University of Leicester - CO7218 Cost Analysis in Financial Systems

This report presents a cost analysis for selecting a suitable software product for a bank's new application. It compares three products (A, B, and C) based on factors like the number of end-users, CAPEX, OPEX, and TCO. The analysis includes cost breakdowns for different user numbers and a detailed comparison for 350 end-users, highlighting Product B as the most cost-effective option due to its lower overall cost. Additional cost factors like security, scalability, telecom lines, disaster environments, functionality, and ease of use are also discussed. The report concludes by recommending Product B to the bank, supported by bibliographic references.

Financial Services Information Systems
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 Since the intention of the bank is to buy a
software product so that it could implement
a new application, it is necessary to conduct
market research for choosing among the
available products.
 After conduction of adequate market
research, three products have been
identified.
 They include Product A, Product B and
Product C.
Facts of the case:

 There would be five sub-products for Product A
and the cost of different end-users would
change based on the numbers and
requirement of CPUs.
 The number of users would vary in Product B
as well; however, it does not require CPUs and
disaster recovery site license; however, there
is need for customisation fee.
 For Product C, the subscription would be
license-based and customisation fee is needed
as well.
Facts of the case
(Continued):

Figure showing total cost for five
years for the three products:
100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950 1000
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Product-Wise Total Cost for 5 Years
Product A Product B Product C
Number of End-Users
Total Cost

 From the graph, it has been observed that
with the rise in number of end-users, the
costs for each product are seen to be
increasing.
 The lowest cost has been £390,000 for
Product B for 100 end-users and £1,650,000
for 1,000 end-users.
Figure showing total cost for five
years for the three products
(Continued):

 For Product A, the minimum cost has been
£418,080 for 100 end-users and £1,606,200
for 1,000 end-users.
 In case of Product C, the lowest cost has
been £611,200 for 100 end-users and
£1,544,800 for 1,000 end-users.
Figure showing total cost for five
years for the three products
(Continued):

Total CAPEX Total OPEX Total TCO
Product A £468,700 £15,000 £483,700
Product B £240,000 £100,000 £340,000
Product C £308,000 £60,000 £368,000
Details of different costs for
350 end-users:

 Total CAPEX is maximum for Product A, after
which it is followed by Product C and
Product B.
 Total OPEX is maximum for Product B, after
which it is followed by Product C and
Product A.
 Overall, the total cost to be incurred for
Product B is minimum, after which comes
Product C and Product A.
Details of different costs for 350
end-users (Continued):

 By considering all the previously-discussed
points, Product B could be identified as the
most cost-effective product for the bank.
 The reason is that the cost to be incurred
for this product is lower in comparison to
the other two products.
 Hence, Product B is strongly advised to the
bank.
Conclusion:

 Security is the most crucial factor, since a
number of programs need additional protection
so that information could be kept confidential.
 Scalability is the next factor so that the
changing requirements and staff growth of the
bank could be fitted effectively.
 The next factor is the cost pertaining to
telecom lines as well as disaster environments,
since it would result in additional drainage of
cash for the concerned bank.
Brief explanation of additional
cost factors:

 Functionality is another factor vital to find
out the exact requirements so that the
suitable software solution could be
determined in an effective manner.
 Ease of use is the final factor, since the
bank has to incur costs to teach the staffs
by taking into account the probable costs
and challenges.
Brief explanation of additional
cost factors (Continued):

 Lugmayr, A, Enterprise Applications and
Services in the Finance Industry. in , Cham,
Springer International Publishing AG, 2016.
 Ramirez, E, Financial Management. in ,
Hauppauge, Nova Science Publishers, Inc.,
2017.
Bibliographies: