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Alternative A

Alternative B

Best Long Term Position

Best Functional Capability

Lowest Cost

Lowest technical skill requirement

Best technical architecture

Total

26

36

Alternative C
7
5
9
7
5

33

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Cost Structure for LegacyMode:
One Time Costs
Contract Signing (5% of yearly maintenance costs)
Transition Costs (2% of yearly maintenance costs)
Lay-off costs (3% of yearly maintenance costs)
Hidden Costs (Upgradation costs etc.)

Long-term costs
Maintenance cost
Help desk support after 1-year

$101,000 x 0.09 x 2

Total:
Assumptions:
Additional 1% to 10% on vendor selection and initial travel costs.
The cost of transition, including infrastructure, training, knowledge transfer: Additional
The Cost of Layoffs: Extra 3% to 5 % on layoffs and related costs.
Hidden Costs:
Extra 3% to 27% on productivity lags.
Upgradation Costs: Extra 1% to 10% on improving software development processes
The Cost of Managing an Offshore Contract:Additional 6% to 10% on managing offshore con

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Benefits:
Savings resulting from lower maintenance costs

Column5

Savings after downsizing IS support staff

($45,000 x 3 ) x 3 years = $405,

Total Savings:

($260,000-$101,000) x 3 = $477

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$101,000 x 0.05 = $5,050

$101,000 x 0.02 = $2,020
$101,000 x 0.03 = $3,030
$500,000

$101,000 x 3 = $303,000
$101,000 x 0.09 x 2 = $18,180
$831,280

edge transfer: Additional 2% to 3% on transition costs.

evelopment processes
10% on managing offshore contract.

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60,000-$101,000) x 3 = $477,000

5,000 x 3 ) x 3 years = $405,000

$882,000

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