Operations and Cost Management: CitySoft's Future Profitability

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ACC503-CitySoft Case Analysis

1. Should we be concerned that CitySoft is focusing on cost, operational control, systems, and quality at the expense of growth? Answer: We don’t need to be concerned about this issue too much. Actually CitySoft has been growing fast since 1998 to 1999, and it is the time to focus more on its cost, operational control and systems in order to improve CitySoft’s profitability in the future. Refining the process of operation and cost management is quite necessary for CitySoft at this point, because if it kept expanding without improving its cost, operational control and system management, it would make little profit according to the huge cash flow. We can see clearly that CitySoft has already invested much on expansion, and its ratio of profit to revenue decreased a lot.

2. What are the decisions facing CitySoft?  Give both one-time decisions and decisions it will have to make on an on-going basis. Answer: One-time decisions are: focus on growth or measurement and management improvement; apply fixed price contracts or cost-plus contracts. On-going basing decisions include: How to adopt refinement of its cost measurement system, project management, quality control management and labor resource management.

3. How does the information systems environment at CitySoft differ from that at more traditional companies? Answer: CitySoft record information mainly by manual paper work instead of advanced electronic information system tools, and the information management system is decentralized. There was hardly any information integration and information analysis in CitySoft, which is typical in a startup company but distinctive from traditional companies.

4. Should CitySoft take fixed price contracts or cost-plus contracts?  When is a good cost-measurement system more valuable? Answer: CitySoft should take cost-plus contracts, because just as the case mentions that clients tend to change their plan...
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