You are the project manager for a software development projectfor an updated management system. The cost of doing it in-house is$27,000. You estimate you'll spend $2,000 per month updating thesoftware with client information, government regulations, andmaintenance.
You know that a contractor do the programming for your companyand charge a fee based on the number of personnel using the programevery month. This contractor will charge you $4 per month per userof the accounting system. You will have roughly 1,000 employeesusing the system each month. You'll need some additional in-houseresources to manage the contract, per se, at a rate of an extra$1,100 per month.
(a) How many months can you use the system before it's better todo it in-house instead of hiring a contractor. Show your work!USE THE ALGEBRAIC FORMULATION OF THE PROBLEM! Inother words, set the cost of contracting it out equal to the costof doing it in-house, and solve for the break-even time.
(b) Outsourcing involves more than just possibly saving money.List at least five other factors that should be considered inmaking this outsourcing decision.
