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Vinsun Infra Engineering Case Solution

SUBMITTED BY- GROUP 17


Amit Bisai 0042/52
Amritanshu Singh - 0047/52
Anant Singh 0051/52
Anirban Kundu - 0057/52
1. PROS AND CONS OF EACH OPTION AVAILABLE TO VINSUN
There are two options available with VINSUN. First is ERP on premise platform and
second is ERP on cloud.
ERP ON PREMISE
Definition: On-Premise ERP is an ERP software in-house maintained in a physical
office, rather than over the web
PROS
1. NO REQUIREMENT OF INTERNET CONNECTION ERP on premise works on
intranet and hence the connectivity and speed has no effect on the operations of
ERP.
2. DATA SECURITY AND PRIVACY Since it is on premise, data is secured by the
companys firewall mechanism as against on-cloud platform where data is kept in
the hands of service provider.
3. CUSTOMIZATION ERP can be heavily customized to suit the needs of the
company as every control on the features is transferred on to the buyer once the
ERP is bought.
4. LONG TERM ADVANTAGE Over the long term, if VINSUN goes for integration, the
size of organization will increase dramatically. In such case, it is wiser to use ERP on
premise as data security and use-as-you-wish feature will be an advantage.
CONS
1. HIGH INITIAL INVESTMENTS The price of an ERP system is quite high, especially,
for an organization like VINSUN who has mere 60 employees.
2. EMPLOYEE TRAINING More the customization of the ERP system more is the
training required to shun the repulsive attitude of employees towards the ERP.
3. MAINTENANCE COST Entire maintenance cost will be borne by the IT
department (or will be covered under IT expenses) of the company.
4. BUSINESS DISRUPTION As the complete ERP is designed by the company, the
testing, training and bug clearing makes business disruption imminent. Thus, the
loss of working hours is comparatively very high for this platform.

ERP ON CLOUD
Definition: Cloud ERP is an ERP software that is hosted on a platform over the
Internet, particularly using SaaS model
PROS
1. LOW INITIAL INVESTMENT As no infrastructure is required for ERP (entire cost
borne by service provider), only expense is the contractual cost and the first
installment.
2. NO SEPARATE ERP TEAM Separate ERP rolling team is not needed in this
platform and the higher managers can focus their energy on their activities.
3. STANDARD, TRIED AND TESTED FEATURES As the features provided by this
platform is standard and been used for many times. The bugs and errors in the ERP
would be less.
4. LOW BUSINESS DISRUPTION As the ERP is ready to use at any moment the loss
of business hours is less. Thus, there is low business disruption.
5. ACCESSIBILITY Work can be done from anyplace, anywhere as ERP available on
cloud.
CONS
1. DATA SECURITY AND PRIVACY Keeping the data secure and private is the major
concern in this platform. As the Trust on the service provider is the only firewall
available, competitive advantage can be lost if the data is leaked out to the
competitors.
2. HIGH RECURRING COST The installments paid is quite high. Over the long term,
the ERP on premise is much more profitable after the break even is reached. Hence,
a costlier option by Cost-Benefit Analysis.
3. INTERNET DEPENDENCY Speed and Connectivity affect the usage of ERP, as no
connectivity or low speed means no ERP and hence no work.
4. TECHNICAL DIFFICULTIES AND CONNECTIVITY ISSUES Technical issues and
connectivity issues are encountered which can stall the progress of the work for a
quite longer duration
Vinsun ERP Problem

2. Evaluate TCO (Total Cost of Ownership) over a period of five years


for the options available to VINSUN
The Total Cost of Ownership of Vinsun for the three alternative are given below in
the table :

Item

Bluechip's on
Premise ERP

Codeautomat
ion
Premise ERP

Codeautomation
Cloud ERP

Workstation x6
Workstation
UPS x6
Laptops x2
Server
Backup up
server
Server UPS x2
Initial Hardware
cost
Hardware
maintenance
(yr 1)
ERP Software
x8
Consulting
Deployment/
Installation cost
Training
Service Fee x8
x12
Data Storage
Cost
Software Cost
Software
maintenance
(yr 1)
Network
Router
Infra set up
Router
maintenance
Infra
maintenance
Internet
Total network
yr1
Total year 1
cost
Five year cost
Hardware Initial
Hardware
yearly
Maintenance

209700

209700

22290
132488
100000

22290
132488
70000

100000
7750

70000
7750

572228

512228

57222.8

51222.8

960000
80000

240000

520000
180000

200000

1740000

440000

172800

36000

15479
120000

15479
120000

1547.9

1547.9

12000
11988

12000
11988

161014.9

161014.9

2703265.7

1200465.7

572228
286114

512228
256114

rate x5
Software Initial
Software yearly
Maintenance
rate x5
Data Storage
Cost
(compound)
Network Router
and
infrastructure
setup
Router
maintenance x5
Net
Infrastructure
Maintenance
X5
Internet x 5
Total Cost of
Ownership(Yr 5)

1740000

440000

864000

180000

135479

135479

7739.5

7739.5

60000
59940

60000
59940

3725501

1651501

The Total Cost of Ownership for 5 years for Bluechips on Premise ERP Solution is
around Rs 37.25 Lacs, where as for Codeautomations on Premise ERP solution is
around Rs 16.51 Lacs only while for Codeautomations on Cloud ERP solution it is Rs
21.36 Lacs.

3. Given your analysis, suggest what Satav should do? Justify your
suggestions.
It may not be a sensible decision to choose ERP on Cloud over ERP on premises as
the variable costs in case of ERP on cloud are too high and keep on increasing at a
compounding rate as the data storage requirement increases. The ERP over cloud
appears to be 32% cheaper than on premise ERP in the 1st year. However the
variable costs keep on increasing at a compounding rate in case of Cloud ERP and
the total cost of ownership surpasses the Premise ERP and increases by upto 29.3%
in year 5.
Thus in view of long term planning VINSUN should not opt for the ERP on cloud
option. The only strategic advantage gained by Cloud ERP is its accessibility over
internet. If VINSUN is of the opinion that this advantage can surpass the cost
advantage by on premise solution then it may consider cloud ERP, otherwise On
Premise ERP solution is the best option for VINSUN.