Hiring vs. Outsourcing IT Department Team 2 Chad Hargrove Gene Neeley III Ian Reyes Audrey Robbins

Project Goal Decide Whether to Hire a Fulltime Network Administrator or Outsource

Project Scenario Small engineering consulting firm (<50 employees) IS/IT department is not a core aspect of the company Should we hire a network administrator or outsource?

Fulltime Employee Network Administrator that maintains our internal computer network Two Fulltime employees Offered salary, health/life insurance, paid vacation and sick time

IT Outsourcing Outsourcing is an agreement by which an organization contracts for the provision of IT/IS services from another firm –Data center management –Network and communications infrastructure management –User Support

Assumptions

Fulltime Employee Salary - $60,000 per year Bonus - $2,000 per year Insurance Benefits Office Space $20/sq.ft. Equipment –Desktop Computer with software

Fulltime Employee Cont. Equipment cont. –PDA –Cell Phone Payroll Taxes Recruiting Costs Training Costs Administrative Costs

Outsourcing 5-year contract Includes: –Technical expertise in network administration –Network storage –Data backup –Unlimited technical support

Analysis Details Present worth of 5-year cash flow –To compare the cost (in today’s dollars) with future cost, taking time value of money into consideration –Fixed output situation, goal is to minimize present worth of cost –5 year analysis period

Present Worth Analysis Hired Employee

Present Worth Analysis cont. Outsourcing

Comparative Results EmployeesOutsourcing NPV = $781,745NPV = $546,589

Sensitivity Analysis EmployeesOutsourcing

Sensitivity Analysis Cont. Special Projects

Advantages Employees Eliminates delay of calling external company Can create/maintain a more specialized network Outsourcing Lowers Cost Access all of your applications and data from any computer on web Innovation without the risk

Disadvantages Employees More costly Less technical expertise Outsourcing Depends on internet connection Technical support hours may vary from the company outsourcing

Final Recommendation Our recommendation is to select the outsourcing alternative in this case.

Resources _cost_employee.html

Questions?