Outsourcing can reduce overall costs, making it a good option for IT investments viewed through an EVA analysis. This example compares the cost of in-house versus outsourced applications:Manitowoc\u2019s application is expected to generate $180,000 in net benefits whether outsourced or in-house. IN-HOUSE EVA SCENARIO:The in-house option requires a $1 million capital investment with a 12 percent cost of capital: $180,000 - ($1 million x 12%) = $60,000(The in-house scenario also assumes a $50,000 annual operating expense.)OUTSOURCED EVA SCENARIO:The outsourced option requires no capital investment, but $80,000 per year in service fees: $180,000 - ($0 - $80,000) = $100,000Looking at both scenarios from a balance sheet basis, the company would choose to not outsource, since the presumed $50,000 annual operating cost for the in-house application is cheaper than the $80,000 outsourcing fee.However, outsourcing eradicates the $1 million initial capital investment required to purchase the in-house application. So when considering both scenarios with an EVA analysis, the company would definitely choose to outsource since that saves the initial capital investment.