Improving Decision Making: Making the Rent vs. Buy Decision forData Storage for ABC Digital
Software skills: Spreadsheet formulas, and charts
Business skills: Technology rent vs. buy decision, TCO analysis
This project provides an opportunity for you help a real-worldcompany make a decision about whether to rent or buy new technologyfor data storage. You’ll use spreadsheetsoftware to compare thetotal 4-year cost of ownership for two options.
Deciding whether to store data on the cloud or on-site is oftenthe dilemma for most business owners. There are advantages anddisadvantages to both options. However, in this project you areonly focusing on the cost benefits of each option regardless ofother aspects including the access time, privacy and scalabilityissues which are also critically important in making thisdecision.
Scenario
ABC Digital is looking for a solution for storing their data.They have approximately 100 Terabytes of data that they need tostore. The followings are typical cost information associated tooption 1, that is to store data on the premises:
Description | Cost/ Resource |
Copies of data needed for redundancy | 3 |
Dollar per Gigabyte of Storage | $4 |
Typical Fulltime Staff for Data Admin | 1 Full Time Admin for 200TB of data |
Typical Cost of Full Time Data Engineer | $80,000 for the first year, increases by 10% each year |
Facilities and Power Charges | $20,000 for the first year, increases by 8% each year |
The cost items associated to cloud-based storage (Option 2) isgiven below.
Description | Cost/ Resource |
Dollar per Gigabyte per year for cloud charge | $1.48 |
Dollar per Gigabyte of initial data migration into cloud | $0.1 |
Cost of Data Communication and Networks | $60,000 for the first year, increases by 7% each year |
Note that with cloud solution, the backup and redundancies areprovided by the cloud provider and the service is included in thecost.
Tasks
Use your spreadsheet application to calculate the cost of eachoption for year 1 to year 4. To get the full mark, you should useExcel formula when it is appropriate. In other words, I should beable to change the above parameters (listed in the tables) and thetotal cost values should be changed automatically. (30 points)
Use an appropriate chart type to present and compare the cost ofboth solutions in one graph for year 1 to year 4. (15 points)
Determine which cost items are considered as capital expenditure(Capex) and which ones are operational expenditures (Opex) for eachsolution. (15 points)
Calculate the total cost of ownerships for a 4-year period foreach of the two solutions and suggest the best solution for the ABCDigital. (20 points)
One of the main advantages of spreadsheets is that you caneasily change the parameters of the model and evaluate “What if...”types of scenarios. Your manager wants to see the sensitivity ofthe total cost for solution 1 in relation to the year-to-yearincrease in the “Facilities and Power Charges”. More specifically,your current solution shows the total cost when considering 8%year-to-year increase of the cost of “Facilities and Power Charges”as shown in the Table. However, she wants to see how your estimateschanges with this quantity. You should evaluate the total costsover 4 years when evaluating 4%,6%,8% (your current solution),10%,12% and 14% increase in the year-to-year cost of “Facilitiesand Power Charges”. The first year cost is still the same, i.e.$20,000 for all scenarios. You should create a new sheet for this.This sheet should show the total cost of solution 1 when changingthe year-to-year changes in the Facilities and Power Charges assuggested above. (20 points)
