BKFin.com provides banks access to sophisticated financial information and analysis systems via the Web. The company combines these tools with benchmarking data access, including email and wireless communications, so that banks can instantly evaluate individual loan applications and entire individual loan applications and entire loan portfolios.

BKFin.coms CEO, Jon Wise, is happy with the companys growth. To better focus on client service, Wise is considering outsourcing some functions. CFO Jenny Lee suggests that the companys e-mail may be the place to start. She recently attended a conference and learned that companies such as Continental Airlines, DelNet, GTE, and NBC were outsourcing their e-mail function. Wise asks Lee to identify costs related to BKFin.coms in-house Microsoft Exchange e-mail application, which has 2,300 mailboxes. This information follows:

Variable costs:

E-mail license $7 per mailbox per month

Virus protection license $1 per mailbox per month

Other variable costs $8 per mailbox per month

Fixed costs:

Computer hardware costs $94,300 per month

$8,050 monthly salary

for two information technology

staff members who work only

on email $16,100 per month

Required:

a) Suppose Mail.com, a leading provider of Internet messaging outsourcing services, offers to host BKFin.coms email function for $9 per mailbox per month. If BKFin.com outsources its e-mail to mail.com, BKFin.com will still need the virus protection software; its computer hardware; and one information technology staff member who would be responsible for maintaining virus protection, quarantining suspicious e-email, and managing content (e.g., screening e-mail for objectionable content). Should CEO Wise accept Mail.coms offer? Why or why not?

b) Suppose for an additional $5 per mailbox per month. Mail.com will also provide virus protection, quarantine, and content-management services. Outsourcing these additional functions would mean that BkFin.com would not need an e-mail information technology staff member or the separate virus protection license. Should CEO Wise outsource these extra services to Mail.com? Why or why not?