The scenario
A retailer with fifty stores in New York State uses modems to validate credit card purchases. Since all of the modems are expected to perform a specific task, they are programmed to a standard default configuration. The company employs an internal technical support person to perform routine maintenance on MIS equipment. Technical support operates out of the central office; the average travel time from the central office to one of the stores is one hour.
The challenge
Because the modems are being used as part of a business transaction, they must be reliable. Occasionally, as machines are reconfigured, the modems will lose their default settings. This will cause them to either fail to connect or to connect at lower speeds. Slow or failed connections that keep the customers waiting can lose sales for the stores. Also, with the potential for long travel times between headquarters and stores, the company wants to be able to do as much maintenance as possible by using remote dial-up connections.
Courier advantages
The Courier business modem can connect faster and more reliably than any consumer modem on the market, so the cashiers at the stores never have to worry about lost sales due to long waits or connection failures. The remote configuration and management features means that technical support personnel can perform management and configuration tasks for the Courier over the phone lines without the need for expensive and time-consuming travel.
Let’s look at the costs and time incurred when modems need to be reconfigured for this organization, comparing ordinary consumer modems against Courier.
Assumptions
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On average, each modem will require a reconfiguration once every six months.
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The typical consumer modem cannot be remotely configured, so a technician will have to travel to the store in order to perform the configuration for every modem that needs to be reconfigured.
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The operation of configuring and testing the modem after the reset will take about one hour per modem.
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Assume an average two-hour round trip travel time per store.
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The technician is paid at the rate of $50 per hour.
Annual maintenance costs for consumer modems
| Item | Cost | Amount | Total cost |
|---|---|---|---|
| Modem configuration and testing | $50.00/hr | 100 (1 hour/incident x 2 incidents/year/modem x 50 modems) | $5,000.00 |
| Travel time | $50.00/hr | 2 hours/site visit x 100 site visits | $5,000.00 |
| Total maintenance cost | $10,000.00 |
Annual maintenance costs for Courier modems
| Item | Cost | Amount | Total cost |
|---|---|---|---|
| Modem configuration and testing | $50.00/hr | 100 (1 hour/incident x 2 incidents/year/modem x 50 modems) | $5,000.00 |
| Travel time | None | [Configuration can be performed remotely] | $0.00 |
| Total maintenance cost | $5,000.00 |
Total cost comparison
| Item | Consumer modem | Courier modem | Difference |
|---|---|---|---|
| Modems (50) | $8,950 | $14,497.50 | $5,547.50 |
| Annual maintenance costs | $10,000.00 | $5,000.00 | –$5,000.00 |
| First year expenses (modem cost plus 12 months of operating expenses) | $18,950 | $19,497.50 | $547.50 |
| Subsequent year expenses | $10,000.00 | $5,000.00 | –$5,000.00 |
Although the initial investment in the Courier modem is higher, the long-term savings will allow the company to recover its initial investment cost after a little more than one year of operation. Also, there are additional indirect benefits to consider. Any time the technician spends traveling is time that he or she will not be available to fix other technical problems. The Courier allows technical support personnel to use their time more efficiently.