Imagine that the bank you work for is about to buy a software product for a new application. After researching the market, it has been decided that there are 2 alternatives: a commercial product (Product A) and a commercially supported opensource product (Product B). Your manager has asked you to perform a comparative study of the 7-year costs of the 2 products, based on the variation of number of users that will have access to the application and prepare a power-point presentation that summarizes your findings and conclusions.
After contacting the products’ vendors, talking to your colleagues at the bank and researching the market you have identified the following facts:
Product A consists of 7 components (sub-products) that are all required for the new application, however, they are licensed independently:
§ Product A1 that is licensed on a per user basis, costing 90£ per User that will have access to the application.
§ Product A2 that is licensed on a per user basis, costing 120£ per User that will have access to the application.
§ Product A3 that is also licensed on a per user basis, costing 400£ per User will have access to the application.
§ Product A4 that is also licensed on a per user basis, costing 500£ per User will have access to the application.
§ Product A5 that is licensed based on the number of CPUs that are installed on the application server that the product will run, costing 13000£ per installed CPU.
§ Product A6 that is licensed based on the number of CPUs that are installed on the application server that the product will run, costing 15000£ per installed CPU.
§ Product A7 that is licensed based on the number of CPUs that are installed on the application server that the product will run, costing 5000£ per installed CPU.
It is estimated that in order to be able to perform adequately in the production environment, Product A requires 2 CPUs for up to 300 Users, 4 CPUs for 301 to 500 Users, 6 CPUs for 501 to 800 Users and 8 CPUs for 801 to 1000 Users.
Additionally, the new application will have a disaster recovery site for which the cost for product A is calculated as 20% of the price of the production site assuming that the production site price is calculated with 0 (zero) Users.
Note that, given its purpose, the disaster site still needs to have the appropriate processing power in order to be able to accommodate the same number of users as the production environment.
Additionally, and starting from the second year, for Product A, the bank will have to pay the product vendor an annual 15% maintenance fee over the final product price (where the final price includes both the production and the disaster recovery sites).
The commercially supported open source product (Product B) license is subscription- based (i.e. maintenance only), starts from the first year and costs 40000£ per year, per CPU installed on the application server that the product will run.
It is also estimated that in order to be able to perform adequately in the production environment, Product B requires 4 CPUs for up to 400 Users, 6 CPUs for 401 to 600 Users and 8 CPUs for 601 to 1000 Users. The cost of the disaster site for Product B is zero.
Based on the facts above and in order to prepare the presentation to your manager you should perform the following tasks:
§ Devise the mathematical formulas that calculate the 7-year costs for each of the products above (the 7-year costs should include the production site license costs, the disaster site license costs and the maintenance or subscription costs)
§ Based on the previous formulas and using MS Excel or by developing your own application (in which case you are free to use any programming language/technology of your choice), implement the formulas you devised and also build the following diagrams/graphs:
- The first diagram will show (in the same diagram) the 7-year costs of each of the products as a variation of the number of users, in other words the vertical axis is the 7-year cost (in £) , whereas the horizontal axis is the number of users ranging from 50 to 1000, in intervals of 50 users.
- The second diagram will show the 7-year cost difference of the two products as a variation of the number of users, in other words the vertical axis is the 7- year cost difference (in £) (Product A 7-year cost minus Product B 7-year cost), whereas the horizontal axis is the number of users ranging from 50 to 1000 in intervals of 50 users).
§ Prepare a concise power point presentation to your manager (in a presentation form suitable for your manager). The slides of the presentation should include at least the following:
o the facts you have identified (already described above),
o the graphs you have prepared (as defined above)
o your own conclusions from this analysis you performed i.e. what does your analysis show that your manager needs to be aware of? e.g., which of the 2 products is more cost-effective and in which cases? If you wish, you may include other calculations in order to reach conclusions on the comparison (e.g. the 5-year or the 10-year costs of each product)
o A list and brief explanations of additional cost factors (at least 3 of them) that you believe the previous analysis does not take into account, but should nevertheless be considered in order to be able to calculate with more precision the final total 7 year cost of the application. For example, the cost of hardware for the production and disaster environments is one such factor (since the 2 products have different hardware needs as variations of application users).
1. If you use MS Excel to implement your formulas you will probably need to use the Excel “IF” function for which you can find several resources online (depending on which MS Excel version you will use). You would also need to create charts in Excel, a task for which you can also find several resources online.
2. If you prefer not to use MS Excel, you may choose any programming language and user interface or technology (e.g. browser-based or other) to implement the application (as long as it runs in a Windows XP or later OS and does not need any special software or even hardware)
§ Submissions should be made electronically containing the following deliverables:
o The .xls file with the formulas implementation or the source code you have developed in which case the “byte” code and the necessary scripts and a file with instructions on how to set up and “run” it in a Windows XP or later OS should also be included.
o The report (in .ppt or pdf format) that you would have delivered to your manager.
§ All the above should be bundled in a .zip file that should be named
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When the no. of users is up to 500 the product A is more cost effective because the cost difference is at low level (max. 645,122 per year)
Product A benefits of both disaster recovery and maintenance support, while product B doesn’t benefit (it worth paying more money within reasonable limits for having provided this support)...
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