Assignment:
You are the Chief Information Officer (CIO) of a large manufacturing company. Profits have been down over the last few years and the CEO has noticed that IT expenditures have substantially increased during this time. In a recent meeting you mentioned that a standard
PC Build for the company costs $893.00. The CEO has mentioned that she feels the total cost is substantially higher and wants to know the total cost of ownership (TCO) per PC in order to get a better handle on company expenditures. Because of the company's current situation, a decision needs to be made regarding employee and budget cuts in the IT Department. The break point is $5,300 if the total cost of ownership per PC is more than this amount the CEO suggests cutting two positions in the IT Department. If the total cost of ownership is less than $5,300 these cuts will not have to be made.
As CIO you are being tasked with determining the total cost of ownership for a single PC. In order to accomplish this you must gather the following information and create a total cost ownership calculator utilizing Microsoft Excel. This tool will act as your decision support system once you have calculated the TCO per PC. Since the budget cycle is approaching, the CEO is asking that you provide her this information no later than the morning of August 11th 2014 at 8:AM This is when she will be making a decision on employee and budget cuts in order for the company to remain profitable in the upcoming years.
The CEO is also asking that you provide a two to three page management recommendation on the problem at hand and how this total cost ownership tool will assist in making this important decision. Finally, the CEO would like for you to present your management summary findings to the board of directors using a Prezi presentation (www.prezi.com) No PowerPoint!
ORGANIZATION INFORMATION
Total Company personal computers: 926
End Users of PC's: 716
Average PC end users Salary: $48,893
Number of work hours in a year: 1760
DIRECT COSTS
HARDWARE AND SOFTWARE
Hardware Expenses in an average year : $525,867
Software Expenses in an average year: $195,567
Annual computer supplies: $82,988
Subtract Annual depreciation on hardware and software capital purchases: $45,887
Total annual hardware and software direct costs: (calculation)
MANAGEMENT AND STAFF SALARIES
Help Desk Personnel: $168,900
System Administration Personnel: $193,887
Network Administration Personnel: $192,534
Internal Training Personnel: $53,500
General End User Support Personnel: $43,000
IT Management Salaries: $211,392
Total IT Management and Staff Salary plus 30% overhead to account for salary increases (calculation):
OTHER EXPENSES
Travel Costs for above personnel: $45,000
Annual consulting and professional services fees related to infrastructure: $25,000
$30,000 is spent annually for training infrastructure personnel
$125,000 is spent annually on maintenance contracts
There was a minimal outsourcing cost of $2500
Total Other Management Expenses: (calculation)
DEVELOPMENT COSTS
Costs incurred for new application development areas are as follows:
Design $45,000
Development $47,500
Testing $35,000
Documentation: $10,000
Existing application maintenance areas: $125,000
Consulting fees and professional services: $25,000
Total annual development costs: (Calculation)
COMMUNICATION COSTS
Leased Lines $122,000
Remote Access Communications $167,000
Annual WAN (Wide Area Network) costs $145,000
Total Communication costs: (Calculation)
TOTAL DIRECT COSTS: (Calculation)
Hint: Total Hardware and Software costs plus Total IT Management and Staff Salaries plus Total Other Management Expenses plus Total Annual Development Costs plus Total Communication Costs
INDIRECT COSTS
END USER ACTIVITY
40 hours annually on PC user training
25 hours annually on local file maintenance
Annual cost of individual end user IT Activity: (Calculation)
Hint: Average PC end user salary divided by number of work hours in a year. Multiply this number by the total number of hours on PC training and Local File Maintenance. Then multiply this number by total company Personal Computers in the organization
DOWNTIME
The Company loses 1.5 hours per month of end-user productivity due to planned or
unplanned downtime.
Total person hours lost annually due to downtime:
Hint: Total number of hours lost per month of end user productivity multiplied by number of months in a year multiplied by total number of end users in the company
Total annual cost of downtime:
Hint: Average PC end users salary divided by number of work hours in a year then multiply this number by total person hours lost annually due to downtime.
TOTAL INDIRECT COSTS: (Calculation)
Hint: Total annual cost of End User IT activity plus Total Annual Cost of Downtime
FINAL CALCULATIONS:
Total annual infrastructure costs: (calculation)
Total Direct Costs plus Total Indirect Costs
TOTAL COST OF OWNERSHIP PER PC: (Calculation)
Total annual infrastructure costs divided by total company personal computers.