San Francisco Bay Consulting

San Francisco Bay Consulting (SF Bay Consulting), as described in the Harvard Business School case by Baker and Monsler (1995), is a leading business consultancy and litigation support group following the goal of providing “practical application of economic theory to business problems” (p. 1). In order to manipulate and analyze data, high-end software and computers are used to serve clients’ needs. The company faces serious internal problems regarding the relationship between their consultants and the computer services (CS) staff because of disagreements concerning the transfer pricing system, which is applied to alleviate the procurement and payment of computer resources. The major challenges for this system are the heavy price drops for computer hardware and the broadness of the researchers demands. The management of SF Bay Consulting forbids their employees to purchase their own computer hardware and software which leads to frustration among the consultants, especially in the case when the CS department refuses to buy and supply certain hardware and software requested by the consultants. The worst scenario occurred when transfer prices produced charges to clients’ bills that exceeded the current market price for the computer as it has happened with the SUN workstation.
Donald Learner, Chief Financial Officer of SF Bay Consulting, now sees himself in charge to find a solution to the current problems that is able to satisfy both, the consultants as well as the CS employees. For this purpose, he has identified three options: a) Stick to the current system, b) make CS a profit center, or c) run CS as an expense center. Due to the fact that the current situation at SF Bay Consulting is going to escalade if it is further made use of, option a) is not recommendable and a different solution has to be found. Otherwise the working environment will be seriously affected in the long run and thus efficiency of the company might decrease to an undesirable level. Option