Pagoda.com 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 e-mail applications and Web-building software, as well as plenty of storage space and fast access via its high-speed servers. 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, a mailbox full of spam, 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-without having to think about whether or not they can retrieve their e-mail, or whether their Web site has crashed. It's no surprise, then, that we have the highest customer satisfaction and retention rates in the industry."
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? How would you weight these factors? Given the above, how might you use a weighted-point evaluation system to evaluate the two options?
3. Should Pagoda.com outsource its online help desk? Why or why not? Be sure to consider Table 7.6 and 7.7 when framing your answer.
4. A statement of work typically specifies performance measurements that the buying firm can use to determine whether the service provider is meeting the terms of the contract. What performance measurements would you recommend be put in place? What should happen if the service provider fails to meet these requirements?