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Chapter 5 Running Case Assignment: Improving Decision Making: Making the
Rent vs. Buy Decision for Hardware and Software
Software skills: Spreadsheet formulas, electronic presentation software (optional)
Business skills: Technology rent vs. buy decision, TCO analysis
This project provides an opportunity for you help a real-world company make a decision
about whether to rent or buy new technology. You’ll use spreadsheet software to
compare the total three-year cost of licensing and maintaining new manufacturing
software or renting the software from an application service provider.
Dirt Bikes would like to implement new production planning, quality control, and
The costs of purchasing the software (actually for purchasing a license from the
vendor to use its software package) include the initial purchase price of the software
(licensing fee of $100,000 paid in the first year), the cost of implementing and
The costs of renting hosted software are the rental fees ($2500 annually per user),
implementation and customization costs ($12,000 in the first year), and training ($10,000
in the first year).
• Use your spreadsheet software to calculate the total cost of renting or purchasing
this software over a three-year period. Identify the lowest-price alternative that
meets Dirt Bikes’s requirements.
• What other factors should Dirt Bikes consider besides cost in determining
whether to rent or buy the hardware and software?
