Handstar Inc Essay Example for Free

Handstar Inc EssayHandstar Inc. was take a leakd a slender over four years ago by two college roommates to develop software applications for handheld cypher devices. It has since grown to ten employees with yearly gross revenue approaching $1. 5 million. Handstars original harvest-tide was an cost report application that al small-scaleed wontrs to record expenses on their handheld computers and then import these expenses into a spreadsheet that then create an expense report in one of five standard formats.Based on the success of its outset product, Handstar subsequently developed three additional software products a computer programme for tracking and measuring the cognitive process of investment portfolios- a calendar program, and a program that allowed occasionrs to download their email messages from their PC and read them on their handheld computers. The two founders of Handstar have recently become concerned about the competitiveness of their offerings, particularl y since no(prenominal) of them has been updated after their initial launch.Therefore, they asked the directors of product outgrowth and trade to work together and prepare a key out of potential construes for updating Handstars current offerings as well as to develop ideas for additional offerings. The directors were also asked to cast the development costs of the various stick outs, product revenues, and the likelihood that Handstar could retain or obtain a leading position for the given product. Also, with the increasing popularity of the Internet, the founders asked the directors to evaluate the extent to which the products made use of the Internet.The product development and marketing directors identified three projects related to updating Handstars existing products. The first project would integrate Handstars current calendar program with its email program. Integrating these two applications into a single program would provide a consequence of benefits to users such a s allowing them to automatically enter the dates of meetings into the calendar based on the content of an email message. The directors estimated that this project would require 1250 arcminutes of software development time.Revenues in the first year of the products launch were estimated to be $750,000. However, because the directors expected that a large percentage of the users would liable(predicate) upgrade to this new product soon after its introduction, they projected that yearbook sales would decline by 10 percent annually in subsequent years. The directors speculated that Handstar was moderately likely to obtain a leading position in email/calendar programs if this project were undertaken and mat this program made moderate use of the Internet. The flake project related to updating the expense report program.The directors estimated that this project would require 400 hours of development time. Sales were estimated to be $250,000 in the first year and to increase 5 percent annually in subsequent years. The directors speculated that completing this project would almost certainly maintain Handstars lead position in the expense report category, although it made little use of the Internet. The last product sweetening project required enhancing the existing portfolio tracking program. This project would require 750 hours of development time and would generate first-year sales of $500,000.Sales were projected to increase 5 percent annually in subsequent years. The directors felt this project would have a high probability of maintaining Handstars leadership position in this category and the product would make moderate use of the Internet. The directors also identified three opportunities for new products. One project was the development of a spreadsheet program that could share files with spread-sheet programs written for PCs. Developing this product would require 2500 hours of development time. First-year sales were estimated to be $1,000,000 with an annu al growth rate of 10 percent.While this product did not make use of the Internet, the directors felt that Handstar had a moderate chance of obtaining a leadership position in this product category. The second new product opportunity identified was a Web browser. Developing this product would require 1875 development hours. First-year sales were estimated to be $2,500,000 with an annual growth rate of 15 percent. Although this application made all-embracing use of the Internet, the directors felt that there was a very low probability that Handstar could obtain a leadership position in this product category.The final product opportunity identified was a trip planner program that would work in conjunction with a PC connected to the Web and download go instructions to the users handheld computer. This product would require 6250 hours of development time. First-year sales were projected to be $1,300,000 with an annual growth rate of 5 percent. Like the Web browser program, the director s felt that there was a low probability that Handstar could obtain a leadership position in this category, although the program would make extensive use of the Internet.In evaluating the projects, the founders believed it was reasonable to assume each product had a three-year life. They also felt that a snub rate of 12 percent fairly reflected the companys cost of capital. An analysis of pay-roll records indicated that the cost of software developers is $52 per hour including salary and fringe benefits. Currently there are four software developers on staff, and each whole works 2500 hours per year. Which option should they choose?