Capstone Case: New Century Wellness Group - Chapter 7

Background

Based on your earlier recommendations, New Century decided to continue the systems development process for a new information system. Now, at the end of the systems analysis phase, you are ready to prepare a system requirements document and give a presentation to the New Century associates. Many of the proposed system's advantages were described during the fact-finding process. Those include smoother operation, better efficiency, and more user-friendly procedures for patients and New Century staff. You also must examine tangible costs and benefits of the business support part of the system highlighted for phase 1, to determine the economic feasibility of several alternatives. If New Century decides to go ahead with the development process, the main options are to develop the system in-house or purchase a vertical package and configure it to meet New Century's needs. You have studied those choices and put together some preliminary figures. You know that New Century's current workload requires six hours of office staff overtime per week. The office staffs normal salary is $11.50 per hour and overtime pay is paid at time-and-a-half (or 1.5 * the normal hourly wage). In addition, based on current projections, New Century will need to add another full-time clerical position in about six months. This individual will get paid at the same rate of the rest of the office staff and work a normal 40-hour week. Neither the overtime nor the additional job will be needed if New Century implements the new system. The current manual system also causes an average of 5 errors per day, and each error takes about 20 minutes to correct. The phase 1 deliverable of the new business support system should eliminate those errors. In addition, the new phase 1system should also eliminate inefficiencies of the existing way of doing things. New Century has estimated this cost savings to be 20 minutes per employee every day. You estimate that by working full-time you could complete the phase 1 part of the project in about 20 weeks. Your consulting rate, which New Century agreed to, is $75 per hour. In addition, you will need to purchase an additional $4,500 in development tools and services (including cloud-based solutions) to complete the phase 1 business support part of the system. After the system is operational and the staff is trained, New Century should be able to handle routine maintenance tasks without any ongoing assistance. As an alternative to phase 1 in-house development, a semi-customizable, vertical, clinical-based business support software package (that can be integrated with the future phase 2 medical support pare of the system) is available for $67,000. The vendor offers a 3-year lease-to-purchase package of $28,000 down, followed by two annual installments of $23,500 each year. If New Century buys the package, it would take you about two weeks to install, configure, and test it, working full-time at your rate described above. The vendor provides free support during the first year of operation, but then New Century must sign a tech support agreement at an annual cost of $2,000. Although the package contains many of the features that New Century wants, many of the reports are pre-designed and it would be difficult to modify their layouts without a significant cost. No matter which approach is selected, New Century will need you to provide about 10 hours of initial training and support each week for the first three months of operation (at your normal consulting rate). After the new system is operational, it will need routine maintenance, file backups, and updating. These tasks will require about four hours per week and can be performed by a clinic staff member. Additionally, all phase 1 options will involve the purchase of necessary hardware (network, computers, devices, servers. etc.) with a one-time cost of $8,500.

Financial Analysis Tips (BE SURE TO READ!)

Double-check all your numbers and calculations

Include charts, graphs, or other helpful visual information in the document

Provide an introduction and description for each analysis section, chart, and/or graph

Include additional supporting material and analysis as appropriate

Be sure your analysis conclusions and recommendations are clear

Highlight that your analysis is based upon estimated number and actual numbers may vary

For the following tasks, you may want to utilize a spreadsheet program like Excel to help with the organization, presentation, and calculations of your numbers and financial data. Be sure to copy and paste the relevant cells from the spreadsheets into you Case Study document. Lastly, you may provide the financial analysis within a PowerPoint presentation copied and pasted into a properly named Appendix and the end of your Case Study document OR you can just integrate the financial analysis into a properly named section of the document itself. You should keep in mind that the owners and management of the New Century organization will be most interested in the work you complete and deliver within this part of the Case Study. This analysis and presentation will tell the client if the investment is financially viable and makes sense. What one-time and ongoing costs will the company need to budget? When ownership will breakeven and expect profits from their investment within a system? Etc.

Tasks

1. Provide a financial overview of the proposed system, including costs and benefits (including cost savings), with an explanation of the various cost-benefit types and categories. Be sure to highlight that the financial analysis within your deliverable does not consider or highlight any intangible benefits of the system. Be sure to create and/or include graphs and charts to provide great visuals for your analysis.

2. Develop an economic feasibility analysis for the system over its estimated 10-year useful life span, including: payback analysis, return on investment (ROI), and a net present value (NPV) calculation assuming a discount rate of 10%.

3. Provide a brief explanation of the various alternatives that should be investigated if development continues, including in-house development and any other possible strategies. (Be sure to think and document these thoroughly or the client may feel you are not performing an appropriate level of diligence and only providing the approach that makes you or your company the most money.)