You are the business analyst for your organization and are trying to determine the best solution for an identified problem. You have determined that you could create a software solution using inhouse resources for $65,000 and with an ongoing support of $5,600 per month. A vendor offers you a quote that they can create the software for $49,000 with an ongoing support of $6,100 per month. Which solution should you choose?

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B. Create the software if you'll use the solution longer than 32 months. The upfront cost difference is $65,000 - $49,000 = $16,000 more for in-house, but the monthly cost is $500 less ($6,100 - $5,600). Dividing the extra upfront cost by the monthly savings ($16,000 / $500) yields a break-even point of 32 months. Beyond 32 months the cumulative monthly savings exceed the higher initial investment, making the in-house solution the financially superior choice.

Answer

A. Create the software if you'll keep the solution less than 32 months. Before 32 months the vendor solution has a lower total cost because the in-house upfront premium has not yet been offset by monthly savings, so creating in-house is the wrong choice in that window.

Answer

C. There is not enough information to determine which solution is financially better. There is sufficient information to perform a break-even calculation - initial costs and ongoing monthly costs are provided for both options.

Answer

D. Buy from the vendor if you'll keep the solution longer than 32 months. After 32 months the in-house solution is cheaper, not the vendor solution, making buying from the vendor the wrong long-term financial decision.

You are the business analyst for your organization and are trying to determine the best solution for an identified problem. You have determined that you could create a software solution using inhouse

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