What other factors, other than costs, should Pagoda consider? How would you weight
these factors? Given the above, how might you use a weighted-point evaluation system
to evaluate the two options?
Pagoda.com is an Internet service provider (ISP) that caters to individual consumers and small businesses who require a high level of service and are willing to pay a premium for it. Specifically, Pagoda.com offers state-of-the-art email applications and Web-building software, as well as plenty of storage space and the fastest access available. The marketing vice president, Jerry Hunter, puts it this way: "There are a lot of companies out there promising the cheapest Internet access. But what do you get for your money? Slow- or no-access and an endless stream of system crashes. An I won't even mention the lack of support if you have a technical question! For a few dollars more a month, we give our customers the environment they need to be productive. It's no surprise, then, that we have the highest customer satisfaction and retention rates in the industry." One of Pagoda's services is its online help desk. The online help desk works as follow stomers who are experiencing technical problems, or who simply have questions about their account, enter a one-on-one chat room, where they can interact directly with an expert. Problems are usually resolved within 10 minutes, and customers have listed it as one of the top three reasons they stick with Pagoda.com. Presently, Pagoda has enough capacity to handle up to 900,000 requests per year, although management doesn't expect the number of requests to change much from the current level of 800,000 per year. A firm located in New Delhi, India, has approached Pagoda about outsourcing the online help desk. The offer is attractive. The New Delhi firm's own personnel would handle the help desk function. These personnel all speak English fluently and have college degrees or appropriate technical backgrounds. And because they are located in India, labor costs would be a fraction of what they are in the United States. The savings would be passed on, in part, to Pagoda. And since the help desk chat room exists on the Internet, Pagoda's customers should be unaware of the switch. Pagoda management has put together the following figures, outlining the yearly costs associated with the current system and the Indian proposal: Personnel costs: 40 full-time-equivalent (FTE) technical experts @ $40,000 per year (salary and benefits); 3 supervisors @ \$70,000 each per year (salary and benefits) Equipment costs: 4 servers @ $2,000 per year 20 PCs@ $1,000 per year Variable costs: $1.50 per request (office supplies, fax paper, etc.) New Delhi Proposal Fixed cost: $1,500,000 per contract year (to cover administrative and IT costs) Charge: $0.50 per request 2. What other factors, other than costs, should Pagoda consider? How would you weight these factors? Given the above, how might you use a weighted-point evaluation system to evaluate the two options
