You are a financial analyst for a mid-size architectural firm with some 100 employees located in three cities across the United States The firm consistently earns over $30 million in annual revenue by providing engineering and design services that cover a variety of structures and systems, from building brand new facilities to renovating and rehabilitating those that already exist. It specializes in providing exceptional design services for HVAC, electrical, piping, fire protection, and lighting systems. The firm currently has a perpetual license for state-of-the-art computer-aided design and drafting software for its 50 architects and engineers at a cost of $6,000 for each copy. The software is periodically in need of software patches to fix bugs and/or security issues. These are provided at no additional cost. However, there is a $400/year charge per user for technical support. Patches are centrally managed and applied each quarter to all copies by a member of the firms IT staff. This typically requires that an IT support person spend about 1 hour with each user and their computer. The software manufacturer provides a major new release every three years at an upgrade cost of $4,000.

You have been asked to evaluate the advisability of moving to a software as a service solution and paying a monthly fee $300 per user that includes all technical support, software support, and upgrades to new releases. Review Questions What are the costs over a six-year period associated with the current arrangement?

What would be the costs with the software as a service solution?