Critical Thinking Challenge: Tasks Page

Chapter 7: Development Strategies

Note to Students: After you complete the Practice Tasks, click here to view the sample
answers and check your work. Your answers might vary from these examples and still be
correct. The intent is to give you a sample to guide you and serve as a reference. When
you complete the Practice Tasks and review the sample answers, please return to this
page and complete the Challenge Tasks.

Background
You are helping the IT team at Game Technology study several software acquisition options for
their Customer Contact Care system (C3). First, you review Chapter 7 of your systems analysis
textbook and the material on financial analysis tools, including the Video Learning Sessions. The
IT team is considering two commercial software packages and an in-house development option.
They prepared the following summary:

Option Description Costs Benefits

Software Software package $8,000 to purchase $9,000/yr. through positive

Solutions, Four-year useful life
Inc. Less flexible than in-house
system
Some customizing needed
$1,500 to install and configure
$2,500 to load existing data
$1,000 additional hardware needed
$2,000 annual support fee after first
year free
customer response. Cannot
predict other specific savings.
Increased sales, improved
customer care, and better
productivity are expected.

CRM Software package $7,000 to purchase Same as above

Corp. Five-year useful life
Less flexible than in-house
system
Moderate customizing needed
Runs slower than other options
$2,500 to install and configure
$2,000 to load existing data
$4,000 additional hardware needed
$1,200 annual support fee in all five
years

Develop In-house system $15,000 to develop, install, and Same as above

C3 Six-year useful life, can use our configure
system software and hardware $1,000 to load existing data
in-house Easiest to update and maintain Existing staff can handle support

Practice Tasks
Study the summary carefully and prepare spreadsheet templates. You should assume that all
three options require a six-month period for acquisition or development, installation,
configuration, and data loading. This period is called Year 0. Actual operation begins in Year 1.
Now complete these tasks:
Task 1. Perform ROI and NPV analysis of the Software Solutions package. Use an 8% discount
factor.
Task 2. Perform ROI analysis of the in-house development option.
Challenge Tasks
After you complete the Practice Tasks, you learn about new developments at Game Technology.
It seems that the Game Technology team liked your work, and asked you to perform some
additional tasks.

Task 1. Perform ROI and NPV analysis of the CRM package. Use an 8% discount factor.
Task 2. Perform NPV analysis of the in-house option. Use an 8% discount factor.
 Critical Thinking Challenge: Sample Answers Page
Chapter 7: Development Strategies
Note to Students: After you complete the Practice Tasks and review the sample
answers, please click here to return to the Tasks page and complete the Challenge Tasks.

Background
You are helping the IT team at Game Technology study several software acquisition options for
their Customer Contact Care system (C3). First, you review Chapter 7 of your systems analysis
textbook and the material on financial analysis tools, including the Video Learning Sessions. The
IT team is considering two commercial software packages and an in-house development option.
They prepared the following summary:

Option Description Costs Benefits

Software Software package $8,000 to purchase $9,000/yr. through positive

Solutions, Four-year useful life
Inc. Less flexible than in-house
system
Some customizing needed
$1,500 to install and configure
$2,500 to load existing data
$1,000 additional hardware needed
$2,000 annual support fee after first
year free
customer response. Cannot
predict other specific savings.
Increased sales, improved
customer care, and better
productivity are expected.

CRM Software package $7,000 to purchase Same as above

Corp. Five-year useful life
Less flexible than in-house
system
Moderate customizing needed
Runs slower than other options
$2,500 to install and configure
$2,000 to load existing data
$4,000 additional hardware needed
$1,200 annual support fee in all five
years

Develop In-house system $15,000 to develop, install, and Same as above

C3 Six-year useful life, can use our configure
system software and hardware $1,000 to load existing data
in-house Easiest to update and maintain Existing staff can handle support

Study the summary carefully and prepare spreadsheet templates, or navigate to the Forms
Library at the MIS CourseMate for this book at www.cengagebrain.com. You should assume that
all three options require a six-month period for acquisition or development, installation,
configuration, and data loading. This period is called Year 0. Actual operation begins in Year 1.
Now complete these tasks:

Sample Answers
Task 1. Perform ROI and NPV analysis of the Software Solutions package. Use an 8% discount
factor.
Task 2. Perform ROI analysis of the in-house development option.