Interoffice memorandum Essay - Part 2

In the fierce competition of business environment, corporations need to use resource efficiently and effectively - Interoffice memorandum Essay introduction.  Concerning the use of new technology, this memo aims at describing three objectives as following:

To present information regarding the need to adopt a new telecommunication technology to reduce operational costs.
To give information to Chief Information Officer (CIO) regarding whether to take the lease option or the buy option for the new phone system, an 825-line PBX/voice messaging system by comparing the advantages and disadvantages of leasing versus buying options

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To provide appropriate NPV analysis worksheet that describes quantitative justification of two options
telecommunication and cost reduction
Telecommunication is one technology and also business that grows at a breakneck speed. For retail customers, the uses of telecommunication gadgets like cellular phones, facsimile machines, and Internet are widespread and they help the customers to get connected with their colleagues and relatives anywhere.

For business, telecommunication technology does not only help us to get connected with colleagues, clients and suppliers but also it helps us to reduce operational costs by using suitable equipment that will be explained in much details as following.


Telecommunication Technology and Cost Reduction for Business

The convergence of digital technologies including television, telephony, and computers has supported the growing number of innovations of the Internet that grew from inter-university computer networks in United States. Therefore, telecommunication has vital role in helping organization to bring down costs of communications.

Concerning the role of telecommunications, Ciborra (2002) says that telecommunication network does not only enable a business to facilitate communication but also to reduce operation costs of the business by supporting the alignment and interlocking of business processes within and between organizations.

This is true since many corporations invest millions of dollars to buy particular technology but they can save operational costs more than the initial investment within a designated period. Therefore, it is essential that our company should pay attention to the adoption of networking technologies to reduce telecommunication expenses such as telephone, facsimile, or email and to reduce transaction costs.



Benefits of Using PBX/Voice Messaging System

Our company has been growing so fast that it also increases the demands for having suitable and reliable telecommunication equipments to help staffs at management, sales/marketing, human resources, finance, and accounting department to provide necessary functionality for the present and accommodate future growth.

After careful consideration, we decide that our company needs a new 825 line PBX/Voice Messaging system.  This equipment is an 825 operating line PBX that contains 900 wired lines, voice messaging capability, least cost routing software, and black station equipment.

This system is the newest version of Private Automatic Branch Exchange (PABX) that employ automated electromechanical and then electronic switching systems, known as the Private Automatic Branch Exchange (PABX).

The system is currently widely used by small-medium and large companies since it exhibit cheaper and more efficient than the PSTN or ISDN set-ups. Without the PBX, each call, even the internal ones, must have its own line, which requires monthly payments. In other words, internal calls would have to be routed out of the building to the central district telephone system, just to be routed-in again. Besides telephone lines, fax machines, modems and other communication devices can also be connected to a PBX.

Prior to buying the 825-line PBX, we have conducted internal meeting between information technology and finance department to discuss the best method regarding terms of payment whether to invest the equipment or to lease it from appointed vendors. Each option has both advantages and disadvantages from technical point of view. However, the discussion pays attention heavily on the financing method since the PBX system costs about $874,125.


Decision upon Buying or Leasing the 825-line PBX

Usually, the purchase of PBX Telephone Systems includes the cost of the first year of maintenance.  For the purposes of this PBX assessment, we assume that the first year PBX Maintenance and Software Upgrade Costs will be zero.

After careful consideration of calculating the two options (as depicted in the Excel table), we decide that our company should take the buying option since it provide financial benefits for the company according to 7-year Life Cycle Analysis (LCA). Table 1 shows the comparison of buying and leasing option within 7-year period.


Table 1                       Comparison of Buying and Leasing Option of 825-Line PBX


Concerning the role of telecommunications, it is found that some organizations use networks not only to facilitate communication but to reduce costs of transacting by supporting the alignment and interlocking of business processes within and between organizations. The situation suggests that selecting telecommunication equipment should be based on the usability and efficiency so that the objective of deploying the equipments is fulfilled.

Concerning the efficiency factor, this paper has conducted comparison for our company regarding the investment of 825-line PBX system. The calculation shows that within 7-year Life Cycle Analysis (LCA), the company will gain benefit of taking a buying option instead of leasing option.
Future Action
·         Since the calculation use annual economical data like interest rate, therefore, the company should monitor the economical data in order to assess the benefits or lost of taking the buying option

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