Riverbend Software Support Administrators (RSSA) provides online and telephone help desk services. Because RSSA's labor costs have steadily increased, it is outsourcing its call center. RSSA's executive-level committee, who oversees the information systems (IS) function, selected a project development team to crease a system to move the help desk and manage it from corporate headquarters.
Two incidents delayed the help desk conversion date by 15 days. A server was damaged when an unidentified employee put a hot coffee pot on it, and several backup tapes were found floating in a restroom sink.
The five-year contract requires an initial payment of $1,750,000 and yearly payments of $525,000. Each year, the contract will save $750,000 in salary, benefits, and equipment costs. There is a $150,000 one-time charge for breaking the current call center's building lease, but doing so will save $360,000 a year. RSSA's cost of capital is 11%.
a. What is the executive-level committee commonly called, who typically serves on it, and what is its primary function?
b. Who typically serves on the project development team?
c. What steps would the development team take during system analysis?
d. Why do you think the server and data tapes were damaged?
e. Calculate the following capital budgeting metrics for RSSA's outsourcing plan:
1. payback period
2. net present value (NPV)
3, internal rate of return (IRR)
As discussed, your tutorial ignores the requirements a-d and completes requirement e in Excel. Click in cells to see computations. You can probably guess that someone is unhappy about the outsourcing!