Important components of IS model include: hardware, software, networking, people, and data. The total cost of information systems in an organization is the sum of the cost of each component of this IS model.
Mishawaka Sales Company (MSC) is a direct marketing company involved in sales and distribution of a range of products in the Mid-West. MSC wants to provide better operational support to its sales representatives (SR) by providing each of its 800 SRs a laptop computer. The lifespan of each laptop is assumed to be five years with zero residual value and the cost of each laptop is $1200. Each laptop needs operational software worth of $500 in the beginning. Second year onwards, each laptop will need software upgrades costing $100 per laptop each year. Each new SR needs to enroll in a training program costing $200 per SR when this SR is hired. Statistics Data show that in each year (from the 1st year to the 5th year) about 10% of SRs quit their jobs and the same number of new SRs are hired each year (*). When a SR leaves, his/her laptop will be used by the new SR who takes over the job. So no new laptops will be needed after the first year. These new SRs need to enroll in the same training program. Based on historical data, MSC knows that 2% of laptops will need repair every year and the cost of a laptop repair is $800 per incident. Determine the total cost of ownership (TCO) for this operational automation project at MSC.
Hint: though you are asked to calculate “total cost”, think about each component (e.g., laptop, software, …) first and figure out how to calculate the cost of each component.
(*) Therefore, 880 (=800+80) new SRs are hired in year 1, and 80 new SRs are hired in each year from year 2 to year 5.
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