TO: Chief Information Officer
DATE: September 13, 2011
SUBJECT: Options for the New Phone System.
The development of our company needed more resources including financial aid to support building of a new workplace that would cater for different segments of the business. They included Human Resource, Accounting, Information Technology, Sales and Marketing. This called attention for the creation of a system that would connect all these departments through the exchange of information and communication. After doing enough research and analysis, the Information Technology department decided to use a VoIP system, a form of technology that allows voice communication on the internet using certain protocols (Mohammed, 2008). The system would be able to support 900 communication lines and would be flexible enough to expand depending on the company’s progress on advancement.
The installation of the system was discussed and it was agreed to set it up in November 2010. The only problem was deciding between the two options of buying and leasing the system because it had not yet been developed. The decision was going to be based on the life cycle of an NPV analysis, where the value of that system project was being evaluated. The finance department also needed a complete seven-year life assessment using value for future operation costs and using straight-line depreciation in their calculations. Each of the two options has its advantages and disadvantages concerning cost, service, structural change, improved communication, and customer and staff satisfaction.
Leasing Option verses Buying Option
For an appropriate decision to be made between these two options, I thought it would be better to exhaust on each of their benefits and weaknesses in order to measure the two and recommend the most suitable. Leasing will enable the company to spend money more efficiently. The purchasing price for the system becomes less when leasing than when buying. In addition, cash is not fixed to the value-declining asset, as its possession can move from one consumer to the other (Al Burns, 1977). Another advantage is that payments of the system become expenses and this is a tax advantage, as money is no longer deducted from the cash. We will also have the flexibility of using the system and returning it if we get another option (Sollish & Semanik, 2007). This means that the company will not suffer from the monotony of the product since they have the freedom to return it if they want a better version of the system.
With buying on the other hand, the overall cost of the system will be much less than when leased. In addition, it will give the company complete possession of the system, giving access to unlimited use. The IT department agreed together with the other employees that they opt for the buying option since the system’s use in the company was intended for a very long period and the costs were considered cheaper than if we opted for the leasing option.
The VoIP system will be of great importance to the development of this company, as it will provide a wide variety of opportunities through networking with other businesses locally and internationally. We as the entire staff of employees have come together and decided to propose that the system be bought. We feel that having our own system is more advantageous than leasing one. However, we have decided to hold another meeting while you are present in order to get your perspective on the issue. We will then factor in your opinion in the decision on how we ought to acquire the system.
Burns, A. (1977). Will the car of your dreams belong to someone else? Popular mechanics, 148: 78.
Mohammed, S.A. (2008). VoIP: Voice Over Internet Protocol Architecture and Features. Lulu.com.
Sollish, F., & Semanik, J. (2007). The procurement and supply manager’s desk reference. Hoboken, NJ: John Wiley & Sons.