus - App Hosted at company HQ Banana accounting old with co, with 160 clients rev 3 yroldVendor 7 mnths 7/10 930k 180k Option 3 Sass, Cloud, Asap. Orange accountingco., with 60 clients 14mil in annual rev

Explanation / Answer

Total cost for each of the option without considering NPV calculation is as below:

Hence cost for Option A : 2.4 million $

For option B : 2.11 million $

For option C : 2.19 million $

Now the best option is based on the business value that TC company is looking from this accounting system:

Objective is that accounting system should cover most of the requirements than Option A is best fit:

In this case option A is most suitable since it covers 90% of the requirement. Option B only covers 80% whereas option C covers 70% of requirements

Objective is to implement most cost effective and reliable solution than Option B is most suitable option.

As shown in above table option B is most cost effective among the three option Also it is the oldest company and has most number of customers (total 160 customers) among the three options. Which implies it to be more reliable than option A and C.

If objective is the fastest turnaround than option C is most suitable option.

If objective is to have the accounting system quickly in place than option C is most preferred option. Option C takes only 7 months for implementation, in contrast option A takes 30 months whereas option B takes 16 months.

All figures in '000K Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Cost Option A 1000 201 201 201 201 201 201 201 2407 Option B 920 170 170 170 170 170 170 170 2110 Option C 930 180 180 180 180 180 180 180 2190

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