DIDDLE is a large independent groceries and general merchandise retailer. It currently has a network of $14$ stores in and around South Wales and South$-$West England. Its annual revenue in $2022$ was $415$ million, returning a net profit of $29$ million.

DIDDLE is about to embark on a large IT project that will completely overhaul its existing computer systems. It is planning to replace the current IT services $($HR & Payroll, Finance and Stock Control$)$ as well as introducing new, specialist services $($Sales Analysis, Marketing, Delivery Fleet Management and Customer Loyalty Scheme$).$

The proposed new system will take the form of a modularized ERP system. The complete system is being developed and supplied by ISDSOL.

As part of the initial project planning, DIDDLE is undertaking a feasibility study. This will include, amongst other things, an investigation into the project$$s business justification.

The project team, with the help of a specialist business analyst, has produced some initial estimates of project costs and benefits, as described:

Cost estimates:

ISDSOL ERP System $4220,000$

ISDSOL ERP HR module $44,000$

ISDSOL ERP Finance module $39,000$

ISDSOL ERP Stock Control module $38,000$

ISDSOL software customisation $35,000$

Sales analysis module $($bespoke$)85,000$

Marketing module, to include Spatial Analyst capability $($bespoke$)100,000$

CMS software with Loyalty Scheme bolt on $($bespoke$)132,000$

Fleet management module $($bespoke$)110,000$

ERP servers $56,000$

Database servers $30,000$

Workstations $40,000$

Network and other infrastructure $31,000$

Hardware maintenance and upgrades $55,000($annual$)$

Software maintenance and upgrades $50,000($annual $$ starts $12$ months after system goes live$)$

Geodemographic data $25,000($annual$)$

Road network data $2,400($monthly$)$

Training $24,000$

Training $7,000($annual$)$ starts $12$ months after system goes live$)$

IT staff $35,000($annual$)$ x $2$ starting salary, starts middle of Year $0$

Data Analyst $45,000($annual$)$ starting salary

Benefit estimates:

Staff reductions $130,000($annual$)$

Increased profit $($new customers$)-550,000$ in first year after system goes live, $10\%$ increase per annum for remainder of product lifespan

Increased profits $($existing customers$)240,000$ in first year after system goes live, then $270,000$ year after that, then $320,000$ for all subsequent years.

Delivery efficiency gains $25,000($annual$)$

Stock savings $45,000($annual$)$

Using the evaluation methods you are required to assess the financial viability of the proposed project based on the given estimated cost and benefit values. You must then recommend whether DIDDLE proceed with the project or not. You should consider the influence estimation error has on your calculations and recommendation. You might also want to make suggestions for how the profitability of the project could be increased. Assume that the system development takes place throughout the duration of project Year $0.$ The new system will $$go live$$ at the start of Year $1.$ The total lifespan of the project expected to be $8-$years $($including Year $0).$