Outsourcing

Introduction Processes and technologies have many variables; planning, analysis, designing and innovations. Albatross Anchor needs to become more effective with the opportunities and challenges in its operating environment. Albatross’ operating system must be capable of producing quality products (anchors) that are n demand within a time frame that is acceptable to the industry. Question One Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions): 1.

Cost a) Cost or Production: The first issue that needs to be addressed is; how much of the fabricating of the anchors could be outsourced? Albatross, a vertically integrated company has an antiquated and technology-deprived plant as well as non-compliant on safety and environmental issues. The factors that can make outsourcing desirable to Albatross Anchors are quality and speed. Quality, which is “standardization of parts, supplier certification, and supplier involvement in design can improve the quality of supplied parts. ” (www. allbusiness. om) Speed of the supplier can produce the components quicker, with adaptability, flexibility and reliability then this is a time benefit for outsourcing. Albatross Anchors is lacking the production capabilities to output products in relation to the industry and customers demands. Outsourcing would be a benefit to the production of the customized and specific anchors and a valuable asset to put into action and still be able to keep the competitive edge. Albatross’ ability to produce the anchors on a larger scale with fewer, less expensive costs needs to be implemented.

Technology, specialized trained employees and bulk purchasing are factors that contribute to the economic scale. An investment in specific technological production techniques would give Albatross more of a competitive advantage over other “anchor” companies. Increasing production efficiency would allow Albatross to reduce the company’s expenses. Reduced expenses means more cash to spend on operational expansion. Experienced and a specialized skilled labor force would improve Albatross Anchor because the ore skilled workforce the more capable workers would be to complete complex tasks. Albatross could hire more skilled labor force to reduce the workforce for their competitors. The advantage of a more highly skilled workforce is to improve the economies of scales because they could produce more anchors in less time. b) Economies of Scale: The ability to grow and expand would lead Albatross to purchase materials in bulk. Bulk purchasing would allow Albatross Anchor to benefit from a reduced average cost per unit. Economies of scale refers to the decreased per unit cost as output increases. More clearly, the initial investment of capital is diffused (spread) over an increasing number of units of output, and therefore, the marginal cost of producing a good or service decreases as production increases. )” (www. uslaw. com) c) Cost of Raw Materials Sitting Idle in the Warehouse: d) Cost of Finished Goods Sitting Idle in the Warehouse: To stay competitive, Albatross needs to implement the “Just-in-time” inventory control system.

This system identifies that a “finished product should be produced just in time for delivery and the raw materials should be delivered just in time for production. ” (www. referenceforbusiness. com) The “Just-in-time” system is used so materials and goods never sit idle for extended periods of time. If products or materials sit for long periods of time in warehouses, Albatross is wasting money and valuable space. Inventory management is another key factor for the success of Albatross Anchors. If Albatross wants to maintain an effective inventory of their materials, regular maintenance needs to be a priority.

Inventory maintenance on a regular basis needs to 1) review all transportation alternatives and how this affects inventory and warehouse issues, 2) do periodic reviews of inventory, especially raw materials and finished products to ensure that customers orders are filled in a timely fashion and 3) establish a review system for managing inventory to ensure that obsolete materials are disposed of properly. Success of Albatross Anchors depends on a successful inventory management system. 2. Speed of manufacturing process from order to finished product.

Albatross’ manufacturing speed needs to be improved in order to stay competitive in the industry. Albatross Anchors would benefit from the use of a computerized production scheduler, this scheduler creates schedules for the production down to the very second. Using flowcharts as well as a computer-based scheduler will take the guess work out of production and increase speed so to improve the lead time, reduce inventories, satisfy customers and still stay competitive. 3. Flexibility in filling order(s):

Implementing a flexible manufacturing system would enhance and increase the speed of fulfilling the anchor orders of Albatross. The ability to easily make changes in the production of anchors would be a major strength for flexibility in volume and product. The manufacturing flexibility has three components: 1) the flexibility to produce varieties of different sizes of anchors by using the same machines and producing the same anchors on different machines, 2) the ability to produce new sizes of anchors on the existing machines and 3) using the flexibility of the current machines to design changes in the anchors.

The present time, Albatross has dedicated machinery which lacks flexibility. Utilizing an FMS would produce benefit as less waste, quicker tool change, better control of quality, efficient uses of machinery and labor force, reduction in inventory, faster shipping and receiving as well as reduction in expenses. 4. Technology Technology in manufacturing operations is a vital part of the success of Albatross Anchors. Implementing automated and flexible manufacturing systems can aid the company to make collaborative decisions about the production of specific and different anchors.

Applying current process, manufacturing, product and information technologies will benefit Albatross to supply employees, suppliers and customers with the best output for their marine craft, whether large or small. 5. Capacity and facilities The current facility layout for Albatross is inefficient for several reasons. The current flows of work, materials, receiving/shipping are not grouped together. Albatross can reduce manufacturing costs and improve profitability by improving the plant layout.

Product layout would be the most beneficial for Albatross Anchors. This type of layout is an assembly line and workers have their stations with tools, materials to complete the manufacturing process for the anchors. Once the anchors have been manufactured, shipping them to a warehouse for storage is the most effective way. Product layout has a sequential arrangement of manufacturing processes, a continuous mass production and assembly, special equipment, a fixed path for material handling, balance for scheduling and efficiency.

Implementing the product layout for Albatross will; 1) minimize material movement, 2) minimize the cost of handling materials, 3) provide work flow in an orderly and efficient manner suitable for the repetitive operations of manufacturing anchors. 6. Service to customers (what types of services would an anchor company provide to marine wholesalers? In any organization, service that is provided to customers must be held at a high standard. Exceptional service will generate a return of customer and profitability.

Services that a marine wholesaler would look for would be; databases for products and manufacturers, on-time delivery, cost effective and efficient supply solutions as well as understanding customer’s requirements. “Technical expertise, alliances with strategic partners, logistics, supply chain management and specialized outsourcing provides strength to customer base. ” (www. anchormarinesupplies. com) Question Two There are many ways that mushroom/bell anchors may be manufactured.

Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. Analysis of the information below will help determine which process has the lowest breakeven point (this validates the process is more cost effective). For each process the following fixed costs and variable costs are identified below: |Anchor and Process |Process A |Process B | |Sale price per anchor |$ 42. 0 |$ 42. 00 | |Total Fixed cost |$ 650,000. 00 |$950,000. 00 | |Variable cost per anchor |$ 36. 00 |$ 29. 99 | Based on the information in the table above complete the table below: Anchor and Process |Process A |Process B | |(a) Fixed costs per anchor |3,900,000  |11,409,500  | |(b) The total number of anchors to attain |108,334  |79,101  | |break–even point for Process A and Process B | | | c) Based on your calculations which Process (A or B) that you would recommend for adoption (you can select only one). Please make sure to explain how you arrived at your conclusion. I would recommend Process A for Albatross Anchors. The fixed costs per anchor are lower than the total fixed costs which would generate a profit for the company but, the number of anchors to manufacturer is greater. Producing a larger number of anchors is a benefit when Albatross purchases bulk materials for process A.

If Albatross can produce a large number of anchors on a monthly basis with lower production expenses then the company will turn a profit. Process A has the factors that all management supervisors want, low costs with a high number of products coming off of the production floor. Conclusion Albatross Anchors has the abilities to mass produce anchors for small, medium and large marine vessels. Albatross Anchors is a company that began in 1976 and has grown rapidly.

In order for the company to make a large profit, the plant needs to be updated with technology, expand the production of the anchors and be a more friendly manufacturing environment. Providing exceptional service to customers, updating the facility, technology, flexibility with fulfillment of orders, speed of the manufacturing process, cost of production and materials as well as utilizing inventory, Albatross can become competitive once again.

Through enhancing the manufacturing processes, Albatross Anchors will be the leader in the manufacturing of anchors in the future. References Evans, J. (2005). Total Quality Management, Organization, and Strategy, (4th Ed. ). Thomson, South-Western. Wilson, Dennis R (2004, March 22). Outsourcing Production and Jobs: Cost and benefits.. Retrieved May 10, 2011, from http://www. allbusiness. com www. uslaw. com www. anchormarinesupplies. com www. referenceforbusiness. com

Seminars should be held to improve awareness on ethical conduct which should be attended by all employees. Meaningful conduct should be developed which is observed by the whole organization. The employee should be informed that the code came from highest level and they should comply with it. The employees should be trained on how to always adhere to the code. 5. How l would go about setting a career development program in my company Knowing what I can and cannot do is very important in order to understand the flexibility of human resource.

This should be given the first priority before anything else is done. Model of integrated job is created which integrates the titles of jobs with salaries and skills required and review of the process annually to know its performance. Publicity campaign is launched and effective communication plan which is timely is availed. Leaders are promoted carefully basing on how they can deal with tougher situations and how they can motivate teammates. Business training is incorporated for IT people to understand the whole business in terms of marketing, budgeting and chains of supply.

Employees are offered with cross training to enrich their job opportunities when they go back to do their routine duties. Elements my plan would include The expectation of promotion by managers and the organization The responsibility that career development program has and how line managers should offer career guidance and a highlight of its effects on individual motivation and organizational effectiveness (www. 4ulr. com) Consider its impact on developers of the organization and the specialists of managing the career and role played by government agencies.

The level of initiatives to this issue should be considered. The eligibility requirements To know whether an individual is eligible for career development grants, consider the citizenship, whether he has a Degree which entails the level of education, when to receive the last degree, duration taken for the course, relationship of the course work to the professional development. What the career development program is expected to do It should improve both the adermic level of students and vocational skills It should help to accomplish the objectives set by the advisory of career development

It should improve the knowledge in the use of the available technology It should set a role model and create a career counselor 6. How to set up an employee appraisal/evaluation system that is fair and objective for all employees The employee should be assessed in order to now how he or she does his work. Promote employee on the basis of merit depending on how effective they are in their duties. All eligible employees should be trained to improve their performance. All candidates interested in the appraisal should be assessed.

Do selection fairly without discrimination and review the selection regularly. (argues Skordoulis and Dawson, 2001) How to develop the process of evaluation and appraisal with a goal structure focused on improving employee performance There should be performance development and improvement to ensure that the level of performance is very high by all the employees. Train the employees on how to do their duties well in order to improve quality and increase productivity. Do cross training to the serving employees to improve their performance and reduce employee turnover.

The challenging assignments given should always 360 degrees feedback and also ensure there is regular performance feedback. 7. How to evaluate different jobs and the specific tasks they represent In cockpit, training improves coordination and passing of nformation ith emphasis to skills of coordination. Composite indices demonstrate great validity which include index that is derived. Schematic jobs stimulates before generating respective stimuli. Jobs that are candidates for flexible work schedules and environments This includes shared jobs which have alternate starting and ending time.

Compressed work where an employee can finish a whole week work within four ten hour day instead of working for a whole week. Telecommuting allows employees to work from location rather than from the main work station. How to determine which jobs could be outsourced If the wage paid on the job will be low if it is outsourced Job can be outsourced to escape from paying high tax to be government If the government regulations become a burden to the industry, it can outsource its jobs If employees resist performing the task, the industry can outsource it or outsourcing due to necessity.

Process of determining the above Define the characteristics of the business processes. Determine how ready the business index is basing on characteristics of the business processes. Rank the business processes basing on the index readiness for the processes of business. The basis for making such decisions Due to increase in product availability, the industry can outsource it to other countries where the demand is high and availability is low. The industry may need to gain competitive advantage by making sure the product is available everywhere to increase sales.

Due to the rise in living standards of a given locality, outsourcing leads to high profits because the product will be sold at higher price. 8. Steps taken to make the workplace a happier work environment for the employees Determine rewards that are valued by individual employee. Determine the desired performance Set performance level that is attainable All the rewards should be linked to performance Know the factors that are likely to counteract how effective the reward is and make sure the rewards given are adequate

Specific things that I would change and how to create linkages to the work place modifications Wages would be increased to ensure that employees are motivated to work harder. Salaries should be raised on yearly basis to ensure that the employees turn over is reduced and to retain the experienced employees who are highly productive. Benefits will be given to employee based on their performance with no discrimination or favourism to improve their morale to do work. Alternative work schedules will be established to ensure that there is a room for employees to have off days when they alternate duties.

The environment will be free from pollution from noise, sewage waste and smoke. (Skordoulis, Dawson)

REFERENCES

1. Barbeito Carol (2004); policies and procedures; Willey John and sons. 2. Rosemary Skordoulis, Patrick Dawson (2001); The Acropolis of Change: Socratically Reflective Employee? – International journal of applied Management Volm2 Issue 3. 3. Lewis Alan (1994); Ethics and Economics Affairs; Routledge. 4. Anthony Van der Wide, Jos Van (2006); International Journal of Quality & Reliability Management. 5-7 June, 36-44

Currently, Botswana has developed It’s tourism Industry Into one that caters for the luxury traveler; offering high-end safaris and lavish accommodations. However, Botswana two mall economies are coming to a fork In the road and the ability to maintain the growth that their economy is experiencing will be directly determined by which path the country ultimately chooses. The Dilemma Diamonds, in truth, are not forever and analysts predict that Botswana diamond reserve will be significantly diminished in twenty years.

With the huge profits that diamonds bring, Botswana focused its attention on the diamond industry and as result the economies lack of diversification is apparent. Botswana now needs o tackle this issue while there is still time to savor the benefits of the diamond industry and begin making the necessary preparations for Its eventual replacement. Tourism, It seems, Is the natural step for the country to take, but it does come with Its own challenges.

Countries all over the world face a salary task; the struggle to find a balance between fostering a growing economy while both protecting and stalling the environment. If Botswana chooses to expand its tourism industry, there will be included, that will be the main attraction. In short, it is progression of the economy rears the preservation of the environment. Impacted Parties Ultimately, it is the wildlife and the landscape that will pay the highest price if an influx is tourism is too steep.

As humans move further and further into untouched land, our mark is obvious; pollution, construction, and loss of habitat will occur. Conservation efforts will be important “Because tourism has a tendency to destroy or at least endanger its own assets, the protection and conservation of its natural environment is imperative” (BID). Conservation groups in Botswana will be eager to hear what measures will be taken to protect the environment.

Nine months later her company was still paying high consulting fees, and half of the original consultants on the project had been replaced with new people. One new consultant had graduated from college only two months before and had extremely poor communications skills. Maria’s Internal staff complained that they were wasting mime training some of these “experienced professionals. ” Marie talked to her company’s purchasing manager about the contract, fees, and special clauses that might be relevant to the problems they were experiencing. Marie was dismayed at how difficult It was to Interpret the contract. It was very long and obviously written by someone with a legal background.

When she asked what her company could do since the consulting firm was not following its proposal, the purchasing manager stated that the proposal was not part of the official contract. Maria’s company was paying for time and materials, not specific deliverables. There was no clause stating the minimum experience level required for the consultants, nor were there penalty clauses for not completing the work on time. There was a termination clause, however, meaning the company could terminate the contract. Marie wondered why her company had signed such a poor contract. Was there a better way to deal with procuring services from outside the company?

Although global outsourcing displaces some IT workers, total employment in the United States increases, according to IOTA, as the benefits ripple through the creates over 257,000 net new Jobs in 2005 and is expected to create over 337,000 net ewe Jobs by 462 Politicians debate on whether offshore outsourcing helps their own country or not. Andy Boor, chief operating officer of a computer network support service provider, describes outsourcing as an essential part of a healthy business diet. He describes good vs.. Bad outsourcing as something like good vs.. Bad cholesterol. He says that most people view offshore outsourcing as being bad because it takes Jobs away from domestic workers. However, many companies are realizing that they can use offshore outsourcing and create more Jobs at home. For example, Atlanta-based Delta Air

Lines created 1,000 call-center Jobs in India in 2003, saving $25 million, which enabled it to add 1,200 Job positions for reservations and sales agents in the United States. 2 Other companies, like Wall-Mart, successfully manage the majority of their information technology projects in-house with very little commercial software and no outsourcing at all. (See the Suggested Reading on the companion Web site on “Wall- Mart’s Way. “) Deciding whether to outsource, what to outsource, and how to outsource are important topics for many organizations throughout the world. In a 2008 survey, 74 percent of 600 global procurement executives believed that recruitment issues are a high priority for their companies.

About half of respondents also said that their companies focus too much on cost reduction instead of value creation. They also believe they are missing opportunities by not focusing on using technology to improve procurement processes. For example, 72 percent of respondents “have less than 10 percent of their spend channeled through procurement and sourcing applications. 3 Most organizations use some form of outsourcing to meet their information technology needs, spending most money within their own country. A 2008 report on IT outsourcing trends in the U. S. And Canada revealed the following: ; Application development is the most popular form of IT outsourcing and was used by 53 percent of organizations surveyed.

Of the surveyed organizations, 44 percent outsourced application maintenance, 40 percent outsourced Web site or e-commerce systems, and 37 percent outsourced disaster recovery services. The IT function with the largest percentage of work outsourced is disaster recovery services, accounting for 50 percent of total IT outsourcing. Mortifications see the benefit in having an outside party perform offsets storage or maintenance of a recovery facility. Desktop support is the second most outsourced IT function (48 percent), followed closely by data center operations and help desk (47 percent each) and Web site or e-commerce systems (46 percent). IT security is at the bottom of the list, with only 29 percent of the work being outsourced.

Even though application development and maintenance are frequently outsourced, they are a low percentage of the amount of total IT work outsourced. Application development and maintenance are often outsourced selectively since most organizations choose to do many projects in-house. 4 Procurement means acquiring goods and/or services from an outside source. The term procurement is Widely used in government; many private companies use the terms purchasing and outsourcing. Organizations or individuals who provide procurement services are referred to as suppliers, vendors, contractors, subcontractors, or sellers, with suppliers being the most widely used term. Many information technology projects involve the use of goods and services from outside the organization.

As described in Chapter 2, outsourcing has become a hot topic for research and debate, especially the implication of outsourcing to other countries, referred to as offspring. The outsourcing statistics below are from an Information Technology Association of America (IOTA)-sponsored report: Spending for global sources of computer software and services is expected to grow at a compound annual rate of about 20 percent, increasing from about $1 5 billion in 2005 to $38 billion in 2010. Total savings from offshore resources diddling the same time period are estimated to grow from $8. 7 billion to $20. 4 billion. The cost savings and use of offshore resources lower inflation, increase productivity, and lower interest rates, which boosts business and consumer spending and increases economic activity.

Chapter 12 Project Procurement Management Because outsourcing is a growing area, it is important for project managers to understand project procurement management. Many organizations are turning to outsourcing to: Reduce betrothed and recurrent costs. Outsourcing suppliers are often able to use economies of scale that may not be available to the client alone, especially for hardware and software. It can also be less expensive to outsource some labor costs to other organizations in the same country or offshore. Companies can also use outsourcing to reduce labor costs on projects by avoiding the costs of hiring, firing, ND reassigning people to projects or paying their salaries when they are between projects. Allow the client organization to focus on its core business.

Most organizations are not in business to provide information technology services, yet many have spent valuable time and resources on information technology functions when they should have focused on core competencies such as marketing, customer service, and new product design. By outsourcing many information technology functions, employees can focus on Jobs that are critical to the success of the organization. Access skills and technologies. Organizations can gain access to specific kills and technologies when they are required by using outside resources. For example, a project may require an expert in a particular field or require the use of expensive hardware or software for one particular month on a project. Planning for this procurement ensure that the needed skills or technology will be available for the project.

Provide flexibility. Outsourcing to provide extra staff during periods of peak workloads can be much more economical than trying to staff entire projects with internal resources. Many companies cite quicker flexibility in staffing as a key reason for outsourcing. Increase accountability. A well-written contract-a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them-can clarify responsibilities and sharpen focus on key deliverables of a project. Because contracts are legally binding, there is more accountability for delivering the work as stated in the contract.

In December 2002, who organ Chase announced a sieving to MM, both companies en- year, $5 billion deal too bragged that the contract w TTS med like a win-win situational would make money an gang Chase could push for innovation. The entrant less than two years However, in September 200 gear fit with Comparing Chaise’s busting its existence because the pro news strategy. According to Austin rumination officer at Comparing Chi cutter is best for the long-term gar “We believe managing our own techno and success of our company as well a railroaders. ” However, IBM said the can contract was simply a result of Comparing Chaise’s merger earlier that year with Bank It tried to shrug off the loss of a large business deal. “The combined firm found its an abundance of IT assets,” IBM spokesperson James Scales said. This decision w other business decisions related to the merger. Ђћ6 Outsourcing can also cause problems in other areas for companies and nations as a whole. For example, many people in Australia are concerned about outsourcing software development. “The Australian Computer Society says sending work offshore IT professionals, and diminish the nation’s strategic technology capability. Another issue is security, which encompasses the protection of intellectual property, integrity of data, and the reliability of infrastructure in offshore locations. 7 The success of many information technology projects that use outside resources is often due to good project procurement management.

Project procurement management includes the processes required to acquire goods and services for a project from outside the performing organization. Organizations can be either the buyer or the seller of products or services under a contract. There are four main processes in project procurement management: Organizations must also consider reasons they might not want to outsource. When an organization outsourcer work, it often does not have as much monitor over those aspects of projects that suppliers carry out. In addition, an organization could become too dependent on particular suppliers. If those suppliers went out of business or lost key personnel, it could cause great damage to a project.

Organizations must also be careful to protect strategic information that could become vulnerable in the hands of suppliers. According to Scott McNealy, CEO of Sun Microsystems, Inc. , “What you want to handle in-house is the stuff that gives you an edge over your competition-your core competencies. I call it your ‘secret sauce. ‘ If you’re on Wall Street and you have your own program for tracking and analyzing the market, you’ll hang onto that. At Sun, we have a complex program for testing sorceresses designs, and we’ll keep it. 5 Project teams must think carefully about procurement issues and make wise decisions based on the unique needs of their projects and organizations.

They can also change their minds on outsourcing as business conditions change. 2. 3. Planning procurements involves determining what to procure, when, and how. In procurement planning, one must decide what to outsource, determine the type of contract, and describe the work for potential sellers. Sellers are contractors, suppliers, or providers who provide goods and services to other organizations. Outputs of this process include a procurement management plan, statements of work, make-or-buy decisions, procurement documents, source selection criteria, and change requests. Conducting procurements involves obtaining seller responses, selecting sellers, and awarding contracts.

Outputs include selected sellers, procurement contract awards, resource calendars, change requests, and updates to the project management plan and other project documents. Administering procurements involves managing relationships with sellers, monitoring contract performance, and malting changes as needed. The main outputs of this process . Process asset updates, change requests, and project management plan updates. Closing procurements involves completion and settlement of each contract, including resolution of any open items. Outputs include closed procurements and organizational process asset updates. Figure 12-1 summarizes these processes and outputs, showing when they occur in a typical project.

Planning Process: Plan procurements Outputs: Procurement management plan, procurement statements of work, make-or-buy decisions, procurement documents, source selection criteria, and change requests 466 Executing Process: Conduct resentment Outputs: Selected sellers, procurement contract award, resource calendars, change requests, project management plan updates, project document updates Monitoring and Controlling Process: Administer procurements Outputs: Procurement documentation, organizational process asset updates, change requests, project management plan updates Closing Process: Close procurements Outputs: Closed procurements, organizational process asset updates Project Start Project Finish FIGURE 12;1 Project procurement management summary The Boots Company PL, a Nottingham, England, outsourced its information t Tiber 002. The Boots Company signed a ten-year d expected to save $203. 9 million over that period com systems itself. IBM managed and developed The Boots Comma cutter “from the mainframes to the tills in our 1,400 stores, to the co , said spokesperson Francis Thomas. More than 400 Boots employees we Vim’s payroll but continued to work at Boots’ head office, with extra IBM s n as needed. Thomas added, “The great thing about this is that if IBM has an expert in Singapore and [if} we need that is not uncommon moon for long contracts to be renegotiated, becoming either shorter or longer in length.

May 2006, Boots and IBM began discussing amendments to their contract because m of Boots’ IT infrastructure renewal program (including a new pharmacy system and roll) was complete. A Boots spokesman said that the company achieved its goal much quicker than planned. In contrast, in 2005 Boots renegotiated its EYE million, seven-yea IT contract it initially signed in 2002 with Sans, extending it for another two years to 2011 in a EYE million deal. 9 It is also not uncommon to take advantage of competition the changing marketplace for major procurements. In 2008, Boots announced that I have up to six different suppliers omitting to supply its IT products and services ova next year. The company is keeping its business system management team and service management in-house-? including helpless and project management. 10 Properly planning purchases and acquisitions and writing good contracts can also save organizations millions of dollars. Many companies centralize purchasing for products, such as personal computers, software, and printers, to earn special pricing discounts. For example, in the mid-sass the U. S. Air Force awarded a five-year, multimillion-dollar contract to automate 15 Air Force Systems Command bases. The project manager and contracting officer decided to allow for a unit pricing strategy for some items required in the contract, such as the workstations and printers.

By not requiring everything to be negotiated at a fixed cost, the winning supplier lowered its final bid by more than $40 million. II Planning procurements involves identifying which project needs can best be met by using products or services outside the organization. It involves deciding whether to procure, how to procure, what to procure, how much to procure, and when to procure. An important output of this process is the make-or-buy decision. A make-or- buy decision is one in which an organization decides if it is in its best interests to make certain products or perform certain services inside the organization, or if it is better to buy them from an outside organization.

If there is no need to buy any products or services from outside the organization, then there is no need to perform any of the other procurement management processes. For many projects, properly outsourcing some information technology functions can be a great investment, as shown in the following examples of What Went Right. Inputs needed for planning resentment include the scope baseline, requirements documentation, teaming agreements, the risk register, risk-related contract decisions, activity resource requirements, the project schedule, activity cost estimates, the cost performance baseline, enterprise environmental factors, and organizational process assets.

For example, a large clothing company might consider outsourcing the delivery of, maintenance of, and basic user training and support for laptops supplied to its international sales and marketing force. If there were suppliers who could provide this service well at a reasonable price, it would make sense to outsource, because his could reduce fixed and recurring costs for the clothing company and let them focus on their core business of selling clothes. It is important to understand why a plan purchases and acquisitions. In the opening case, Maria’s company hired outside consultants to help complete an operating system conversion project because it needed people with specialized skills for a short period of time. This is a common occurrence in many information technology projects.

It can be more effective to hire skilled consultants to perform specific tasks for a short period of time than to hire or keep employees on staff full time. However, it is also important to define clearly the scope of the project, the products, services, or results required, market conditions, and constraints and assumptions. In Maria’s case, the scope of the project and services required were relatively clear, but her company may not have adequately discussed or documented the market conditions or constraints and assumptions involved in using the outside consultants. Were there many companies that provided consultants to do operating conversion projects similar to theirs? Did the project team investigate the background of the company that provided the consultants?

Did they list important constraints and assumptions for using the consultants, such as limiting the time that the consultants had to complete the conversion project or the minimum years of experience for any consultant assigned to the project? It is very important to answer these types of questions before going into an outsourcing agreement. Dividing both sides by $400, you get: which means that the purchase cost equals the lease cost in 30 days. So, if you need the equipment for less than 30 days, it would be more economical to lease it. If you need the equipment for more than 30 days, you should purchase it. In general, leasing is often cheaper for meeting short-term needs, but more expensive for long- term needs.

Expert Judgment Tools and Techniques for Planning Procurements There are several tools and techniques to help project managers and their teams in planning procurements, including make-or-buy analysis, expert Judgment, and contract types. Make-or-Buy Analysis Make-or-buy analysis is a general management technique used to determine whether an organization should make or perform a particular product or service inside the organization or buy from someone else. This form of analysis involves estimating the internal costs of providing a product or service and comparing that estimate to the cost of outsourcing. Consider a company that has 1,000 international salespeople with laptops. Using make-or-buy analysis, the company would compare those services from an outside source.

If supplier quotes were less than its internal estimates, the company should definitely consider outsourcing the training and user support services. Another common make-or-buy decision, though more complex, is whether a company should develop an application itself or purchase software from an outside source and customize it to the company’s needs. Many organizations also use make-or-buy analysis to decide if they should either purchase or lease items for a particular project. For example, suppose you need a piece of equipment for a project that has a purchase price of $12,000. Assume it also had a daily operational cost of $400. Suppose you could lease the same piece of equipment for $800 per day, including the operational costs.

You can set up an equation in which the purchase cost equals the lease cost to determine when it makes sense financially to lease or buy the equipment. In this example, d = the number of days you need the piece of equipment. The equation would then be: Experts inside an organization and outside an organization could provide excellent advice in planning purchases and acquisitions. Project teams often need to consult experts within their organization as part of good business practice. Internal experts might suggest that the company in the above example could not provide quality training and user support for the 1,000 laptop users since the service involves so many people with different skill levels in so many different locations.

Experts in the company might also know that most of their competitors outsource this type of work and know who the qualified outside suppliers are. It is also important to consult legal experts since contracts for outsourced work are legal agreements. Experts outside the company, including potential suppliers themselves, can also provide expert judgment. For example, suppliers might suggest an option for salespeople to purchase the laptops themselves at a reduced cost. This option would solve problems during employee turnover-exiting employees would own their laptops and new employees would purchase a laptop through the program. An internal expert might then suggest that employees receive a technology bonus to help offset what they might view as an added expense.

Expert Judgment, both internal and external, is an asset in making many procurement decisions. Types of Contracts $80th = $12,000 + $40th Subtracting $40th from both sides, you get: $40th = $12,000 Contract type is an important consideration. Different types of contracts can be used in different situations. Three broad categories of contracts are fixed price or lump sum, cost reimbursable, and time and material. A single contract can actually include all three of these categories, if it makes sense for that particular procurement. For example, you could have a contract with a seller that includes purchasing specific reward for a fixed price or lump sum, some services that are provided on a cost basis.

Project managers and their teams must understand and decide which approaches to use to meet their particular project needs. It is also important to understand when and how you can take advantage of unit pricing in contracts. Fixed- price or lump-sum contracts involve a fixed total price for a well-defined product or service. The buyer incurs little risk in this situation since the price is predetermined. The sellers often pad their estimate somewhat to reduce their risk, realizing their rice must still be competitive. For example, a company could award a fixed-price contract to purchase 100 laser printers with a certain print resolution and print speed to be delivered to one location within two months.

Starbucks Case

Starbucks’ customer satisfaction scores have declined because customers have come to expect the speed of service of within three minutes regardless of the time of the day. The speed of service is one of the “Basic Service” criteria of Service, Cleanliness, Product quality and Speed of Service. The company goal of three minute service from back of the line to drink in hand is expected to be achieved if 20 hours of labor is added per week per store (costing $40 million per year). The measuring service has its own issues because the company had not been using market data in driving decision making. However, the reality was that service had declined. Read about

The ideal customer is one that Starbucks can reach where they work, travel, shop and dine, who would drink coffee every day and would visit a store at least 18 times a month. In order to have satisfied customers Starbucks will need to:

have friendlier, have more attentive staff
deliver faster, more efficient service
offer better prices/incentive programs
offer better quality/variety of products (Exhibit 11, top 5 requirements).

A highly satisfied customer is valuable to Starbucks because there is a link between satisfaction and customer loyalty. Satisfied customers are loyal customers.

Starbucks should make the $40 million dollar investment so it can meet the three minute service target which will result in satisfied, loyal customers. It is possible for a mega-brand like Starbucks to deliver customer intimacy through service. Service is used interchangeably at Starbucks with ‘service’. If the customer has an uplifting experience every time they walk through the door, then Starbucks has achieved customer intimacy.

Four Seasons Case

Four Seasons Hotels and Resorts, a leader in the hospitality sector, is a leading operator of luxury hotels. The company is in the business of operating mid-sized luxury hotels and resorts. It does not own them.  The Canadian company is committed to providing consistently exceptional service so that guests can maximize the value of their time.

The company’s success is due to a key strength of promoting diversity and singularity. While the company’s basic processes remain the same, they have been made adaptable to suit the essence of the local culture where the property resides.

The company’s corporate culture has also contributed to the organization’s success. These are listed in the seven “service culture standards” which all staff all over the word have to display at all times.

They are:

Smile

Make Eye contact

Create a sense of Recognition

Speak in a clear Voice

Be well Informed

Maintain a Clean appearance

Everyone, everywhere must show care for the guest

These together form the word SERVICE.

(Exhibit 4)

The company is also very particular in its choice of general managers because they should embody the hotel’s culture. The general manager sets the example for the other employees and is well paid. Top managers had to be comfortable in different international settings. One of the rules was ‘no bragging, no excuses’ because modesty, compassion and discipline are an important part of the culture. The top managers also had strong allegiance to the firm.

Another key reason for Four Seasons success is their approach to Human Resources. The company has a “Golden Rule” strategy for human resources and this is to treat others and you would like to be treated. The employees are treated with dignity and respect. The company did not just say it, it practiced it. This has led to being named fifth year in a row as Fortune magazine’s top 100 best companies to work for in North America.  It also has much lower turnover (half) than the industry average.

Four Seasons entry to the French market was a challenge and was done with a lot of planning and understanding of the local market. It also has to make a lot of sacrifices. The company entered the French market by providing management for the Four Seasons Hotel George V Paris (the F.S. George V). This was a landmark building purchased in 1996 by H.R.H. Prince Al Waheed Bin Taleel Bin Abdulaziz Saud for $170 million. It was one of the six Parisian hotels that are classified as “Palaces”.

The good points

The fact that this was a Canadian company helped the adaptation process. This is because France has a labor-oriented government policy and since Canada has many attributes of a welfare state, it made it easier to understand the French context. The company made sure it was well informed about French labor laws and got close to the labor unions. Some of the laws were a bit restrictive like the rule on firing.

The company invested in training employees, looked for people persons and introduced annual evaluations so that there would be a system of meritocracy. It was able to sell the evaluation system to the Anglo Saxon sense of pride the French have in having their work speak for itself.

The bad points

This required a huge amount of cultural adjustment to things like the French temper, the need to hire more people if the company was to stick to the 35-hour work week as well as maintain the number of holidays. This resulted to the highest employee-to-room ration in the company of 2.5 (Exhibit 9).

Another bad point was the fact that the company had to inherit employees if it was not closed for at least 18 months. The F.S.George V could only close for 12 months so it was left with the less high performing employees. It was eventually able to overcome this issue by the concept of creating a critical mass of employees with the right culture who would positively affect the others. The individuals with the right attitude and culture were promoted as a reward.

Istituto Clinico Humanitas

Istituto Clinico Humanitas was built by the early 1990s as an experiment in applying innovative management models to healthcare. Istituto Clinico Humanitas is performing very well. By August 2002, it was the largest hospital in Milan with an occupancy rate of 80%. It also had the First Day Surgery in Italy.

Istituto Clinico Humanitas realized this level of performance by introducing innovative management ideas like multi specialty for nurses and a new way of compensating doctors (with their pay being part fixed-pay and part variable-pay based on performance). The variable pay of doctors helped to make them more responsive to the objectives of the unit and the hospital.

It is difficult for others to copy the Istituto Clinico Humanitas’ model and practices because they are more expensive and are geared more towards the more experienced doctors. Some things that make them more expensive are the expense of operating rooms and the cost of patient beds which include facility cost, nursing staff salaries and cost of support service.

They should go ahead with the idea of affiliating with the University of Milan because, according to Dioguardi, the hospital needed to become a research and teaching organization in order for it to be credible. Also, if it developed a teaching relationship with the university, it would have available to it additional revenue sources that are made available to academic institutions in Italy.

Exel PLC

Exel’s performance to date has been very impressive. In 2000, MSAS, a freight management company and Exel Logistics, a contract logistics company, merged to form Exel plc. In 2003, Exel became the world’s largest provider of freight management and contract logistics services. In the same year, with 675 locations in 112 countries, sales were roughly ?5.1 billion.

The strategy of combining freight management with contract logistics was a successful one because it created end-to-end solutions for customers and helped Exel cross-sell contract logistics to freight management customers and vice-versa.

The company has developed strategies for matching supply and demand by forecasting demand for products, optimizing inventory levels and creating production plans. It has developed an extremely effective process for creating, selling and implementing new services. The company has done this with a four-team approach.

The teams are: business development, solution design, implementation and operations.

 Value has been added for Haus Mart through better planning by introducing a system of joint planning between HM and Exel so that competencies from both companies can be combined. Better coordination and execution has resulted in combining Exel’s operational expertise with HM’s planning function. Rationalization, restructuring, and improvement of the structure of a firms supply chain resulted in the removal of inefficient behaviour like ordering additional inventory “just in case”.

Exel should move into joint planning with Haus Mart because it can help HM with cost savings in the areas of transportation economics and shipping logistics. Exel will also make profit from the deal.

Tecnovate

Tecnovate is an Indian business process outsourcing subsidiary to its parent firm, Cendant (the world’s leading provider of travel and real estate services).

Tecnovate was originally owned by ebookers PLC, Europe’s second largest agency. In 2004, Cendant bought over ebookers plc.

Tecnovate’s growth strategy was to move from a captive (such that it provided services only to its parent company) to providing BPO services to third parties as well as offering certified courses to those in the BPO industry.

It succeeded in this before being bought over by Cendant from ebookers. Tecnovate incorporated in 2001 and operated as captive of ebookers until 2003. Tecnovate grew up ebookers value chain by providing more services. It also started offering certified courses to others in the BPO industry. In addition it started a travel BPO education centre called Travelguru. Travelguru offered IATA (Montreal) and UGC (India) certified courses.

Transition management’s plan for successful outsourcing should include the following steps:

Scoping: this involves defining the high level objectives of the deal.
Feasibility: this involves the building on the initial scope and constraints to define the next level of detail.
Preparation: this is the step where the process moves from defining the service so that it can be laid out in a contract and assumptions and assets can be confirmed through due diligence.

Transition: This is the same as process migration. This is the step that hands over the process from the client to the supplier. This us regarded the most difficult and challenging step.

Tecnovate’s business development head defines Tecnovate’s fusion philosophy “fusion BPO” as a “unique example of ‘globalisation’ where different cultures and processes ‘fuse’ to release energy in terms of worker enthusiasm and higher revenues”.

It offers seamless integration of the contact centre, IT and BPO services in the travel domain, under the operation of multicultural staff.

The fusion BPO model that Tecnovate has is one that is multi-lingual and services voice and non-voice processes. The staff of over 1000 are multicultural and about 10% of them are Europeans. Expatriate staff was from 11 countries in Europe.

Since being acquired by Cendant, Tecnovate is once again an captive but is looking forward to taking on additional functions at Cendant and hopefully to offer services to third parties. It has started making the necessary steps towards moving out of the captive status.

By 2005, Tecnovate was already doing well as a subsidiary of Cendant. The company had been having a lot more travel related processes being assigned to it from its parent company.

The new processes being introduced by Cendant and the new recruitments taking place were making new opportunities available to Tecnovate.

McDonalds

As CEO of McDonalds, I would prioritize sustainability relative to other supply chain goals such as food safety and cost management by taking into consideration consumer concerns. As CEO Jim Skinner confirms, customers will let the company know if there are issues with product or services, or whether they get the impression that McDonalds is socially responsible or otherwise.

The goals are compatible because they reinforce trust in the McDonald’s brand. And trust is the most valuable asset of the company. However the goals could conflict. An example is where the company stood in support of organized efforts against overfishing, in the short term, to ensure sustainability of fish supply for the Fish-o-Fillet product in the long run.

An example of a negative effect of sustainability failures not due to McDonald’s direct actions was the case where Greenpeace research discovered that the European suppliers of McNuggets to McDonalds fed its chickens soya from deforested Amazon land in Brazil (leading to the “McAmazon” assault). McDonalds became a front runner against deforestation and this is the approach they should continue to take.

The sustainability vision aligns with the business strategy because it must profitably yield high quality, safe products without supply interruption while creating a net benefit for employees, their communities, biodiversity and the environment.

McDonalds

1.      If you were the CEO of McDonalds, how would you prioritize sustainability relative to other supply chain goals such as food safety and cost management?

2.      In what ways are these goals compatible and in what ways do they conflict?

3.      How can McDonalds plan for and mitigate the negative effects of sustainability failures that are not due to its direct actions?

4.      How well is McDonald’s supply chain sustainability vision aligned with their business strategy?

Asking how much it costs to make an app is rather vague.

It is like asking, “what’s the price of a car?” Well, what kind of car are you trying to buy? A used one with high mileage or a brand new, exotic, luxury car? The same questions can be said of mobile apps.

If you have ever searched for the cost of creating an app (perhaps that is what brought you here), you probably got a lot of different answers.

The answers can range anywhere from a few thousand dollars to a few hundred thousand dollars.

Why? Because mobile development involves a lot of different variables so the final price is going to change depending on those factors.

The cause of the sporadic price estimates of mobile apps is the technology is relatively new and evolving. For example new hybrid app development technology caused the  of app development for a small business to drop from $49,000 to $38,500 in February of 2015.

As new tools and strategies emerge, the price of producing an app goes down because developers are able to leverage these tools to reduce their time frames and thereby the overallcost of their labor. In other words, the more mobile evolves, the easier it is becoming to make apps, which means affordable alternatives are appearing.

In fact,  technology offers the ability for a small business to build their own app, with dozens of powerful premade functions, clean templates and more.

To understand the cost of creating an app in detail, we will explore the different variables that affect cost, as well as how a  solution may help.

In-house vs. outsourced solutions costs

In most cases, we know that doing things in-house can be better, but is way more expensive. This is exactly why many companies turn to mobile development firms. But, that doesn’t mean the off-shore or in-house conversation is over because some of these firms don’t have all of their own resources in-house.

They may have their design teams immediately available on hand, but outsource their engineering and development needs elsewhere. This saves them money, but you’ll still end up with an expensive “in-house” development team.

To help protect yourself from being taken advantage of by mobile development firms, you have to do your due diligence. Since building an app from the ground up is a big expense, it will be well worth your time (and budget) to do your homework.

Ask any prospective development team or agency a lot of questions.

• Who will be working on my app?
• What apps have they worked on before?
• How much will the the app cost?
• How much time will the app take to create?
• How will you make my app? Native code or hybrid code?
• How much does it cost to create the iPhone app?
• How much does it cost to create the Android app?
• Who handles development and engineering?
• How do you calculate app development cost?
• How can I get the cost down on my mobile app?
• What is the average price to create an app with you?

Then once you get into the the overall price, try breaking it down into stages of development with more questions.

Planning, designing, engineering features, app infrastructure, mobile app administration, testing and Q/A costs and launching your app to the app stores — what are the cost of these stages of the app development process? Again, ask a lot of questions.

• How much will the cost to plan the app be?
• What is the cost of designing the app?
• How much will it cost to engineering the features?
• What will the ongoing infrastructure cost?
• Are there any mobile app administration costs involved?
• How much will the testing of the app cost?
• Then finally, are there costs to deploy your mobile app?

If you aren’t satisfied with the answers or they refuse to let you communicate with individual members, you are better off taking your business elsewhere.

Waterfall vs. agile costs

The main differences between these two common app development strategies are planning and speed. Waterfall developments make a detailed plan of each process, how long every step will take, the costs, etc.

This, as you would expect, extends the timeline by a bit. However, there is a lot of value in planning. At the end of the project, you will have neat records of each process and how long they took. Not only does this make it easy to improve the development and design process for any future apps, but you will also have a much better idea of the costs and timeline.

Apps created with the agile strategy, on the other hand, use a lot less planning. Developers gets right to work and move quickly. To someone who desires control and organization, the lack of structure in this approach may be alarming, but it has its perks.

Aside from reaching your launch date sooner, the agile approach is also more adaptable and according to the data, this approach is  than a waterfall approach. Since developers code and design on the fly, it is easier to change directions to meet emerging needs, whereas the waterfall approach is stuck in its stone form, planned structure.

There are drawbacks to moving quickly, though. Costs can easily pile up because developers are moving in quick spurts. Before you know it, the project may be grossly over budget. If you are under a tight deadline (perhaps you want to get an app released before the holiday shopping season), you may have little choice but to choose the agile approach.

Fixed app cost vs. hourly app development cost

Typically, but not always, the type of pay system is based on the above development approaches. Waterfall developments are more likely to be a fixed fee because everything is planned ahead of time. During the planning stage, the client (you) and the developers reach an agreed price to spend on the design and planning phase and another price for the actual development of the app.

Sometimes, as you change and tweak your process, the fixed price has to be altered. A lot of firms will use work orders to track the costs of these changes. Thus, your ‘fixed’ price is actually not fixed and can be greatly affected, depending on the number of work orders needed.

To top it off, after your first release, you will need to update your app as well.  This price tag can range between  after you launch.

Agile structures always follow an hourly or labor rate that pays based on the amount of work or effort needed to produce. Before starting, it is important that you fully understand these rates and how they are tracked, especially if it is hourly.

There are . These range from independent contractors up through an extravagant class.  Depending on what class of developer you hire, your hourly rate can range anywhere between $75/hour up through $800/hour.

A good development firm will have tracking software in place that will allow you to see the progress made and how muchtime is being put into each stage. While choosing to go with an hourly or labor rate is generally more expensive, a lot of people find the quality is higher because it encourages developers to continue working diligently, whereas a fixed price can sometimes cause them to make shortcuts to hasten the deadline, as they are being paid a set amount, no matter howmuch work they end up putting in.

In either case, you have to be prepared for your developer to go over budget. On average, you will spend about 20% more than you expected.

The affordable app builder alternative

It is easy to look at all of these variables and simply see dollar signs zooming by, but don’t be discouraged. Many of these costly variables are only associated with building an app for the ground up and there is an alternative solution in the forms of content management systems for app development.

You’ve all seen the commercials for DIY websites that look and act professionally.  You can do the same with your app.  With a small team of people who are familiar with the basics of technology, you can have your app up and running in a few days.

Many of these app builder solutions are responsible for putting high functioning, quality apps in the hands of over , at an affordable price. If you’ve ever wondered how your local pizzeria could possibly afford such a clean looking mobile app, an affordable app builder is the answer. So, you can stop spreading those rumors that they must be “connected.”

What makes a DIY app builder so affordable?

Instead of building every app from the ground up, an app building content management system will offer a wide range of features, design templates and other options that allow you to piece together your own app, using a platform that has already been created, tested and proven effective.

Thus, you don’t have to tear any hair out over deciding between which development firm to choose; you are the developer! With pre-built features and templates, no programming expertise is required; you don’t need any background in mobile development. And, a high quality DIY app builder offers an expansive library of webinars, step-by-step guides and helpful articles to turn anyone into their own app design pro.

Waterfall or agile approach? You build your app on your own time. The beauty of choosing a app creation platform is the comfort knowing that the app will be bug and glitch free. Once you are ready to hit that publish button, you are all set; there is no testing or planning necessary. In addition, the cost of building an app dramatically goes down when using a “out of the box” solution.

And, as the mobile app industry progresses and evolves, your mobile app continues to update and evolve with it — so there’s no paying for upgrades. Again, driving the cost of your app down because you don’t have to consistently update it. By staying current with emerging trends, a DIY mobile app creation platform will continue to offer all the features and tools your customers are looking for in a mobile app. So, you never have to worry about having an outdated app or worry about the cost of your app going over budget.

The bottom line of how much does an app cost?

From a price standpoint, a pre-built app creation platform blows the costs of a ground-up, custom app out of the water.  as much as $500,000 or higher with a median price between $37,913 and $171,450 as the median price.

With a DIY app builder, the mobile app you build only costs a small monthly fee of around  to maintain, which is likely to include all the continued support, tools and updates offered with your mobile app. A lot of companies forget that the cost of an app is ongoing due to maintenance and keeping the app up to date.

Conclusion

So is there an actually bottom line when it comes to the cost of developing an app? It all depends on what vehicle you take to get there.  If you are looking for a luxury app complete with customizations beyond what most business need, you can expect to pay a hearty hourly fee anywhere between $75-$800/hour.

The data shows that most often the final number comes somewhere between $39,913 for a small simple app, but it can reach well beyond the $500,000 mark.

Keep in mind that custom solutions are not necessary for all businesses. If you are looking to build an app so that your business can compete in the mobile market, there are solutions out there that can get you in the game for as little as $59/month.

So, what is the true cost of creating an app for your small business? A lot more than you think, but also a lot less if you use the correct tools.

Executive summary

Internet is an ever expanding medium. The number of users of the World Wide Web colloquially called as the internet has grown to over 1.02 billion and includes 15 percent population of the World. (World Internet Usage, 2006). This is slated to expand even more rapidly hereafter as it is proving to be an ideal medium for all types of social, business, government and informational transactions. Cyber Rater is a web site rating service which will assess web sites based on their quality, reliability and the timeliness with which they provide information to the user.

The number of web sites is increasing exponentially. A survey by Netcraft for June 2006 reported an increase of 3.96 million sites in one month between May to June. (Webserver Survey, 2006). However the plethora of sites on virtually all subjects has created a problem for the user, as he is unable to assess the efficacy and accuracy of the information provided on the site. Cyber rater will attempt to fill this void, by rating sites and providing these with a verification certificate based on authenticity, quality and speed in providing the information to the user.

Cyber Rater will be a web based organization, thereby the initial infra structure cost will be restricted to computers and other information technology assets to facilitate speedy access of the net, register the sites, assess these and provide certification. The cyber rater would be a privately owned organization, and would operate as a limited liability company. Here the initial capital outlay for the organization would be raised by the promoters of the business, i.e. those constituting the board of directors.  The business is proposed to be started by December 2006 and a healthy return is expected with break even point reached by December 2007.

Mission statement

Our Mission.

To facilitate web users in instantly assessing the quality of a web site. Grading web sites on each subject based on quality will be a key facet of the mission. To create excellence on the web by generating a hierarchy of gradation for web sites will be inclusive in the overall mission. To improve the overall content on the web will be the underlying theme of the mission.

Needs

Proliferation of web sites as well as the large number of users of the web has created a new market for certification of the best sites based on quality and accuracy of content, timeliness in publication and credibility. This will provide a service to both the user as well as the web site provider. While the user will be able to gravitate to the best web site on a subject, the provider will attempt to improve his content based on authenticity of information, the assessed market needs of the users and the latest web and communication technologies available.

This will greatly facilitate all users such as researchers and students who will get a certified source, the e purchaser, and an authenticated, best bargain without cheating and the business person timely information of opportunities available for commerce to beat the competition. A certified web site rating system will greatly improve the overall quality of the web as it will assist in establishing uniform standards, motivate investments in using state of the art technologies by web sites, adoption of best practices and sustained support will be available through government policies.

Objectives

The objectives of Cyber Rater will flow from its mission which is to facilitate web users in assessing the quality of a web site thereby enabling them to sort out the best site among the category in which information is being sought for. The objectives will be broken down into three criteria as given below:-

Objectives Related to Users

Objective 1. To provide the users information of the quality of the web site they are accessing to do commercial functions, interact socially or merely to gain information on a subject

Objective 2. To provide knowledge workers assurance of the information that is being accessed by them on the web. This will overcome the present lack of credibility of most web sources for research.

Objective 3. To provide users access to valid and reliable information that are acceptable for academic researches, business and marketing researches, government planning and policy formulation and for individual knowledge enrichment.

Objectives Related To Web Sites

Objective 1. To provide a forum for quality web sites to propagate their value on the web. This will also enable them an opportunity to increase their popularity and revenues.

Objective 2. To generate impetus for improving the overall quality of web sites and web content by creating a hierarchy of excellence.

Objective 3. To disfranchise those web site providers who are not able to provide quality and authenticity to continue on the web. This will come about by their non certification, non access over a period by the user and thus a virtual demise due to infrequent access.

Objectives Related to Business

Objective 1. To follow the highest standards of ethics and values. This is essential to every rating agency and will enable maintenance of credibility and thus attract maximum business in the long term.

Objective 2. To attract the best talent in the profession. This alone will ensure that the assessments made would maintain an even standard and are free from biases of lack of knowledge as well as judgment.

Objective 3. To employ the best technologies available in the field and continue to constantly upgrade them.

Objective 4. To ensure the financial viability of the business and break even within one year.

Plan of operation

The business shall operate in a central facility that provides global service, initially for United States, Canada, and Europe, which will be expanded further to develop a diverse client base in the dot-com industry.

The Cyber Rater in order o meet its stated objective of giving users access to quality web sites would carry out an explicit rating ascribed to websites. In this instance, similar websites would be rated according to their level of information dissemination, reliability of displayed information, validity of information and their accuracy. Base on these criteria for rating websites users would be positioned to assess the quality of web they intend using through the certified rated sign ascribed to each website by Cyber Rater.

Also to meet the mission goal of creating an excellent web hosting, Cyber Rater would create a healthy and excellent web management, in such a way that users would not be lost in mass of junk websites; this will be attain through the assigning of hierarchy and proper rating and certification to registered web.

To improve the overall content and reliability of information dissemination on webs, the underlying theme is directed towards making users of webs to get the most quality information sought at the lest time expended for this. The organization would have its own sites where weekly rated sited categorized according to their specification would be displayed for users access to the best quality site they sought for any pattern of usage they intend utilizing the web.

The creation of a good web management would be ensured through the granting of prototype of quality web creation through contract basis to clients wishing to create standard webs. The quality standard would be maintained in all cases.

In order to carry out an effective rating of websites, periodical data base of existing websites  would be sourced through web hosting organizations; and a deal would be entered to existing web search machines , such as www.google.com, www.searchalot.com etc. The gathered data for web rating would be reviewed every month, so as to enlist new webs and observed new innovative trends in existing webs so as to have a better rating and changes taken in cognizance.

Experts and knowledgeable personnel on diverse categories of fields, e.g. academia websites, relationship and social interactive websites, information disseminating websites, entertainment websites, freelancing websites etc., each would  carry out a thorough analysis and allocate the rating according to the quality of the websites assessed.

The criteria to be considered on a general bases when rating websites would be on the following:

• The level of accuracy of information dissemination
• The level of current and resourceful information mad available to users
• How the website is structured to ease users access to information
• Ability to generate new information and innovative pattern of dissemination at an interval basis
• The extent of in-depth researching
• The ability to meet users need at the time information is sought.
• The design of the website to capture and attract users.

The above criteria would constitute a general basis for rating webs, but other criteria would be observed for each specific category of websites.

In order to make the organization rating and information dissemination to users and clients most reliable and valid, the rating of websites would be done without bias, or fear or favor. Quality and fairness would be the ethical consideration of Cyber Rater.

Projects shall be on a per-contract basis and the progress of each project shall be monitored by the account executives in coordination with the technical personnel using project management software like the latest version of Microsoft Project Standard. Once certified, the client will be given a seal/logo as proof of their certification which will be placed accordingly in their website.

1. Business License Acquisition

The business license shall be obtained from the local business licensing authority as well as business registration from the ‘Secretary of State’s Corporations Division, together with the Company’s Articles of Incorporation.  Likewise, the Corporate Name shall be reserved via online through the Corporations Division website upon payment of the US$25 filing fee.  The Company’s Tax Identification Number shall be obtained from the Internal Revenue Service Office.

Resource Requirements

• Personnel

Technical.  A team of website auditors shall be formed, led by Project Managers that will be initially hired. The Project Managers shall oversee the assessment procedures conducted by the team and the result will be recommended to the Board of Directors for certification. The team shall be composed of the following skilled staff:

• Web analysts
• System analysts
• Information technology officers

A Board of Directors shall likewise be formed to serve as the Certifying body.

Marketing.  Three Corporate Account Executives shall be hired for the account management and act as client coordinators. They shall ensure that the needs of the clients will be fulfilled.

Administrative. Support staff shall be hired to perform the administrative support functions of the company. The number of staff shall be determined once total number of personnel has been determined.

• Facilities/Infrastructure

Office space shall be leased and the ICT infrastructure, particularly the major ICT services shall be outsourced to be able to focus on the core functions of the Company.  These shall include the network infrastructure, lease line access, web hosting, and e-mail hosting.

Major required Equipment for Cyber Rater operation:

• Computer systems with internet compliant; with window 2000 version.
• Off the shelf software to enable adequate search, rating, line access, web hosting, and email hosting.
• High quality modem, to enable interconnectivity
• High quality ISP
• Adequate power backup equipment, e.g. solar energy, diesel plant etc.
• Several telephone lines to enable business communication and effective transactions

Summary of finances needed

The major part of expense will be used to pay the salaries of the employees for technical personnel, marketing account executives, support staff, directors’ per diems,

The other major part of the finances will be infrastructure requirements which will include the contract of  lease the of space which will require at least three months advance rental, the outsourcing contract where the outsourcing services for the services will be obtained as well as payment for the purchase of equipments.

To have a complete picture of the needed finance, please refer to Appendix A (Excel file on worksheet: estimates)

The estimated capital requirement will not be too big. With the seven boards of directors, each could just invest an amount just to cover the early expense of the company.

The company will have to liquid then to pay salaries on time. Borrowing will not be resorted to finance the need of the business since customers are also expected to have entered contract with Cyber Rater.  Customer is expected to come to the company considering the value that they will have in availing of the service from Cyber Rater.  The selling proposition of the company is the assurance of quality of use of websites by internet users. This will drive better quality of the product hence; Cyber Rater is expected to build up its business on the basis of the company strength.

The company will bank on the skill of technical people, hence the reason for paying them higher than other personnel.

Financial Plan with Analysis of Financial Projections

A projected income statement and balance sheet is prepared for Cyber Rater. See Appendix A (Excel File) for projected financial statement for the next five years. As per analysis, the financial plan of Cyber Rater produced Table I below:

Financial plan of the company is based on assumptions made on manpower requirements and the infrastructure requirements.

As one will readily observe the first year will be under break even point, which means that total revenues will be equal expenses. Profits are only expected to be coming starting second year. As revenues as expected to increase per year, the return on sales per year is also expected to increase. As can be seen on the Table I above, return on sales average 30% for the next second to fifth year.  Return on sales profitability of the Company.

A 30% return on sales would also mean that every service costing one US dollar rendered to customers the company earns 30 cents. The net income is computed after considering the expenses.  Expenses are those spent by the company in providing services. The breakdown comes from the estimate of cost and expenses for the first.

Expenses include the payment of salaries of the different employees which include 3 project managers who will work the three separate shifts.  The business is expected to operate 24 hours a day for seven days hence the 3 project managers.  Each manager will be assisted by one web analyst, one system analyst and 2 information technology officers each. The salaries of these technical personnel range from 3000 to 5000 dollars per month.

The company will also have to pay the per diems of the members of the Board of Directors, who are to function in the organization, since the board will have only regular meeting each, will have a per diem fee of 1,000 dollars per month.

Marketing people will also form part of the organisation with 3 account executive officers to be hired to become coordinators in addressing client’s needs. They will also be in charged in maintaining and increasing customers which are expected to increase in number starting the second year and yearly onwards. Each account executive will be receiving 4,000 USD per month subject to adjust perhaps on a commission basis should they perform exceeding the targets.

The administrative are indispensable part of the organization, hence there are about all of them, they will assist the account executives and will help in the processing of orders and. Each support staff is to receive 2,500 USD.

For facilities and infrastructure requirement, office space will be leased at 5,000 USD per month, while monthly outsourcing cost is estimated at 3,000 USD per month.

To realize the profitability target of the company, revenues are expected to come from both individual and corporate clients, divided on a 20 to 80% allocation.  Corporate client will be given more priority since a more long-term business[1] could be built with the company which could sustain the economy.

Based on forecasted income statement and balance sheet, the company’s liquidity is very much above par. Leverage ratio  is also one (1) below for the next five years which means that the business faces less risk since there are great of borrowings or liabilities.  This is the result of investments to be purely coming from the members of board of directors, which each one expected to shell 30,000 USD as initial investment.

References

1. Webserver Survey. 2006. June 2006 Webserver Survey. http://news.netcraft.com/archives/2006/06/04/june_2006_web_server_survey.html  (24 June 2006)
2. World Internet Usage. 2006. Internet Usage Statistics: The Big Picture. http://www.internetworldstats.com/stats.htm (24 June 2006).
3. First Stop Business Center – Frequently Asked Questions. Secretary of State. http://www.sos.state.ga.us/firststop/faqs.htm
4. Price, A. 2006. “Mastering Web site management with improved guidelines,” published in ISO Focus

   , Ref.: 1015, 28 June 2006. http://www.iso.org/iso/en/commcentre/pressreleases/2006/Ref1015.html

5.  Bodenhorn, H. , Short-Term Loans and Long-Term Relationships: Relationship Lending in Early America ; Journal of Money, Credit & Banking, Vol. 35, 2003