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Homework answers / question archive / Introduction Pagoda is an Internet service provider (ISP) that caters to individual consumers and small businesses who require a high level of service and are willing to pay a premium for it

Introduction Pagoda is an Internet service provider (ISP) that caters to individual consumers and small businesses who require a high level of service and are willing to pay a premium for it

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Introduction Pagoda is an Internet service provider (ISP) that caters to individual consumers and small businesses who require a high level of service and are willing to pay a premium for it. Specifically, Pagoda.com offers state-of-the-art email applications and Web-building software, as well as plenty of storage space and the fastest access available. The marketing vice president, Jerry Hunter, puts it this way: “There are a lot of companies out there promising the cheapest Internet access. But what do you get for your money? Slow- or no-access and an endless stream of system crashes. And I won’t even mention the lack of support if you have a technical question! For a few dollars more a month, we give our customers the environment they need to be productive. It’s no surprise, then, that we have the highest customer satisfaction and retention rates in the industry.” The Online Help Desk One of Pagoda’s services is its online help desk. The online help desk works as follows: Customers who are experiencing technical problems, or who simply have questions about their account, enter a one-on-one chat room, where they can interact directly with an expert. Problems are usually resolved within 10 minutes, and customers have listed it as one of the top three reasons they stick with Pagoda.com. Presently, Pagoda has enough capacity to handle up to 900,000 requests per year, although management doesn’t expect the number of requests to change much from the current level of 800,000 per year. A firm located in New Delhi, India, has approached Pagoda about outsourcing the online help desk. The offer is attractive. The New Delhi firm’s own personnel would handle the help desk function. These personnel all speak English fluently and have college degrees or appropriate technical backgrounds. And because they are located in India, labor costs would be a fraction of what they are in the United States. The savings would be passed on, in part, to Pagoda. And since the help desk chat room exists on the Internet, Pagoda’s customers should be unaware of the switch. Pagoda management has put together the following figures, outlining the yearly costs associated with the current system and the Indian proposal: Current Online Help Desk Personnel costs: 40 full-time-equivalent (FTE) technical experts @ $40,000 per year (salary and benefits); 3 supervisors @ $70,000 each per year (salary and benefits) Equipment costs: 4 servers @ $2,000 per year 20 PCs @ $1,000 per year Variable costs: $1.50 per request (office supplies, fax paper, etc.) New Delhi Proposal Fixed cost: $1,500,000 per contract year (to cover administrative and IT costs) Charge: $0.50 per request Questions 1. Calculate the total cost of outsourcing the online help desk versus staying with the current solution. Which option is cheaper? 2. What other factors, other than costs, should Pagoda consider? Explain your answer.
 

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  1. Calculate the total cost of outsourcing the online help desk versus staying with the current solution. Which option is cheaper?

ANSWER

TOTAL COST FOR CURRENT.

Total cost = personnel cost + equipment cost + variable cost.

Personnel cost = (40 × $40,000) + (3 × $70,000) = $1,810,000

Equipment cost = server cost + PC cost

Equipment cost = 4 ×$2,000 +20 × $1,000 = $28,000

Variable cost = 800,000 × $1.50 = $1,200,000

Total cost = $1,810,000 + $28,000 + $1,200,000 =                $3,038,000

 

TOTAL COST FOR OUTSOURCING.

Total cost = fixed costs + charged costs

But fixed costs = $1,500,000

Charge’s cost = 800,000 × $0.50 = $400,000

Total cost = $1,500,000 + $400,000 =                                    $1,900,000

 

After Performing the calculations, the total cost involved when Pagoda.com decides to outsource from the New Delhi firm will be $1,900,000, which is cheaper than the current costs that Pagoda.com incurs which stands at $3,038,000. Outsourcing will therefore be $1,138,00 cheaper than the current costs of Pagoda.com.

 

  1. What other factors other than costs should Pagoda consider? Explain your answer.

ANSWER.

  • Recourses and technology (Sass, 2011).

Pagoda. Com should consider the level of technology and resources that the New Delhi firm has. This might be because the New Delhi firm might be underpricing their services because they do not have adequate resources to meet the consumer demands of the Pagoda.com consumers. Hence it is essential to consider the resources and level of technology of the New Delhi firm.

 

  • Level of supervision needed (Sandhu, 2018).

Before Pagoda.com gets into agreement with the New Delhi firm, they should consider assessing the level of supervision they would have to put on the New Delhi firm to deliver satisfactorily to Pagoda customers. It is always vital for the outsourced firm to be able to work excellently under minimal supervision.

 

  • Trustworthiness (Pankowska, 2019).

Pagoda.com should ensure that the New Delhi firm is highly trustworthy. This is because the nature of the business of Pagoda.com involves having personal details of the customers. Hence, if the New Delhi firm is not trustworthy, they might engage in certain malicious activities with the Pagoda.com customer information. This might further reduce the customer base for Pagoda.com.

 

  • The team leader of the New Delhi firm (Pankowska, 2019).

Pagoda.com should consider assessing the group leader of the New Delhi firm. This is because a focused team leader would result in better results since he would continuously put his team members on their toes, hence delivering better services to the Pagoda.com customers.

 

  • Communication (Sandhu, 2018).

Pagoda.com should also consider the communication and fluency of communication that the New Delhi firm workers and management can offer. Pagoda would have to consider this because the customers would need to be attended to by people who can communicate adequately in their preferred language. They would also need people who would provide timely communication to the customers and their management.