Group D – Project 1BFinancial Considerations for

Blackboard vs. Self-Created System

July 18th 2005

Financial Management in Online Course Design and Implementation

@ New York University

GROUP DProject 1B Presented by

Group D:

Matt Carbone Tushar Mehta

Ann Powers Jessica Strahl

GROUP DProject 1B Agenda

Introduction

Financial Considerations

Break-Even Analysis

Capital Budget

Summary

Q&A

GROUP DProject 1B Introduction

The university CommunityU and the corporation ZippityZ are reviewing the financial aspects (using break-even and cash-flow analysis) regarding their decisions to purchase a new Learning Management System (LMS) sold by the Blackboard Corporation (proprietary) or a self-created (In-House) system.

GROUP DProject 1B Financial Considerations

Types of Financial Considerations:

Inflow

Ongoing costs

Upfront costs

GROUP DProject 1B Financial Considerations

Inflow Revenue: $1500 / student per class

Start-up Grant from NY State

Ongoing costs Helpdesk / Publisher Support Costs

Professional Development Costs

Maintenance/Replacement/License upgrade costs Network Maintenance Maintenance of Enterprise SQL/Web Servers LMS Maintenance Server/OS Licensing Maintenance

Connectivity Costs

Software/Course Development Costs

Depreciation

GROUP DProject 1B Financial Considerations

Upfront Costs Network Cost Estimates

Firewall Proxy Server

Hardware & Operating Server Cost Estimates Web Server (Equipment) Enterprise SQL Server (Software) Operating System/Client License

LMS Costs LMS/LCMS System Configuration Costs Installation Fees Training Costs Professional Development Costs

Software/Course Development Costs

GROUP DProject 1B Break-Even AnalysisBased on $1,500 per student per class (Using CommunityU Financials)

Analysis Summary: Students Based on a unit cost of $1500/ student per class:

Blackboard is favored over the In-House (Self-Created) system by a break-even point of: 275

The University would require additional students to break even if they built the In-House (Self-Created) system 382 The difference between Blackboard and the In-House (Self-Created) system is: 107

Based on the Break-Even Analysis results above, BLACKBOARD is favored over the

IN-HOUSE System

$1,500 TUITION; Costs based on 200 STUDENTS $1,500 TUITION; Costs based on 200 STUDENTS

Fixed Costs (FC) 406,833 = Fixed Costs (FC) 556,135 =Revenue (I) 1,500 = Revenue (I) 1,500 =Variable Costs (VC) 16.00 - Variable Costs (VC) 16.00 -Contribution margin (CM) 1,484 Contribution margin (CM) 1,484

-405,349# of Students to break-even 275 # of Students to break-even 382

Blackboard In-House

GROUP DProject 1B Capital Budget

The following Capital Budget is based on the financial criteria below:

200 Students per year

ROI of 10%

3 Yr Life for the Blackboard System

5 Yr Life for the In-house (self-created) system

0% Tax

GROUP DProject 1B Cash Flow Estimates

Blackboard Proprietary systemBased on 3 Years(Using CommunityU Financials)

PVIF Rate = 10%

218,682

GROUP DProject 1B Cash Flow Estimates

Self-Created (In-House) systemBased on 5 Years(Using CommunityU Financials)

PVIF Rate = 10%

269,401

GROUP DProject 1B Analysis of Net Present Value

In comparing the above two Net Present Values the NPV for the In-house system is favored over Blackboard mainly because of the additional two years of income.

PVIF Rate = 10%

269,401

218,682

Blackboard

In-House

GROUP DProject 1B Factoring 1,500 Students

Server/Maintenance Costs for 1500 Users1500 Users 200 Users

Connectivity Costs 12,000 1,600 Server Operating System/ Client License 10,000 1,335 Server/OS Licence Maint. @ 20% 2,000 275

24,000 3,210

1 “Server” capacity has two components: a) Hardware and b) Software. In our project only server software licenses is variable while hardware is set to meet the capacity of 1,500 students to manage scalability – it is a fixed cost.

The estimated capital budget was based on 200 students. To measure the range of possible outcomes for decision making we will factor in a server1 and maintenance costs with a capacity of 1,500 students.

GROUP DProject 1B Summary

We continue to recommend Blackboard as the Learning Management System (LMS/LCMS) for CommunityU.

Break-Even

NPV ~ not enough

GROUP DProject 1B Thank You!

Q?A