TABULA RASA

TEAM A PROJECT PART 1

EXECUTIVE SUMMARY
Feeding what is now a multimillion dollar industry, the tablet pc, or tablet, has been around since the 1990s. Only recently, however, has the market shown such incredible potential. As professional and recreational demand for tablets grows it is apparent the legal industry is critically lacking in technological advancements. Tabula Rasa is interested in bridging this gap in the legal industry by providing a legal-industry based tablet designed to provide digital, wireless access to the immense amount of critical information available to the legal professional; such as Magistrate Benchbooks. Our tablet will not only allow benchbook access, it will have many tablet-optimized features to keep the legal profession informed during travel. Tabula Rasa (blank slate) is a 4G (fastest wireless data network currently available), dynamic, mobile tablet that will fill the void for the legal and judicial markets, where competition has yet to take hold. We propose that our company take advantage of this opportunity by developing the Tabula Rasa tablet. We are estimating project costs to total $484,877 (including overhead). The project team recommends beginning production of this exciting new legal tablet and hit the market while others are napping in accordance with this proposal. Tabula Rasa expects to sell tablets with a retail price of $700 per tablet. Production cost is estimated at approximately $450 each. We are expecting Tabula Rasa to have about 1 million buyers over a three year period, and thus have a $250 million return on investment. With an increasing demand for a more dynamic approach to accessing legal information and the

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continued need for technological growth in the judicial system, Tabula Rasa is sure to be the #1 resource for the legal and judicial professions digital needs.

MARKET EVALUATION
After careful consideration of the steps required for this project, the Tabula Rasa project team has assembled and prepared all of their findings on the industry, consumer research, market trends, competition, project planning, and financial analysis for market feasibility. The Tabula Rasa team believes the time is ripe for taking this project from conceptual design to the market place in as timely a manner as possible. The legal and judicial device market is primed for profession-specific, technologically advanced tablets and the team expects to make great strides in bridging this critical gap for the specified professions. For this product, Tabula Rasa is focusing on the customer. We have personnel dedicated to performing data analysis on what the customer wants and what we anticipate they might need. We have selectively approached attorneys offices in several large metropolitan cities, outlining what we anticipate offering, and factoring in their critiques. In addition, we intend to provide post-sales surveys to customers and hope to capture and implement their ideas for improvement, thereby making our products better and more marketable for the future. The tablet industry has been around since the 1990s. However, there are few competitors in this multi-million dollar a year industry. In the final three months of 2010, Apple

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recorded sales of 7.3 million iPads for $4.61 billion in revenue (Long, 2011). Apples iPad, iOS (formerly known as iPhone), and iPod Touch have revolutionized the way people do business. The anticipated future market potential is staggering as people working in the legal industry exist in nearly every city, county, and state within the US and Canada; and they have vast amounts of information to reference. Any tool that speeds that process is highly valuable to what is largely a wealthy market mostly unaffected by economic swings. In addition, the company can capitalize on the untapped international market once the product is established. According to the American Bar Association, the total number of lawyers alone in America is now about 1.14 million (Karni, 2007); factor in the number of supporting legal staff and judicial employees and the significant market opportunity is readily apparent.

PROJECT DESCRIPTION
The project is broken down into 5 major phases over 34 weeks: Market Feasibility, Hardware Design, Software Design, Legal Industry Specifics, and Accessories. The Market Feasibility portion is designed to provide the project stakeholders with the detailed critical information they need to approve going forward with the project without risking significant costs. Once the decision is made to move forward with the project, all other phases continue in near parallel execution. See Appendix 1 for the complete WBS and Appendix 2 for the schedule. The Tabula Rasa project envisions a dynamic, mobile tablet device based on the Android OS, similar to the multi-faceted iPad. Our product differentiates from competing offerings by focusing on the legal and judicial markets. Target users will be paralegals, attorneys, judges,

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and other legal system personnel. This project is expected to transform current Magistrate Benchbooks from electronically formatted documents to an application accessible via our tablet with functionality beyond what is available today. Tabula Rasa will fill the current void in the legal market. The project will develop and host a Customized User Interface and server technologies to include, at minimum, benchbook table of contents, basic search capability, remembered historical searches and customized searches, plus all the other capabilities expected of a tablet: email, Internet, word processing, instant communications, and more. Beyond access to legal benchbooks, Tabula Rasa customers should expect one-touch access to perform application (aka app) multi-tasking to a variety of iPad-like favorite apps by taking advantage of the Android operating system and the existing Android market. Access to these Apps is expected to allow attorneys on the road to remain connected to the rest of the world and their desired legal information with what must prove to be a state-of-the-art tablet. Naturally, corporate controls will be implemented to allow IT department control over user permissions in larger corporate environments. We anticipate designing, testing, and developing our own hardware, applications, and accessories to make this project successful. Based on initial market feasibility analysis, there is little competition in the legal tablet marketplace and initial indications from third-party analysts point to a profitable return on investment.

COST ESTIMATE
Table 1 shows the breakdown of the costs on the project for each of the 44 bottom-level tasks included in this project. As the majority of product costs are determined by an outsourced manufacturer, the project costs listed are primarily labor costs. See the Advanced 4|Page

Cost Estimate section for detail on the manufacturers quote. See Appendix 1 for the complete task structure and Appendix 2 files for complete resource listing and assumptions. All tasks are assumed to be labor costs unless denoted otherwise. Total Project Cost is currently estimated at $484,877.
Table 1 Bottom Level Task Costs Task
1.1.1.1 1.1.1.2 1.1.2.1 1.1.2.2 1.1.3.1 1.1.3.2 1.1.4.1 1.1.4.2 1.1.5.1 1.1.5.2 1.3.1.1 1.3.1.2 1.3.1.3 1.3.1.4 1.3.2.1.1.1 1.3.2.1.1.2 1.3.2.1.2 1.3.2.2 1.3.3 1.4.1.1 1.4.1.2 1.4.1.3 1.4.2.1 1.4.2.2 1.4.3 1.5.1 1.5.2.1 1.5.2.2 1.5.2.3 1.5.2.4 1.5.3.1 1.5.3.2 1.5.3.3 1.5.4 1.6.1.1 1.6.1.2.1 1.6.1.2.2 1.6.1.3 1.6.1.4 1.6.2 1.6.3 1.6.4 Perform Data Analysis Interview Potential Customers 60% Material Perform Trend Analysis Compile Findings Execute Internet Searches Document Results Calculate Projected Costs Calculate Expected ROI Assemble All Findings Prepare Findings Consumer Ergonomic Evaluation 82% Material Ergonomic Design Recommendations Form Factor Design 30% Material Feature Selection Core Components Selection Connectivity Solutions Motherboard Integration 22% Material Final Design Review Manufacturing Plant Selection 33% Travel Brainstorm Desired Applications Create Applications Test Applications 3% Material Integrate All Applications and CUI Load Testing 6% Material Final Integration & Testing 6% Material Software licensing 99% Material Develop CUI Requirements Develop CUI CUI Hosting CUI Testing Convert files Hyperlinking citations HTML Formatting CUI Maintenance Device Protection Power Adapters Interface Adapters Device Docking Creative Accessories Invite/Poll Accessory Manufacturers Consumer Reviews Marketability Project Cost before Overhead:

Cost
$4,000 $10,000 $6,000 $1,000 $2,000 $1,000 $1,000 $2,000 $4,250 $4,250 $15,800 $1,800 $24,700 $4,000 $28,000 $8,800 $21,800 $8,100 $15,000 $16,920 $84,600 $29,200 $13,200 $17,400 $15,800 $5,060 $7,100 $6,000 $5,200 $11,200 $5,200 $5,200 $1,760 $330 $4,000 $4,000 $4,000 $4,000 $4,000 $8,000 $4,000 $4,000 $423,670

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Overhead costs are calculated using the companys expected overall overhead for the year, prorating for the portion of the year consumed by the project, and dividing according to the overhead responsibility in relation to the other projects

Table 2 Overhead Impact on Project Cost Annual Overhead: $150,000 34 of 52 Weeks: $98,077 25% of Overhead Rate: $0.16 Total Project Overhead: $61,207 Project Cost: $423,670 Total Project Cost: $484,877 Total Project Cost Per Unit: $0.48

underway in the company. Estimated overhead for the entire company for the year is $150,000. Factoring in project duration of 34 weeks produces $98,077 and factoring a 25% overhead responsibility rate (based on company resource usage) yields $0.16 per dollar of labor. The resulting overhead cost for $374,440 of projected labor is $61,207. Therefore, total project cost spread over the project lifetime is $484,877. With expected sales of 1 million units, project cost per unit is $0.48 Refer to Table 2 for specifics. See the next section for production cost details.

ADVANCED COST ESTIMATE

Project costs are forecasted with current employee salary rates and estimates based on prior projects. As the end-product will be manufactured by an outsourced manufacturer, the majority of overall production cost estimates are determined by the quote provided by the manufacturer based on the initial specifications determined by the project team. Included with the manufacturers product cost is a breakdown of major components and their sensitivity to market forces. The contingency estimates are shown below. In essence, this method illustrates which elements of the project are subject to price fluctuations and uses a standardized contingency methodology to estimate the worst-case estimate of price increases. Table 3 illustrates the specific materials that have price fluctuations and Table 4 illustrates how much 6|Page

each category is expected to fluctuate. Table 5 summarizes the differences between expected costs and worst-case costs. The highest price sensitivity is in the IPS (In-Plane Switching) screen, copper, and silicon. IPS is the latest screen technology and as such, availability fluctuates significantly. Bottom line, expected profit remains at $250 million while worst case profit is at a still sizeable $115.15 million.
Table 3 Advanced Cost Estimate Categories (Contingency Estimation) Item IPS Screen Copper Silicon Processor Memory (RAM) Fixed Memory (DRAM) Other Parts Case Labor Packing and shipping Total cost for 1 tablet $ $ $ $ $ $ $ $ $ $ $ Quote 120.00 75.00 12.00 50.00 45.00 14.00 3.00 6.00 100.00 25.00 450.00 Cost Category Order of Magnitude (market price) Order of Magnitude (market price) Order of Magnitude (market price) Budget (existing supplier) Budget (existing supplier) Budget (existing supplier) Definitive (market standards) Budget (existing supplier) Definitive (based on current personnel rates) Definitive (fixed cost based on shipping rates) Manufacturers Quote

Table 4 Adjustment Rates for Contingency Categories Category Order of Magnitude Budget Definitive Adjustment -25%, +50% -10%, +20% -5%, +5% Total Base Cost $ 207.00 $ 128.00 $ 115.00 $ 450.00 Adjusted $ 310.50 $ 153.60 $ 120.75 $ 584.85

Table 5 Expected Cost vs Worst Case Costs Sale Price: Adjusted Total*: Per Tablet Profit: Total 3-year Profit: Expected $ 700.00 $ 450.48 $ 249.52 Worst Case $ 700.00 $ 584.93 $ 115.15

$250M

$115.15M

*-includes Total Project Cost Per Unit

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COST ASSUMPTIONS
This documents the assumptions used to quantify materials and unit costs for the Preliminary Cost Estimate prepared for the Tabula Rasa Legal Industry Tablet Project. Costs are assumed for manufacturing 1,000,000 tablets. Each customer would purchase a maintenance package to accompany the benchbook material annually and has been priced accordingly in our estimates. Customers who purchase the Tabula Rasa would be required to gain access to the internet through one of the recommended providers at their own cost. Only data included in the benchbook will be converted to the CUI on the Tablet, no additional legislative material, cases, or other legal material is included in the conversion costs. Overhead is estimated based on $150,000 per year for the entire organization. Our project will consume 25% of the overhead for a time period of 34 weeks, and is therefore estimated at $61,207. (Detailed calculations can be found in the Cost Estimate section of this document) Current manufacturers price has been assumed for the IPS (In-Plane switching) unit within the Tablet. Copper and Silicon are also assumed to be valued at current market price.
GENERAL ASSUMPTIONS:

Market Feasibility assumes a strong desire by the legal community to find a way to use electronically available features to increase effectiveness. Our assumptions would include the assumption that our lower price point of Tabula Rasa will inspire the legal community and generate demand.

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Hardware Design assumptions would consider that the tablet is manufactured to include wireless adapter for Internet and local network connection necessary for this type of equipment. The design would use the same hardware as other tablets. It would include the minimum hardware requirements included in the systems requirements documentation. This includes processors, memory, screen resolution and other particulars. Software Design assumes that the tablet is running on the Android operating system and meets all the minimum software requirements included in the system requirements documentation. Legal Industry Design Assumptions include that the data received for the particular benchbook to be converted is inclusive and in a readable format. Each request for a different benchbook would be a separate add-on to the tablet.

FINANCIAL ANALYSIS
The categories in the financial breakdown are salaries, material parts, travel, and overhead. These four main categories comprise the costs of the entire project. The company expects to spend $450.48 to build one tablet with the assumption of 1 million tablets sold. At a $700 price point, we estimate 1 million people will purchase our product over a period of three years for total revenue of $700
Table 6 Project Costs

Category Labor Material Travel Overhead

Price $374,440 $35,730 $13,500 $61,207 Total: $484,877

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million, or $233.3 million annually. Estimated cost to produce one tablet is $450, or $450 million for 1 million tablets. Thus, the projected gain on investment is approximately $250 million over a 3 year period, or a 55.6% return on investment.
Table 7 Return on Investment Calculator
Return on Investment Calculator Original Investment ($) Investment Start Date Returned Value ($) Investment End Date Calculator Results: Gain or Loss on Investment ($) Investment Term (Years) Return on Investment (%) Simple Annualized ROI (%) $250 M 3.0 55.6% 18.5% $450 M 4/1/2011 $700 M 4/1/2014

The project team cost planning is based on the Product Cost Planning process to understand the cost of supplies, parts, and suppliers. An operating cycle for a company must also consider the purchasing of raw materials if starting a new product, investing in inventory, and creating accounts receivables with extended credit. Examples of tracing and
Figure 1 - Product Cost Planning

displaying different requirements are: using standard cost estimate that has been released for material valuation and to calculate the costs of sales that have been reconciled with financial accounting for the goods issue key day; they calculate the contribution margins for group 10 | P a g e

production costs and then valuate sold products using group costing. To the right is Figure 1 highlighting the process in which the project uses the combination of the costing key and the assignment of the costing key to characteristics (Valuation). The Net Present Value (or NPV) as calculated using the formula in Figure 2) of the Tabula Rasa project, assuming an 8% discount rate produces results as shown in Table 8 for the next 3 years. This means that
Figure 1 - NPV Formula

in todays value of money, the Tabula Rasa project would yield $214.2M over the course of the next three years (Anthes). Table 9 illustrates the NPV for the same period assuming worst case revenues from the contingency estimates results in profit of $98.4M.
Table 8 - Net Present Value per Year of Operations Years Cash Inflow Cash Outflow Cash Flow Elapsed 0 $0 $484,877 -$484,877 1 2 3 $233,333,333 $150,000,000 $83,333,333 $233,333,333 $150,000,000 $83,333,333 $233,333,333 $150,000,000 $83,333,333 Based on $450M annual cost

Discount Rate 8% 8% 8% 8% NPV:

Present Value $ (484,877)

$ 77,160,494 $ 71,444,902 $ 66,152,687 $ 214,273,238

Table 9 - Net Present Value per Year of Operations (Worst Case) Years Discount Cash Inflow Cash Outflow Cash Flow Elapsed Rate 0 $0 $484,877 -$484,877 8% 1 2 3 $233,333,333 $194,950,000 $38,383,333 $233,333,333 $194,950,000 $38,383,333 $233,333,333 $194,950,000 $38,383,333 Based on $584.4M annual cost 8% 8% 8% NPV:

Present Value $ (484,877)

$ 35,540,123 $ 32,907,522 $ 30,469,928 $ 98,432,729

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CONCLUSION
Tabula Rasa will make a name for the company by capitalizing on an untapped industry worth millions by serving the needs of legal and judicial professionals around the world. Cost/Benefit analysis indicates that the project will produce significant corporate profit and fuel future growth. Contingency costing makes clear that even worst case market prices would still yield a sizeable profit. Bottom line: clearly, the Tabula Rasa project would be good for the health of the company.

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APPENDIX 1 - WORK BREAKDOWN STRUCTURE

1. Tabula Rasa Legal Industry Tablet 1.1. Market Feasibility 1.1.1. Establish Market Feasibility 1.1.1.1. Perform Data Analysis 1.1.1.2. Interview Potential Customers 1.1.2. Review Market Trends 1.1.2.1. Perform Trend Analysis 1.1.2.2. Compile Findings 1.1.3. Research Competition 1.1.3.1. Execute Internet Searches 1.1.3.2. Document Results 1.1.4. Profitability Analysis 1.1.4.1. Calculate Costs 1.1.4.2. Calculate Expected ROI 1.1.5. Market Evaluation 1.1.5.1. Assemble All Findings 1.1.5.2. Prepare Findings 1.1.5.3. Submit Market Feasibility (Milestone) 1.2. Project Approval Decision 1.3. Hardware Design 1.3.1. Consumer Experience 1.3.1.1. Consumer Ergonomic Evaluation 1.3.1.2. Ergonomic Design Recommendations 1.3.1.3. Form Factor Design 1.3.1.4. Feature Selection 1.3.2. Specifications 1.3.2.1. Internal Design/Integration 1.3.2.1.1. Component/Supplier Selection 1.3.2.1.1.1. Core Components Selection 1.3.2.1.1.2. Connectivity Solutions 1.3.2.1.2. Motherboard Integration 1.3.2.2. Final Design Review 1.3.3. Manufacturing Plant Selection 1.4. Software Design 13 | P a g e

1.4.1. Custom Software Design 1.4.1.1. Brainstorm Desired Applications 1.4.1.2. Create Applications 1.4.1.3. Test Applications 1.4.2. Application Integration 1.4.2.1. Integrate All Applications and CUI 1.4.2.2. Load Testing 1.4.3. Final Integration & Testing 1.5. Legal industry Design Particulars 1.5.1. Software licensing 1.5.2. Develop Custom User Interface (CUI) 1.5.2.1. Develop CUI Requirements 1.5.2.2. Develop CUI 1.5.2.3. CUI Hosting 1.5.2.4. CUI Testing 1.5.3. Document Conversion 1.5.3.1. Converting files 1.5.3.2. Hyperlinking citations 1.5.3.3. HTML Formatting 1.5.4. CUI Maintenance 1.6. Accessories 1.6.1. Determine Accessory Product Lines 1.6.1.1. Device Protection 1.6.1.2. Device Connectivity/Compatibility 1.6.1.2.1. Power Adapters 1.6.1.2.2. Interface Adapters 1.6.1.3. Device Docking 1.6.1.4. Creative Accessories 1.6.2. Invite/Poll Accessory Manufacturers 1.6.3. Consumer Reviews 1.6.4. Marketability

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APPENDIX 2
Tabula Rasa MS Project File (2010 version)

PM592-ClassProjectTeamA-2010.mpp

Tabula Rasa MS Project File (2007 version)

PM592-ClassProjectTeamA-2007.mpp

Tabula Rasa WBS Drawing (Visio 2010)

PM592-WBSDrawingTeamA.vsd

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REFERENCES
Anthes, Gary. (2003). Computer World, ROI Guide: Net Present Value, Retrieved from http://www.computerworld.com/s/article/78530/ROI_Guide_Net_Present_Value Karni, Annie. 2007. The New York Sun. Tidal Wave of Lawyers nears, Bar Data Forewarn. Retrieved from http://www.nysun.com/new-york/tidal-wave-of-lawyers-nears-bar-dataforewarn/67423/ Long, M. (2011). Strong iPad Sales Drive Apples Huge Revenue Gain. Yahoo! News. Retrieved from http://news.yahoo.com/s/nf/20110119/tc_nf/76970 Kimley-Hom and Associates, Inc. (2010) Intelligent Transportation System Strategic Deployment Plan update, Final Cost Estimate Report, SAP Library Profitability Analysis; Valuation Using Material Cost Estimates, found at http://helps.sap.com/saphelp_46C/helpdata/en7a

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