Vinsun Case Analysis

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 Bluechip’s ERP on premise package is too expensive, costing about 128% more than Codeautmation’s ERP on premise offering. This we feel may be an unnecessary strain on the company’s 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 Codeautomation’s 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.