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Vinsun Infra

Engineering:
ERP On-Premise or On
Cloud

Group F8:
Soumyasree
Sridhar
Tripti
Vipul

(0391/52)
(0392/52)
(0417/52)
(0443/52)

1. What are the pros and cons associated with each service option?
Pros

Cons

Bluechip ERP on
premise

Codeautomation
ERP on premise

Codeautomation
ERP on cloud

Reliability of service and


quality of product
High credibility of the
agency due to extensive
prior experience in the
domain
No internet connectivity
required resulting in
secure operations
Lower security concerns
as data is stored on own
database
Customization options
available
Low investment and
maintenance cost
Customizable solutions
No internet connectivity
required resulting in
secure operations
Lower security concerns
as data is stored on own
database

Low initial investment


Easily scalable during
expansion of firm
Database available for
onsite workers
Flexibility of storage
space during growth and
recession phases
Operational risk lies with
service provider

High initial investment,


much higher than the
budget
Yearly costs also higher
than other alternatives
Unnecessary features in
the product presently
Database not available
for onsite workers
Not scalable easily
during growth phase

Concerns of Unreliable
service due to lack of
experience
Product quality is
questionable as it is a
startup
Database not available
for onsite workers
Not scalable easily
during growth phase
High recurring annual
costs (2.11-2.31 times
of option 2)
High Security Concerns
due to data transfer via
internet and data
storage on service
provider database
Employees may not be
tech-saavy
Concerns over service
as it as a startup and
the cloud technology is
also new

2. Evaluate TCO over a period of five years for the options available to
VINSUN?
5 year costs for Bluechip ERP on premise

Workstations
Workstation UPS
Laptops
Server
Backup server
Server UPS system
Total hardware costs
ERP Application
software
Consulting
Deployment cost
Training
Total software cost
Hardware maintenance
Software maintenance
Annual cost

Initial
First
Cost
year
209700
0
22290
0
132488
0
100000
0
100000
0
7750
0
572228
0
960000
80000
520000
180000
174000
0
0
0
231222
8

0
0
0
0
0
57223
31320
0
37042
3

Second
year
0
0
0
0
0
0
0
0
0
0
0
0
57223
313200
370423

Third
year

Fourth
year

Fifth
year

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
57223
31320
0
37042
3

0
57223
313200
370423

5 year costs for Codeautomation ERP on premise


Initial
First
Second
Third
Fourth
Cost
year
year
year
year
Workstations
209700
0
0
0
0
Workstation UPS
22290
0
0
0
0
Laptops
132488
0
0
0
0
Server
70000
0
0
0
0
Back-up server
70000
0
0
0
0
Server UPS system
7750
0
0
0
0
Total hardware costs
512228
0
0
0
0
ERP Application
software
240000
0
0
0
0
Installation cost
200000
0
0
0
0
Total software cost
440000
0
0
0
0
Hardware maintenance
0 51223
51223 51223
51223
Software maintenance
0 66000
66000 66000
66000
Router
15479
0
0
0
0

0
57223
31320
0
37042
3

Fifth
year
0
0
0
0
0
0
0
0
0
0
51223
66000
0

Network infrastructure
setup
Router maintenance
Network maintenance
Internet line
Annual cost

120000
0
0
0
108770
7

0
1548
12000
11988
14275
9

0
1548
12000
11988
142759

0
1548
12000
11988
14275
9

0
1548
12000
11988
142759

0
1548
12000
11988
14275
9

5 year costs for Codeautomation ERP on cloud

Workstations
Workstation UPS
Laptops
Total hardware costs
Servicing Fee
Data storage cost
Total software cost
Hardware maintenance
Software maintenance
Router
Network infrastructure
setup
Router maintenance
Network maintenance
Internet line
Annual cost

Initial
First
Second
Cost
year
year
209700
0
0
22290
0
0
132488
0
0
364478
0
0
19200
0
0
192000
0 60000
66000
0
0
0
0 36448
36448
25200
0
0
258000
15479
0
0
0
0
0
0
379957

Option

0
1548
0
11988
30198
4

0
1548
0
11988
307984

Third
year
0
0
0
0
19200
0
72600
0
36448
26460
0
0
0
1548
0
11988
31458
4

Total Cost of Operations


Initial
O&M Cost
Investment
for 5 years

Bluechip ERP on premise


Codeautomation ERP on
premise
Codeautomation ERP on cloud

2312228

1852114

1087707

713794

379957

1576225

Fourth
year

Fifth
year
0
0
0
0

192000
79860
0
36448
271860
0
0
1548
0
11988
321844

0
0
0
0
19200
0
87846
0
36448
27984
6
0
0
1548
0
11988
32983
0

Total
cost
416434
2
180150
1
195618
2

3. Given your analysis, suggest what Satav should do? Justify your
suggestions.
The first decision point for Vinsun is whether to implement ERP or not. The
objective of Vinsun is to find a way to access accurate information more
rapidly. The main concerns about implementing ERP are employee

resistance to change and whether the benefits will be actually realized. As


a group we feel that Satav should go ahead with implementing ERP. Vinsun
is growing at a stupendous rate and as it continues to grow, the need for
proper data maintenance and accessibility will become more acute. ERP
system will ensure proper data maintenance and easy accessibility, which
will help in integrating the various activities and departments of the
organization. Also resistance to any change is inevitable but when
employees are trained in the new system and become cognizant of its
advantages, the implementation will be smoother. So with an eye towards
future benefit, Satav should go ahead with implementing ERP.
The second decision point is whether to choose the company and type of
ERP package to implement. Satav plans to allocate 2-3% of the annual
turnover to IT expansion, i.e. upto Rs.13.5 lakh in FY 2010-11 Bluechips
ERP on premise package is too expensive, costing about 128% more than
Codeautmations ERP on premise offering. This we feel may be an
unnecessary strain on the companys financial resources. The ERP on
cloud package has high recurring costs and so though the initial
investment is lower, it is more expensive in the long term. Besides
considering that the situation is being contemplated in 2010 when internet
usage was much lower than today, concerns over security are quite grave.
Codeautomation is a startup, so building the trust and reliability to entrust
it with all data to store on their servers is difficult. So we feel that
Codeautomations ERP on premise will be the best alternative for Vinsun
because the total cost is lowest over the long term, security issues are less
due to internal database, the opportunity to customise the package to
have an optimum mix of current practices in the company and industry
best practices and the technology is well-proven.