Pagoda Case Study

1. Calculate the total cost of outsourcing the on-line help desk versus staying with the current solution. Which option is cheaper?

Number | Item | Cost per unit per year | Total Cost per year |

| | | |

| Current Pogoda.Com costs | | |

40 | Full Time Employees | $40,000 | $1,600,00 |

3 | Supervisors | $70,000 | $210,000 |

4 | Servers | $2,000 | $8,000 |

20 | PCs | $1,000 | $20,000 |

| Total Fixed Costs | | $1,838,000 |

| | | |

800,000 | Variable costs | $1.50 | $1,200,000 |

| Total Costs for Pagoda | | $3,038,000 |

| | | |

900,000 | Variable costs | $1.50 | $1,350,000 |

| Total Costs for Pagoda | | $3,188,000 |

| | | |

| New Delhi proposal | | |

| Fixed Costs | | $1,500,00 |

| | | |

800,000 | Variable costs | $.50 | $400,000 |

| Total Costs for New Delhi | | $1,900,000 |

| | | |

900,000 | Variable costs | $.50 | $450,000 |

| Total Costs for New Delhi | | $1,950,000 |

The New Delhi proposal is far less expensive regardless of volume.

2. What other factors, other than costs, should Pagoda consider? How would you weight these factors? Given the above, how might you use a weighted-point evaluation system to evaluate the two options?

Using the information contained in the introduction, costs may not be the main issue for its customers. Again, the New Delhi option is far less expensive. Costs should be considered but have a smaller impact on the decision model – maybe a .1 of 1.0. The Help Desk time response is one of the top 3 reasons of customer satisfaction – I would give it a .7 or .8 of 1.0 – will new Delhi guarantee a staff large enough to handle the expected volume with the same time response? I would give the remainder of the decision process to number of expected requests.

3. Should Pagoda.com outsource its on-line help desk? Why or why not? Be sure to consider Table 10.3 when framing your answer.

I would not. Cost difference is tremendous between...