Hey, I am working on a Financial Management question and need a sample draft to help me study
You are the manager of a business analysis team for Resources as Needed (RAN), a consulting firm. RAN supports other companies with experienced consultants for short-term projects in areas such as information technology, accounting, and change management. RAN’s executive leadership is requesting daily information and analysis around various financial metrics such as revenue earned, hours worked, profitability by client, etc. The executive team also provided a list of desired capabilities which includes a dashboard with real-time data summarizing the metrics for ease of viewing and use.
After reviewing the capabilities of your current financial software systems, you have determined that new software will be needed to support the request. Your team researched the software market and determined three possible options, each with a different pattern of cash flows.
- The first option is to build a custom program using internal resources. There are experienced consultants in your firm that could do the work. However, the consultants would be unavailable for client projects during the build, so their wages would be a direct cost (unreimbursed with no profit margin) to your firm. The build project will take approximately 9 months and will require some annual maintenance. The expected result is a tool that meets all aspects of the executive team’s request.
- The second option is to purchase an off-the-shelf software program. The installation will require consulting resources for 1 month and has no annual maintenance; however, upgrades to new versions are likely every other year. The best off-the-shelf option identified is expected to meet 90% of the executive team’s request.
- The third option is to subscribe to a software program that is available via internet access (i.e. in the cloud). This subscription model, known as software as a service or SaaS, requires a one-time start-up payment, then regular monthly access payments. Start-up will take 1 month, and no internal consulting resources are needed as all work is handled by the vendor. The monthly access payment ensures that your firm is using the latest version of the software as released. The current version is expected to meet 90% of the executive team’s request.
Over a 10-year project life, the total cash outflow of all three options is similar. However, the year-by-year cash flow patterns differ for each option as do the operational and strategic implications of each.
Using financial data such as the cash flow and metrics provided, evaluate the financing implications for the firm’s income statement from each option.
Write an email to the executive team summarizing your evaluation. The summary must include a comparison of the financing implications and any strategic, operational, or other non-financial factors considered as well as the recommended option with justification.