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Analysis 1: Renown Server Virtualization For this analysis you are to evaluate a proposal for Renown Medical Center to optimize their data center by virtualizing

Analysis 1: Renown Server Virtualization For this analysis you are to evaluate a proposal for Renown Medical Center to optimize their data center by virtualizing their existing servers. Use the following facts to conduct a break even analysis of the virtualization technology assuming that all of the virtualization takes place in 2017. Costs It is estimated that virtualization will reduce the number of servers required in Renowns data center by a ratio of 4 to 1. That means for every 4 physical servers running applications the virtualization process will enable just 1 physical server to run the same set of applications. Renown currently has 80 physical servers in their data center. In 2017 virtualization software will be installed on each of the physical servers that are to be retained for virtualization. The licensing cost of the virtualization software is $7,200 per server per year. The virtualization software provider will also software services for Renowns data center at a cost of $20,000 per year. In 2017 there will be a onetime cost of $50,000 to train Renowns IT staff on the virtualization software. Benefits The reduction in servers due to virtualization is expected to save Renown $800 per server in maintenance costs, each year, for each of the servers that will no longer be required. The reduction in servers from the virtualization process is also expected to save Renown $700 per server in electricity and cooling costs each year, for each of the servers that will no longer be required. Physical servers have a limited life expectancy and must eventually be replaced. Therefore, by not having to replace as many servers each year, the cost of the replacements that are no longer required, will become a benefit for Renown. Servers have a four years life expectancy and Renown replaces 25% of their servers each year. The hardware cost to replace each physical server is $5,200. Due to virtualization, Renown will save on the replacement cost for the servers that became redundant due to virtualization. Renown will also save on the labor cost to procure and deploy each physical server they would not need to replace. This amounts to $900 per server that does not require replacement. IS 301 Summer 2017 Professor: Mala Kaul Calculations The break even analysis will cover a 4 year period from 2017-2020. For each year: Calculate the system costs. Calculate the system benefits. Calculate the net benefits of the system. Calculate the break even total for the system. For the total time period: Calculate the net present value (NPV) of the investment using a rate of 10%. Calculate the internal rate of return (IRR). At the bottom of your spreadsheet add the two questions below and include your answer to them: In what year will Renown break even on this project? Based on their required rate of return of 10%, should Renown go forward with this project? Analysis 1 Part B Many organizations build/maintain duplicates of their data centers for backup as a part of their disaster recovery plans (DRPs). This requires them to purchase and maintain a larger number of servers that mostly remain idle. As a result of virtualization, Renown can implement a disaster recovery plan for its critical applications with fewer servers. If Renown was maintaining an exact duplicate of their data center, how would the cost-benefit analysis change? Create a new Worksheet Tab in the same Excel file by copying the existing worksheet. Rename the copy Renown-DRP. Change the number of original physical servers to account for duplicates for the DRP. The cost of the software services that was earlier $20,000, will double in this analysis. Since employees will not need additional training for additional servers, the annual training cost will not change. You will note that the number of servers after virtualization, and the number of servers that will not be needing replacement, will change automatically. Similarly, the cost and benefit numbers that are based upon the number of servers, should change automatically. Be sure to review the answers to the two questions at the bottom of the spreadsheet and correct them, if required. Analysis 2: Walmart Customer Kiosk For this analysis you are to evaluate a system proposal for Walmart which is considering the installation of customer kiosks in their Supercenters. The kiosks will allow customers to search for products, tell them if the products are in stock, and show them on a map where in the store the products are located. Use the following facts to conduct a break even analysis of the customer kiosk technology. Costs There will be a one-time cost of $18,000,000 in 2017 to develop and implement the system software. Starting in 2017 there will be an annual software maintenance fee of $15,000 per store in which kiosks are installed to cover bug fixes and upgrades. Walmart has a total of 3,029 Supercenters with kiosk installation occurring on the following schedule: 600 stores in 2017, 850 stores in 2018, 950 stores in 2019, and the remaining 629 stores in 2020 IS 301 Summer 2017 Professor: Mala Kaul Each store will have 6 customer kiosks installed. One kiosk will be located at each entrance with four other kiosks located at select spots within the store. There is a one-time cost per kiosk of $34,000 which represents the kiosks purchase and installation. There is an annual hardware maintenance fee of $8,000 to maintain each installed kiosk starting in the year the kiosk is installed. Benefits The tangible benefits come from reduced labor costs and increased sales revenue. The kiosks are expected to reduce the need for employees to spend time directing customers to products. This time savings will result in reduced labor costs equivalent to employing one employee during regular store hours from 8am-8pm per store where kiosks are installed. Supercenters are open 365 days per year. The sales associate labor rate is $10.00 per hour. The kiosks are also expected to increase the likelihood that customers will find all of the items they are looking to purchase. It is estimated that each store with kiosks will sell 60 additional items per day, averaging $3.40 per item. Calculations The break even analysis will cover a 6 year period from 2017-2022. For each year: Calculate the system costs. Calculate the system benefits. Calculate the net benefits of the system. Calculate the break even total for the system. For the total time period: Calculate the net present value (NPV) of the investment using a rate of 15%. Calculate the internal rate of return (IRR). At the bottom of your spreadsheet add the two questions below and include your answer to them: In what year will Walmart break even on this project? Based on their target rate of return of 15%, should Walmart go forward with this project? Deliverables Use the template from the lab exercise to construct your analyses. You will just need to add rows and columns as necessary to make room for the variables, costs, and benefits specific to each analysis. Construct all analyses in a single Excel file with each analysis in its own worksheet and label the worksheets appropriately. Use a clearly defined list of variables. A variables list will allow someone else to adjust the variables to see the effect of those adjustments on the analysis results without having to change any formulas. Use formulas when calculations are required. Do not just figure them out offline and then enter the totals in the spreadsheet. IS 301 Summer 2017 Professor: Mala Kaul Your formulas should also be constructed so that it is possible to extend the analysis to include additional years simply by copying and pasting the formulas from the last column into adjacent columns. This will require the use of absolute cell referencing. Use conditional formatting for the net annual benefits, break-even calculations, and NPV so that positive numbers are highlighted in green and negative numbers are highlighted in red.

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