A firm is considering developing a Customer Relationship Management (CRM) system in order to better learn their
Question:
A firm is considering developing a Customer Relationship Management (CRM) system in order to better learn their customer's preferences, and simplifying the ordering process. The firm is considering outsourcing the development to a well-known vendor. The vendor estimates the development cost to be $1 Million, which will be due upfront. The firm expects to generate additional revenues from better targeting of customers to the tune of $250,000 every year for the next ten years. The ongoing licensing and maintenance costs for the initiative is expected to be $25,000 annually. Assuming that the investment will be made in Year 0, and the annual benefits and costs will be incurred at the end of each year, is the initiative financially desirable? Assume the firm's discount rate (cost of capital) is pegged at 10%. Provide all calculations.
Modern Systems Analysis And Design
ISBN: 9780134204925
8th Edition
Authors: Joseph Valacich, Joey George