The Cost of Pride

Question # 10-6

a. The development costs that are likely to be the highest are developer hardware and developer software infrastructure.  It is because the developer hardware, like computers, are normally quite expensive, and the required developer software such as Microsoft Visual studio is quite expensive.

b. The most difficult to estimate will be the software; this is because all the software to be used by PRIDE is custom developed.

c. Development expenses not included in this estimate are changes in the software development features because of competitors.

Question # 10-7

a. The largest operational expenses are likely to be the cloud hardware, staff salaries and contractor fees. Cloud hardware servers for hosting cloud data are expensive and therefore, will raise the costs; implementation of this project will require extra staffing and a contractor to manage the network infrastructure hence the increased costs.

b. The most difficult operational expense to estimate is the customer support expense; this is because this will depend on the popularity of PRIDE.

c. The operational expenses not likely included in the estimates are changes in government regulations and medical practice payment through insurance policies.

Question #10-8

a. Operational costs that rely on the quantity of doctors and the recurrence of their utilization are customer support expenses, salaries, and operational cloud storage costs.  Those that do not rely on the quantity of specialists and the recurrence of their utilization are ongoing training, software maintenance expenses, backup and recovery.

b. Operational costs that rely on the quantity of patients and the recurrence of their utilization are customer support expense and new employee training. Those that do not rely on the quantity of patients and the recurrence of their utilization are ongoing training, software maintenance expenses, backup and recovery.

c. Operational expenses that depend upon the number of health club users are operational cloud storage, backup and recovery costs, maintenance and testing of cloud servers. Those that do not depend upon the number of health club users include contractor fees, ongoing training and new employee training.

d. Using the answers in 10-8 a-c, a potential investor would compare the costs incurred in the provision services against the corresponding revenue generated;  as it would be expected for PRIDE to be successful, the costs should be less than the revenue.

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Question #10-9

a. I would choose that Maggie and the two experts investigate the costs of development cloud servers and operational costs of PRIDE servers and any unknown costs that are associated with the two sources of PRIDE costs. By choosing to investigate this, we ensure clear identification of whether the Dr. Flores’ investment in acquiring their servers would be beneficial to the practice more than using a cloud server.

b. To assess the completeness and exactness of the reaction I will inspect the schedules and may choose to keep away from all of them together and not develop the custom-made system, but rather go for the authorized bundles, for example, ERP systems that incorporate both business processes and information systems components. Such packages are available over-the-counter and could therefore, be easily attainable. The second way would be to integrate the processes into the business. It is because the schedule risk of the integration activities is far less than that of developing processes, programs, databases, and other components. Since this method does not treat fictional estimates and schedules as if they were real, only loosest commitments are made regarding the date of completing the final system functionality; should Maggie show this in her assessment, it may be the only real alternative. However, the company admits the impossibility of scheduling date for completion of the entire system and takes the best result available. Another way is to schedule the development project oblivious of all the difficulties. This way, if there is data from a past schedule, it can be used for planning.

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Question # 10-10

I would advise the investor to keep in mind that estimates of any given project are only a guideline of the real working, and given the magnitude of the PRIDE project there is a high possibility of trying to mitigate flaws observed by the experience. It will have an overall effect of significantly improving the output in the current project and would therefore reduce the low factor initially estimated at between three and five. Furthermore, I would advise the investor to remember that the cost captures not only the real cost of the project but also the unknown costs that may arise during and after the completion. Therefore, to avoid making additional investments into the project, I find it prudent to make an original consideration for such even before the project starts. 

Question # 10-11

Should the investor let me know that I have not done my job if I can't get closer than a variable of 3 to 5 in my evaluation of their expense appraisal?

I would respond by telling them that the assessment is just a basic guideline of the whole project. From experience with the real work, this estimate will significantly go lower and thus bring a high possibility of being less than the 3 to 5 factor. In addition, it is essential to understand that this factor captured the unknown. Given that no one can really account for the unknown, it would be prudent for such factors to be captured at the onset of the project. This would help avoid making any cost additions to the original cost of the project as it progresses or after completion. Being confident on this, I would even assure the investor that anything above these all factors held constant should be charged on me.

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