VINSUN Infra Engineering: ERP on Premise or on Cloud

Q1. What are the pros and cons associated with each of the options being evaluated by VINSUN?
-Following are the pros associated with Bluechip on Premise:

Bluechips ERP on premise solution seemed to be versatile.

It suited the companys need.
Bluechip had a track record of successful implementation.
It also had various customization options to produce a product that include only the
required module.

Following are the cons associated with Bluechip on Premise:

It was costly .It exceeded the annual IT budget of VINSUN.

It offered functions such as fixed asset management and fleet management which the
company didnt require in near future
The deployment cost which amounted to Rs 520,000 was too high.

Following are the pros associated with Codeautomations ERP on Premise:

The cost of server & backup server provided by code automation was 30% less than that
of Bluechip server.
Cost of ERP application software provided by codeautomation was 25% less than that of
provide by Bluechip.

Following are the cons associated with Codeautomations ERP on Premise:

It was a startup company & lack of experience was ve point since a small mistake could
jeopardize his entire investment

Following are the pros associated with Codeautomations ERP on Cloud:

ERP on cloud would be accessible from anywhere through the internet.

Flexibility to work from virtually any location.
On balance sheet ,cloud seems to be less costly

Following are the cons associated with Codeautomations ERP on Cloud:

High security risk as companys data will be stored on service provider database.
 If any issues arise about the speed & connectivity of the internet, ERP on cloud would
not work properly.

Q2. Evaluate TCO over a period of five years for the options available to VINSUN.

-The total cost of ownership for the 3 available options for period of 5 years is as follows:

Bluechip's Codeautomation Codeautomation

Item on on on
Premise ERP Premise ERP Cloud ERP
Workstation (x6) 209700 209700 209700
Workstation UPS (x6 ) 22290 22290 22290
Laptops (x2 ) 132488 132488 132488
Server 100000 70000
Backup up server 100000 70000
Server UPS (x2 ) 7750 7750
Initial Hardware cost 572228 512228 364478
Hardware maintenance (yr 1) 57222.8 51222.8 36447.8

ERP Software (x8) 960000 240000

Consulting 80000
Deployment/ Installation cost 520000 200000
Training 180000
Service Fee (x8 x12) 192000
Data Storage Cost 60000
Software Cost 1740000 440000 192000
Software maintenance (yr 1) 172800 36000

Network
Router 15479 15479 15479
Infra set up 120000 120000 120000
Router maintenance 1547.9 1547.9 1547.9
Infra maintenance 12000 12000 12000
Internet 11988 11988 11988
Total network yr1 161014.9 161014.9 161014.9
Total year 1 cost 2703265.7 1200465.7 813940.7

Five year cost

Hardware Initial 572228 512228 364478
Hardware yearly Maintenance rate (x5) 286114 256114 182239
Software Initial 1740000 440000 960000
Software yearly Maintenance rate (x5) 864000 180000 0
Data Storage Cost (compound) 366306
Network Router and infrastructure setup 135479 135479 135479
Router maintenance (x5) 7739.5 7739.5 7739.5
Net Infrastructure Maintenance ( X5 ) 60000 60000 60000
Internet (x 5 x12) 59940 59940 59940
Total Cost of Ownership(Yr 5) 3725501 1651501 2136182

From the above calculations codeautomation on premise ERP seems the best option.

Q3. Given your analysis, suggest what Satav should do?

-Satav should go for premise solution provided by codeautomation. Following are the reasons :

From the above calculations it is clearly visible that premise solution provided by
codeautomation is cheaper than other available options.
Premise solution by Bluechip exceeded the net IT budget of VINSUN.
ERP systems implementations have failed in many cases, so company should not invest
a large sum in such technology.
Most of the users of VINSUN were not technology savvy so it was difficult tasks to shift
to a new system. They were not sure of implementing the ERP system successfully.
Premise ERP system is more secure as compared to ERP on cloud system.