Software skills: Spreadsheet formulas, electronic presentation software $($optional$)$

Business skills: Technology rent vs$.$ buy decision, TCO analysis

This project provides an opportunity for you to help a real$-$world company decide whether to rent or buy new technology. You$$ll use spreadsheet software to compare the total three$-$year cost of licensing and maintaining new manufacturing software or renting the software from an application service provider.

Dirt Bikes would like to implement new production planning, quality control, and scheduling software for use by $25$ members of its manufacturing staff. Management is trying to determine whether to purchase the software from a commercial vendor and any hardware required to run the software or to use a hosted software solution from a software service provider. $($The hosted software runs on the service provider$$s computer.$)$ You have been asked to help management with this rent vs$.$ buy decision by calculating the total cost of each option over a three$-$year period.

The costs of purchasing the software $($actually for purchasing a license from the vendor to use its software package$)$ include the initial purchase price of the software $($licensing fee of $$100,000$ paid in the first year$),$ the cost of implementing and customizing the software in the first year $($$$20,000),$ one new server to run the software $($a first$-$year purchase of $$4000),$ one information systems specialist devoting half of his or her time to supporting the software $($$$55,000$ in full$-$time annual salary and benefits with a $3\%$ annual salary increase each year after the first year$),$ user training in the first year $($$$10,000),$ and the cost of annual software upgrades $($$$5,000).$

The costs of renting hosted software are the rental fees $($$$2500$ annually per user$),$ implementation and customization costs $($$$12,000$ in the first year$),$ and training $($$$10,000$ in the first year$).$

Prepare a report addressing the following:

Calculate the total cost of renting or purchasing this software over a three$-$year period. Identify the lowest$-$price alternative that meets Dirt Bikes' requirements. Use spreadsheet software to calculate this $($Insert an image of your spreadsheet summary$).$

What other factors should Dirt Bikes consider besides cost in determining whether to rent or buy the hardware and software?