Microcost: BlueJay Outsourcing Project Essay

Introduction

Carrying out business activities is always associated with the number of calculations and forecasts the companies need to conduct in order to see, at least approximately, the potential and financial implications of this or that planned activity. The calculations of the cost of ownership of every single business project is vital for predicting its dynamics character, and this activity is associated with three basic estimation methods, i. e. life cycle costs (LCC), through life costs (TLC), and whole life costs (WLC) estimation techniques. The concept of the acquisition costs for the project is also crucial in this respect together with the delineated and clearly understood microcosts involved in the conduct of the project. Therefore, the following paragraphs aim at explaining the project acquisition costs for BlueJay’s outsourcing project and delineates the major implications that microcosts bear for this project.

Background

The essence of the difficulties associated with the BlueJay’s outsourcing project lies in the need to carry out the cost analysis for outsourcing and keeping the work in house and make respective decisions on whether the outsourcing should be carried out or not. To answer this question it is necessary to calculate the acquisition costs for the whole project and determine the microcosts involved in its implementation. The next step is to find out what those microcosts delineate and how the outsourcing project should be handled (Jones, 2006, pp. 11-2 – 11.4). In this respect, it is necessary to realize the acquisition costs (Ca) of the project are combined of the research and development costs (Crd) and investment costs (Ci) following the formula (Jones, 2006, p. 11-4):

Ca = Crd + Ci

Keyes (2005) argues about the different composition of the project acquisition costs, also known as the total project costs, including the costs involved by the stages of development, maintenance, and operation (pp. 123 – 124). In any case, the microcosts involved in the project acquisition mix will include the costs for the preliminary research of the market conditions associated with the outsourcing project actuality, the development costs, connected investment costs, as well as the maintenance and operational costs for the outsourcing project launching and effectiveness assessment (Delaney, 2009, p. 187).

Microcosts Involved

Thus, the more detailed list of the microcosts involved in the acquisition cost for the BlueJay’s outsourcing project includes the following points (Fisher, 2002, p. 199; Jones, 2006, p. 11-4):

1. Market research prior to the project launch – costs directed at assessing the market position of the company and the changes that the project might cause to it;
2. Concept development – on the basis of the market research and assessment the concept of the new project is developed;
3. Concept assessment – the comparative analysis of the concept in the context of the market conditions data is carried out also involving considerable costs;
4. Concept testing – the process of testing the concept developed in the artificially created environment is also rather costly but it provides preliminary vision of how the actual project will function when launched;
5. Determination of the project launching phases in the real market environment – the company that develops the project needs to outline the phases in which the project will be implemented for the easier control of its progress and efficiency;
6. Final stage of project design – after the phases of project implementation are defined, the very project is finalized and the costs are exactly known to the company;
7. Qualification testing for the project personnel – the additional microcosts are involved for testing the personnel involved in the project;
8. Development of the project control system – the system is to include the project requirements, the criteria for assessing the conformity of the project to those requirements, and the distribution of role among the project team members in the control process;
9. Initial support system development – the initial stages of the project implementation might be associated with certain difficulties, like for instance shortage of materials, untimely activities of partners or suppliers, etc., so the initial support system is the tool to avoid project damages if these difficulties happen;
10. Initial operating capability establishment – the first stages of the project development will allow the company to monitor the operating capability and develop further projections based on initial operating capability data (Jones, 2006, p. 11-4).

Microcosts’ Implications

Thus, the major implications that the above discussed microcosts have for the whole acquisition cost of the BlueJay’s outsourcing project are that the project’s total cost might grow under the conditions of numerous difficulties arising on the way towards its implementation but can be easily controlled due to the clear outline of all the minor points that will require BlueJay to spend its funds (Fisher, 2002, p. 199; Jones, 2006, p. 11-4).

Conclusions

The conclusion from the above presented discussion is that the BlueJay’s outsourcing project is a costly initiative involving at least 10 points of microcosts that can be modified in the process of project development and operation. The major implications of the clear vision of all the microcosts involved in the project acquisition costs are the knowledge of the possible total cost modification and the ability to control the project fund usage.

References

Delaney, P. (2009). Wiley CPA Exam Review 2009: Financial Accounting and Reporting. John Wiley and Sons.

Fisher, T. (2002). Beyond micro-credit: putting development back into micro-finance. Oxfam.

Jones, J. V. (2006). Integrated Logistics Support Handbook. McGraw-Hill Professional.

Keyes, J. (2005). Implementing the IT balanced scorecard: aligning IT with corporate strategy. CRC Press.