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Option #1: Application Development: Build In-House or Outsource Decision Tree

Build a decision tree to decide if your project team should develop an application that will allow users to readily access their accounting spreadsheets, or should this effort be outsourced to a contractor?

During the requirements gathering for the project, the requirements were not completed accurately. Therefore, there is a risk that the final product will not pass the customer-acceptance test. Although doing the project in-house will be expensive, the chances of user acceptance are high, thus preventing a costly rework of the project.

Use the information in the table below to decide whether you want to build the application in-house
or outsource it.

Create a decision tree to show outcomes for each decision node using the SilverDecisions website (http://silverdecisions.pl/SilverDecisions.html?lang=en (Links to an external site.)). Please note: while the SilverDecisions tool is intuitive, you can find a manual at the following site: http://silverdecisions.pl/ (Links to an external site.).

Calculate expected value of each outcome and show your calculations (Probability X Impact).

Export your decision tree as a png. file and save it on your computer.

1. Explain the best option based on the outcome, and why.

Cost to build the application in-house.

1. $125,000

Cost to outsource to a contractor

$90,000

Probability of passing the user acceptance test.

85%

1. Probability of passing the user acceptance test if work is outsourced.
2. 15%
3. Cost of rework after the user acceptance test if build in-house.

$40,000

Cost of rework after the user acceptance test if work is outsourced.

$50,000