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Workbook 1

Alternative B is the best long term position with a score of 6, while Alternative A has the lowest cost with a score of 3. Alternative C has the highest total score of 33. The document outlines the costs structure for maintaining a legacy IT system, including one-time costs like contract signing fees and transition costs, as well as long-term maintenance costs. The total cost is estimated to be $831,280 over 3 years. The potential benefits of replacing the legacy system include savings from lower maintenance costs of $477,000 over 3 years, as well as savings of $405,000 from reducing IT support staff. The total estimated savings are $882,000.

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Harshal Naik
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39 views4 pages

Workbook 1

Alternative B is the best long term position with a score of 6, while Alternative A has the lowest cost with a score of 3. Alternative C has the highest total score of 33. The document outlines the costs structure for maintaining a legacy IT system, including one-time costs like contract signing fees and transition costs, as well as long-term maintenance costs. The total cost is estimated to be $831,280 over 3 years. The potential benefits of replacing the legacy system include savings from lower maintenance costs of $477,000 over 3 years, as well as savings of $405,000 from reducing IT support staff. The total estimated savings are $882,000.

Uploaded by

Harshal Naik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Column1

Alternative A

Alternative B

Best Long Term Position

Best Functional Capability

Lowest Cost

Lowest technical skill requirement

Best technical architecture


Total

26

36

Alternative C
7
5
9
7
5

33

Column1
Column2
Column3
Column4
Column5
Cost Structure for LegacyMode:
One Time Costs
Contract Signing (5% of yearly maintenance costs)
Transition Costs (2% of yearly maintenance costs)
Lay-off costs (3% of yearly maintenance costs)
Hidden Costs (Upgradation costs etc.)

Long-term costs
Maintenance cost
Help desk support after 1-year

$101,000 x 0.09 x 2

Total:
Assumptions:
Additional 1% to 10% on vendor selection and initial travel costs.
The cost of transition, including infrastructure, training, knowledge transfer: Additional
The Cost of Layoffs: Extra 3% to 5 % on layoffs and related costs.
Hidden Costs:
Extra 3% to 27% on productivity lags.
Upgradation Costs: Extra 1% to 10% on improving software development processes
The Cost of Managing an Offshore Contract:Additional 6% to 10% on managing offshore con

Column1
Column2
Column3
Column4
Benefits:
Savings resulting from lower maintenance costs

Column5

Savings after downsizing IS support staff

($45,000 x 3 ) x 3 years = $405,

Total Savings:

($260,000-$101,000) x 3 = $477

Column6

Column7

$101,000 x 0.05 = $5,050


$101,000 x 0.02 = $2,020
$101,000 x 0.03 = $3,030
$500,000

$101,000 x 3 = $303,000
$101,000 x 0.09 x 2 = $18,180
$831,280

edge transfer: Additional 2% to 3% on transition costs.

evelopment processes
10% on managing offshore contract.

Column6

60,000-$101,000) x 3 = $477,000

5,000 x 3 ) x 3 years = $405,000


$882,000

Column8

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