Management Accounting: Software Selection Case Study Analysis

This case study examines a bank's decision-making process in selecting a software product for a new application, considering three options: Product A (a commercial package), Product B (a cloud-based SaaS product), and Product C (commercially supported open-source software). The analysis involves a comparison of total cost of ownership (TCO), capital expenditure (CAPEX), and operational expenditure (OPEX) for each product over a five-year period, considering factors like end-user costs, CPU requirements, disaster recovery, and customization fees. The study finds that Product B is the most cost-effective option based on TCO, despite having higher OPEX than Product A. Additional cost factors, including security, scalability, telecommunication costs, functionality, and ease of use, are also discussed. The case study concludes that Product B is the preferred choice due to its overall cost advantages. Desklib provides access to similar solved assignments and past papers for students.

Management Accounting
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Facts of the case:
• As the bank wants to purchase a software product for
implementing a new application, market research
needs to be conducted about the available products.
• Three products are identified- Product A (a
commercial package), Product B (a cloud-based SaaS
product) and Product C (commercially supported open
source software).
• Product A would have five sub-products with different
end-user costs and different CPU requirements based
on the number of users. In addition, it would have
disaster recovery site for which licence fee has to be
incurred and from the second year, annual
maintenance charge has to be incurred as well.
• Product B is dependent on the number of varying
users along with their respective roles having product
access. No costs would be incurred for disaster
recovery sites ; however, there would be a fee for
customisations.
• Product C would be a licence-based subscription and
it requires customisation fee as well.

Graph showing five-year
costs:
100
150
200
250
300
350
400
450
500
550
600
650
700
750
800
850
900
950
1000
£0
£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 5 Years Total Cost
Product A Product B Product C
Nos. of End-Users
Total Cost

Overview of different costs
for 350 end-users:
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

Conclusion:
• After consideration of all the above factors, it
needs to be mentioned that Product B is the most
cost-effective product in terms of TCO.
• Total CAPEX is higher for Product A, followed by
Product C and Product B.
• Total OPEX is maximum for Product B, followed by
Product C and Product A.
• However, as the total cost of Product B is found to
be the lowest, this product is strongly preferred.

Five additional cost
factors:
• The first factor is security, as many programs
require additional security measures for providing
adequate protection to information.
• The second factor is scalability to fit the changing
needs and staff growth of the bank.
• The third factor is the cost associated with
telecommunication lines and disaster
environments, which could increase the overall
spending of the bank.
• The fourth factor is functionality for digging
deeper into the requirements for adequate
ascertainment of the feasible software solution.
• The fifth factor is ease of use, as it is necessary to
consider the challenges and costs related to
teaching the bank staffs in using the same.

Bibliographies:
 Lavia López, O. and Hiebl, M.R., 2014.
Management accounting in small and
medium-sized enterprises: current knowledge
and avenues for further research. Journal of
Management Accounting Research, 27(1),
pp.81-119.
 Otley, D., 2016. The contingency theory of
management accounting and control: 1980–
2014. Management accounting research, 31,
pp.45-62.