Introduction
The assignment is focused on selecting an IT plan for the Bank of Central Queensland (BCQ). The bank has a IT and CRM plan which is already implemented. However, the bank wants to further improve this by selecting an plan for outsourcing the IT and CRM plan. The company has three options out of which Ozzie Solutions are being considered. As per the offer of Ozzie solution, the business has successfully implemented software for small businesses in past but has never operated in a banking and finance industry.
Benefits
The benefits which can be attributed with the installation of the new software in a banking and finance industry such as Bank of Central Queensland can be immense as it will change the working environment of the bank. The benefits which the bank will be experiencing are given below:
- The cost and time of processing of any deposits or payments which are to be made by the bank will be reduced considerably and make the running of operations smooth.
- The internal control of all activities of the business will be strengthen with the implementation of the new software.
- The new software will maintain the cash deposits and cash withdrawals effectively stored in a computerized environment which will facilitate scrutiny of the information as and when required.
Issues
The major issues which the installation of the software and Ozzie Solution faces in case of operating in a banking environment such as BCQ are given below:
- The firm which is developing the software has no experience of a banking sector and how the same operates and therefore there is a risk that the software developed might not be useful for the bank.
- Ozzie Solution offers to host the software for BCQ however the business does not have any experience in the same which will affect the management of the software significantly.
- Ozzie solutions does not even have references in integration process for the software which might create some issues in future.
Risk and Cost
The basic risks which is associated with Ozzie Solution is related to the inexperience which Ozzie Solution. Ozzie solution has never operated in a banking and finance industry and there is always a change that errors might take place or the software might not be favorable for the business. The case study makes it clear that Ozzie solution generally works for small firm and there is always the risk that the same will not be successful in banking sector. The costs which is associated with Ozzie solution comes to around $ 12,50,000 and the cost of hosting the software comes to about $ 3,50,000.
Financial Analysis
![]()
Figure 1: (Image Showing profit of the Bank)
Source: (Created by Author)
![]()
Figure 2: (Image Showing Payback period and IRR of Ozzie Solution’s option)
Source: (Created by Author)
![]()
Figure 3: (Image Showing Payback period and IRR of Customer Solutions Development Consulting’s option)
Source: (Created by Author)
![]()
Figure 4: (Image Showing Payback period and IRR of Relationship Plus Solution’s option)
Source: (Created by Author)
As per the table which is shown above, the payback period of option is less than one which suggests that the bank will recover its initial investment costs within a period of one year (Brunzell, Liljeblom and Vaihekoski 2013). The payback period is shown at 0.899. The internal rate of return of option is 187.84% which is appropriate. In comparison with the other options which are available to the bank, option 1 which is Ozzie Solutions is the most favorable. The payback period of Ozzie solution plan is most favorable as it allows the bank to recover the initial investment with in a period of one year (San Ong and Thum 2013). In addition to this, the IRR of Ozzie Solution plan is also more than the other two options which shows that Ozzie solutions is the most favorable (Daunfeldt and Hartwig 2014).
Conclusion
Thus, from the above analysis, it can be clearly identified that Ozzie Solution is the best option which the bank has if the results of Payback period and IRR approach. Accounting, as mentioned above the option lacks experience when it comes to banking sector industry and therefore QCB should consider all the options and pros and cons of the option before taking decision about implementing the option.
Reference
Brunzell, T., Liljeblom, E. and Vaihekoski, M., 2013. Determinants of capital budgeting methods and hurdle rates in Nordic firms. Accounting & Finance, 53(1), pp.85-110.
Daunfeldt, S.O. and Hartwig, F., 2014. What determines the use of capital budgeting methods?: Evidence from Swedish listed companies. Journal of Finance and Economics, 2(4), pp.101-112.
San Ong, T. and Thum, C.H., 2013. Net present value and payback period for building integrated photovoltaic projects in Malaysia. International Journal of Academic Research in Business and Social Sciences, 3(2), p.153.
