Project Pagoda

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PROJECT PROPOSAL

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Insourcing vs. Outsourcing

Introduction

First Research Quarterly Update states “Major products (for Internet Service Providers, ISP) are internet access, website design, hosting, and technical support services. Internet access accounts for about 75 percent of industry revenue. Three major systems operate on the internet: the email system that allows users to send email messages to each other; the file transfer system, called FTP, that allows users to exchange many types of files; and the World Wide Web (www, by far, the largest part of the internet), that allows the user to see special graphical files or Web pages.”

Yearly Costs of Present and Proposed Help Desk Alternatives

Current Online Help Desk

Personnel Costs

* 40 full-time equivalent (FTE) technical experts @ $40,000 per year (salary and benefits)

Total Personnel Cost = $1,600,000

Equipment Costs

* 4 servers @ $2,000 each per year

* 20 PCs @ $1,000 each per year

Total Equipment Cost = $28,000

Variable Costs in Server Requests

* $1.50 per request (office supplies, fax paper, etc.).

* 800,000 requests per year

Total Variable Cost $1,200,000

Total insourcing cost = $2,828,000

Bangalore Proposal

Fixed Cost

* $1,500,000 per contract year (covers all administrative and IT costs)

Total Fixed Cost = $1,500,000

Variable Costs

* $0.50 per request

* 800,000 request per year

Total Variable Cost = $400,000

Total outsourcing cost = 1,900,000

From a cost perspective only, outsourcing to India ISP, is the best option, saving $928,000

Figure 1 - Weighting Point Evaluation Factors

| | Insourcing | Outsourcing |

Category | Weight Factor | Score | Total | Score | Total |

Environment/Safety | 0.1 | 4 | 0.4 | 1 | 0.3 |

Data Loss Prevention | 0.1 | 3 | 0.3 | 3 | 0.9 |...