Cost and Benefit Analysis

1. Benefits:
Benefits Calculation Total savings per year
Reduced Salary RM 3000 ×30 × 365 days ×30 % RM 324,000.00
Reduced Bonus 1.82 % × RM 324,000.00 RM 5,896.80
According to Salary Expert (n.d.) and Glassdoor (2024), the average salary for a virtual
chat agent is RM3000, and the average bonus rate is 1.82%. Based on research, an AI
chatbot could reduce interaction handle time by up to 30% (“The Total Economic Impact
of IBM Watson Assistant,” 2023). Assuming that MAS Airlines has a total of 30 human
agents currently, the 5-year total savings on salary and bonus will be RM 1,620,000 and
RM 29,484, respectively.
In addition, Gen AI has the ability to analyze data trends and integrate data with existing
CRM systems and social media platforms, saving cost spent on these processes.
According to Brevo (2024), the median cost of data analysis is estimated to be RM
256,973.75 per year. Additionally, data integration across applications using cloud
service costs RM 46,720 per year (Midura, 2022). By leveraging generative AI for both
data analysis and integration, MAS Airlines can reduce a total of RM 303,693.75 on
data analysis and integration.

2. Cost:
In-house development
 Development team
A development team should comprise of a project lead, 5 software developers, 5
machine learning engineers, and 5 user interface designers. According to Salary Expert
(n.d.), the average annual salary for a software developer lead and a software
development programmer is RM 184,681 and RM166,774, respectively. Also, a
machine learning engineer costs RM 6,450 monthly, while a UI designer costs RM 4000
monthly (Glassdoor, n.d.). The estimated development period is 6 months. Also,
trainings will be provided for all the development team members, which is estimated to
cost RM 5,190.87 each (Nexwell, n.d.).
Position Calculation Total cost (RM)
Lead RM 184,681 × 6/12 months 92,340.50
 Programmer RM166,774 × 6/12 months × 5 416,917.50
Machine learning Engineer RM 6,450 × 6 months × 5 193,500.00
UI designer RM 4,000 × 6 months × 5 120,000.00
Trainings for 40 members RM 1,111 × 40 129,771.75
Total 952,529.75
 Hardware and software
Additionally, the hardware and software needed to build and run Gen AI Chatbot are
GPU, Ice Drive, and IBM Watsons (Hardy, 2024). . A unit of Nvidia A100 GPU is
needed for neural network training due to parallel processing capabilities, and its cost is
estimated to be RM 234,424.56 (Reilly, 2024). Also, IBM Watsons, which are required
for NLP development, cost RM 7,849.44 annually (“The Total Economic Impact of IBM
Watson Assistant,” 2023). Additionally, an Ice Drive, which is needed for data storage,
costs RM 27.99 monthly (Plans & Pricing, Icedrive, n.d.).
Hardware/software Annual cost (RM)
Nvidia A100 GPU 46,720.00
IBM Watsons 7,849.44
Ice drive 27.99 × 12 months = 335.88
Total 54,905.32
 Development process
Building a Gen AI chatbot would cost approximately RM 700,800.00 (Pohrebniyak,
2024). Based on the percentage of each component of the development cost estimated
by Hardy (2024), the development cost is broken down as follows:
Development process Percentage Costs (RM)
Planning and Research 6% 39,941.97
Design (UX/UI) 16% 108,932.64
Front-end Development 22% 152,505.70
Back-end Development 27% 192,447.67
Integration 15% 101,670.47
Testing 7% 47,204.15
Deployment 8% 58,097.41
Total 700,800.00

In addition, according to estimation by Hardy (2024), the cost for security and
compliance is $5,840.00. In summary, the initial cost of the first year is as shown below:
 Costs Amount (RM)
In-house development team 952,529.75
Hardware and software 54,905.32
Development cost of Gen AI chatbot 700,800.00
Security and compliance 5,840.00
Total 1,714,075.07

Outsourced Software Packages

According to Kodukula (2024), the estimated cost of an outsourced software package is
RM 23,360.00 per project. The breakdown of costs incurred in the first year is as
follows:
Costs Amount (RM)
Outsourcing fee 23,360.00
Hardware and software 54,905.32
Deployment 174,630.02
Development cost of Gen AI chatbot 700,800.00
Total 953,695.34
The initial cost of outsourcing is significantly lower than that of in-house development,
with a difference of 71.73%.

Subsequent annual cost

In addition of data storage fees, IBM Watsons License fee, security and compliance
cost, subsequent annual cost includes costs for hosting, technical support,
maintenance, upgrades, analytics and reporting, and content updates which are shown
below
Costs Amount (RM)
Hosting cost 1,285.80
Technical support 12,848.00
Maintenance and upgrades 14,016.00
Content updates 5,840.00
Analytics and reporting 2,569.60
Total 36,559.40
Security and compliance 5,840.00
IBM Watsons 7,849.44
Ice drive 335.88
Total 50,584.72
All the estimated costs, except the software fees, are based on the research by Hardy
(2024).

Payback period analysis

Cumulative Cumulative
Cumulative Benefit
Year Cost (RM) Benefit net cash flow
cost (RM) (RM)
(RM) (RM)
In-house development:
(1,882,865.09
0 1,882,865.09 1,882,865.09 - -
)
(1,346,579.26
1 50,584.72 1,933,449.81 586,870.55 586,870.55
)
2 50,584.72 1,984,034.53 586,870.55 1,173,741.10 (810,293.43)
3 50,584.72 2,034,619.25 586,870.55 1,760,611.65 (274,007.60)
4 50,584.72 2,085,203.97 586,870.55 2,347,482.20 262,278.23
5 50,584.72 2,135,788.69 586,870.55 2,934,352.75 798,564.06
Outsourced Software Packages:
0 953,695.34 953,695.34 - - (953,695.34)
1 50,584.72 1,004,280.06 586,870.55 586,870.55 (417,409.51)
2 50,584.72 1,054,864.78 586,870.55 1,173,741.10 118,876.32
3 50,584.72 1,105,449.50 586,870.55 1,760,611.65 655,162.15
4 50,584.72 1,156,034.22 586,870.55 2,347,482.20 1,191,447.98
5 50,584.72 1,206,618.94 586,870.55 2,934,352.75 1,727,733.81

Software Acquisition Alternatives Payback Period

In-house development 4+( 182,097.30
333,214.84 )
=4.55 yrs

2+(
403,189.95 )
182,097.30
Outsourced Software Packages =2.06 yrs

PV analysis and return on investment

In-house development
Y0 Y1 Y2 Y3 Y4 Y5
RM RM RM RM RM RM
Benefits
Reduced payroll expenses
Salary (40 pax) - 432,000.00 432,000.00 432,000.00 432,000.00 432,000.00
Bonus (40 pax) - 7,862.40 7,862.40 7,862.40 7,862.40 7,862.40
Reduced operational cost
Cost of analysing data 256,973.75 256,973.75 256,973.75 256,973.75 256,973.75
Total - 696,836.15 696,836.15 696,836.15 696,836.15 696,836.15
Factor (10% discount rate) 1.00 0.91 0.83 0.75 0.68 0.62
PV of benefits - 633,487.41 575,897.64 523,543.31 475,948.47 432,680.42 2,641,557.26

Costs
Development team 952,529.75
Development cost 700,800.00 - - - - -
Hardware 46,720.00
Icedrive 335.88 335.88 335.88 335.88 335.88 335.88
IBM Watsons 7,849.44 7,849.44 7,849.44 7,849.44 7,849.44 7,849.44
Security and compliance cost 5,840.00 5,840.00 5,840.00 5,840.00 5,840.00 5,840.00
Subsequent monthly cost - 36,559.40 36,559.40 36,559.40 36,559.40 36,559.40
Total 1,714,075.07 50,584.72 50,584.72 50,584.72 50,584.72 50,584.72
Factor (10% discount rate) 1.00 0.91 0.83 0.75 0.68 0.62
PV of cost 1,714,075.07 45,986.11 41,805.55 38,005.05 34,550.04 31,409.13 1,905,830.96

Outsourced Software Packages

Y0 Y1 Y2 Y3 Y4 Y5
RM RM RM RM RM RM
Benefits
Reduced payroll expenses
Salary (30 pax) - 432,000.00 432,000.00 432,000.00 432,000.00 432,000.00
Bonus (30 pax) - 7,862.40 7,862.40 7,862.40 7,862.40 7,862.40
Reduced operational cost
Cost of analysing data 256,973.75 256,973.75 256,973.75 256,973.75 256,973.75
Total - 696,836.15 696,836.15 696,836.15 696,836.15 696,836.15
Factor (10% discount rate) 1.00 0.91 0.83 0.75 0.68 0.62
PV of benefits - 633,487.41 575,897.64 523,543.31 475,948.47 432,680.42 2,641,557.26

Costs
Outsorced development fees 23,360.00
Development cost 700,800.00
Hardware 46,720.00
Data storage - Icedrive 335.88 335.88 335.88 335.88 335.88 335.88
NLP-IBM Watsons license fees 7,849.44 7,849.44 7,849.44 7,849.44 7,849.44 7,849.44
Security and compliance cost 5,840.00 5,840.00 5,840.00 5,840.00 5,840.00 5,840.00
Subsequent monthly cost - 36,559.40 36,559.40 36,559.40 36,559.40 36,559.40
Total 784,905.32 50,584.72 50,584.72 50,584.72 50,584.72 50,584.72
Factor (10% discount rate) 1.00 0.91 0.83 0.75 0.68 0.62
PV of cost 784,905.32 45,986.11 41,805.55 38,005.05 34,550.04 31,409.13 976,661.21

ROI computation:
 In-house development Outsourced Software Packages
( 2,641,557.26−1,905,830.96 ) (2,641,557.26−976,661.21)
×100 %=39 % ×100 %=170 %
1,905,830.96 976,661.21

Input screen
On mobile phone: - On PC: -
 Output screen: -

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