1. PC Uplift at Pallet World, Inc (PWI).

Pallet World, Inc. is a $75M manufacturer of wooden pallets, shipping materials and packing
materials located in High Point NC. The company decided to replace a large number of its office
PCs to support a new ERP software project expected to deliver better information to company
management. PWI competes in a highly competitive market in which strict control of costs,
margins and prices is key to survival.

A change of ownership recently brought new leadership, who quickly determined that the
company must invest in new ERP-based information systems to grow and compete with larger
rivals. As a pre-requisite, most PC’s in the company were to be replaced in a single “uplift”
project. The company had traditionally pursued a conservative IT strategy, preferring to lag
behind industry leaders in order to keep operating costs low. Now it needed to replace most all of
its PC portfolio in a short time.

To help ensure the success of this project, the company engaged IT Purchasing expert Dennis
Fixer on a temporary consulting engagement (costing $ 10,000) to assist their IT and Purchasing
Departments in supplier selection and contract negotiation. Dennis was asked to review the work
of the local IT Manager Tripp Twice to confirm that PWI would make the optimal selection.
Dennis was also to assist PWI Purchasing Director Lolo Price to ensure the company received
the best possible pricing and contracts for the resulting purchase.

First, Dennis interviewed Tripp and his staff to review the PC information they had accumulated.
He also asked for a copy of their latest IT budget and scheduled a review meeting with Tripp,
Lolo and the PWI Controller.

Review Meeting
Tripp didn’t see why a review of his budget was necessary to support a PC purchase – especially
since he had already run the numbers and determined which supplier offered the best deal – but
he complied with the request. The total IT budget consisted as follows:

Salaries & Benefits $ 650,000

Equipment Rental $ 750,000
Software $ 125,000
Telecommunications $ 100,000
Purchased Services $ 75,000
Supplies $ 55,000
Depreciation $ 45,000
Other $ 75,000
Total $1,875,000

Separately, Tripp estimated that PC support (help desk, hardware maintenance, etc.) cost the
company about $150,000 per year. The PWI PC support team managed an inventory of 135 PCs
(25 laptops, the rest desktops). Tripp estimated that due to their compact design and the higher

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wear and tear from travel, laptops incurred 25% more PWI support cost per unit per year versus
the desktops.

Tripp and Lolo had developed standard hardware and software configurations for the suppliers to
quote based on Wintel (Microsoft Windows / Intel) industry standards. The products quoted were
considered functionally identical, although there were differences between the companies which
supplied these products.

Tripp estimated that incase of any breakdown of any equipment a replacement cost until
equipment return will be $ 50 for desktop and $75 for laptop per day.

Tripp researched industry hardware forecasts and projected that the desktops would be with $250
at the end of the 5 year period; laptops would be worth $400. He also assumed a disposal /
recycling fee of $100 for all computers (laptops or desktops) at end of life.

The list of potential suppliers had been narrowed to 4:

• Lenbow

• Bell

• PH

Tripp and Lolo had received the following bids and pricing info. from each of the suppliers,
which they reviewed with Dennis. Dennis summarized these bids as follows:

Lenbow Technology
Lenbow quoted their model A-350 desktop at $1,375 minus a 10% discount. Shipping charges
were $25 per unit and installation was charged at actual cost and estimated at $5,000. Software
configuration and licensing was provided at the factory for $275 per unit. Annual service
contracts were available for $150 per unit.

Lenbow quoted model L-2000 laptop at $2,495. Shipping charges were $45 per unit and
installation was charged at actual cost and estimated at $3,500. Software configuration and
licensing was provided at the factory for $275 per unit. Annual service contracts were available
for $250 per unit.

Lenbow was a strong national supplier with international presence. They had recently been sold
to a Chinese company. Their laptops were considered the standard for durability.

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Bell Computer
Bell Computer quoted their model Z-100 desktop at $1,314 minus a 20% discount. Shipping
charges were $35 per unit and installation was charged at actual cost and estimated at $7,500.
Software configuration and licensing was provided at the factory for $199 per unit. Annual
service contracts were available for $220 per year per unit, fixed for 5 years.

Bell was a national (and international) supplier with the leading share of the corporate PC
market.

Bell quoted model X-890 laptop at $2,175. Shipping charges were list price $40 per unit but
discounted to $30; and installation was charged at actual cost and estimated at $5,000. Software
configuration and licensing was provided at the factory for the same $199 per unit as the
desktop. Annual service contracts were available for PC at $ 275 per year per unit, fixed for 5
years.

PH
PH, Inc. quoted their model 150 desktop at $1,220. Shipping charges were $15 per unit and
installation was charged at actual cost and estimated at $6,200. Software configuration and
licensing was provided at the factory for $235 per unit. Annual service contracts were available
for $235 per year per unit.

PH quoted model 250 laptop at $2,295. Shipping charges were $25 per unit and installation was
charged at actual cost and estimated at $4,200. Software configuration and licensing was
provided at the factory for $175 per unit. Annual service contracts were available for $175 per
year per unit with annual increase 5%.

PH was a national manufacturer with strong consumer sales and modest corporate presence.
They were making inroads in corporate sales and were considered “hungry” to gain corporate
accounts from Bell.

Dennis’ Deliverable,
In the role of Dennis, you will develop and submit the following:
1. An independent TCO analysis of the PWI PC replacement project, including a fully
detailed TCO matrix with separate sections for desktops, laptops and total.
2. Your ranked recommendation of the three suppliers, with an explanation.
3. Provide your assumptions in case you made any.

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