Question

1. Project Evaluation.
   1. Describe the weighted average method of evaluation. How do you use it? How are the weights determined?
   2. A university is evaluating whether to continue using their current CRM (Customer Relationship Management) software:
      1. PowerCRM - The current system is slow, had two weeks worth of outages last year and frustrates the marketing department because it isn’t flexible.
      2. The competitor is SailsForce, a CRM platform developed by a company whose founder also loves ships. It is known for being reliable and flexible. Schools using it report average recruitment of 5 additional students per year.
      3. Using the above facts, choose 5 evaluation criteria, weigh the criteria and score the companies. The evaluation criteria should be pertinent to the question; use your imagination to score the companies (Hint: you can use the template) Explain your choices for criteria selection and weighting.

   3. Total Cost of Ownership

      1. What is meant by Total Cost of Ownership? How is it calculated? What is included? How is it used in project evaluation?

      2. Consider the options from Question 1 Project Evaluation:

      3. SailsForce has an upfront cost to implement $25,000. The annual licensing fee is $600 per user, and there are 75 employees in admissions who need a license.

      4. PowerCRM is already implemented and has a licensing cost of $40,000 per year. The average full-time student, after discount, pays $20,000 per year.

      5. Compare the 5-year total cost of ownership.  

      6. Based on the TCO and Weighted average, which would you recommend and why?

Answer 1

1. Total cost of ownership refers to a financial estimate of all direct and indirect costs associated with a purchased or acquired asset over its entire lifetime, life expectancy or life cycle. It is intended to aid consumers and business entity managers determine the total costs of owning a given product, system or other asset.

2. There is no definitive formula used for determining the total cost of ownership in relation to calculating the return on investments of a computer system and its intangible investments.

Analyzing costs to benefits entails more than just determining the monetary considerations. It also includes the comparison of supplier and service provider information for alternative options. The use of a single equation poses difficulty in providing assurance regarding the quality of work generated by throughputs and in determining the standards for quality.

There is a consensus that the aggregation of ownership costs depends on the industry category and the inherent characteristics of the business that will require additional outlays. These outlays may be categorized as:

Values for currency conversion (if imported from another country or territory).

Requirements for upgrades, in relation to frequency, necessity or urgency.

Training initiatives with consideration for the number of staff and the turnover rates of previously trained-workers.

Type of support, after-sales service and maintenance requirements.

Opportunity lost during downtime period.

Safety requirements and costs of mitigation.

Related expenses to fulfill productivity via computerized systems.

Management of waste-disposal including the measures taken to ensure control over e-wastes.

3. There are three key components to TCO calculations:

Acquisition/Physical Hardware Costs

Operating Costs

Personnel Costs

Let’s look at each of these in turn.

Acquisition Costs

Acquisition/Physical Hardware costs include the cost of equipment or property before taxes, but after commissions, discounts, purchasing incentives, and closing costs. Sometimes this will include one-time peripheral equipment or upgrades necessary to installation or utilization of the asset.

Operating Costs

Operating costs include subscriptions or services needed to put the item into business use. This includes utility costs, direct operator labor, and initial training costs.

Personnel Costs

Personnel overhead may include administrative staffing, support personnel to the equipment, facility housing the equipment and operators. This may include ongoing training and troubleshooting labor for maintenance purposes.


4. The approximate total project cost, called the costestimate, is used to authorize a project's budget and manage its costs. Professional estimators use defined techniques to create cost estimates that are used to assess the financial feasibility ofprojects, to budget for project costs, and to monitor project spending.