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Vinsun Infra Engineering: Erp On Premise or On Cloud: Case Analysis

Vinsun infra engineering faces inefficiencies due to a lack of data compilation and storage software. The company is considering an ERP system to address these challenges. There are two options - ERP on-premise or on cloud. ERP on-premise has higher upfront costs but lower recurring costs, while ERP on cloud has lower upfront costs but higher recurring costs that increase annually. A cost analysis showed ERP on-premise from Codeautomations would be less expensive over the long run. Therefore, the document recommends Vinsun adopt the on-premise option for its customization benefits and more stable long-term costs.

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145 views4 pages

Vinsun Infra Engineering: Erp On Premise or On Cloud: Case Analysis

Vinsun infra engineering faces inefficiencies due to a lack of data compilation and storage software. The company is considering an ERP system to address these challenges. There are two options - ERP on-premise or on cloud. ERP on-premise has higher upfront costs but lower recurring costs, while ERP on cloud has lower upfront costs but higher recurring costs that increase annually. A cost analysis showed ERP on-premise from Codeautomations would be less expensive over the long run. Therefore, the document recommends Vinsun adopt the on-premise option for its customization benefits and more stable long-term costs.

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Sachin
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© © All Rights Reserved
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ICT FOR ORGANIZATIONAL EFFECTIVENESS

VINSUN INFRA ENGINEERING: ERP ON


PREMISE OR ON CLOUD
CASE ANALYSIS

AKSHAY BORHADE, 4007/20

ICT FOR ORGANIZATIONAL EFFECTIVENESS

EXECUTIVE SUMMARY
VINSUN infra engineering has been providing electrical and civil services across India since 2000.
The managing director Mr. Sunil Satav has identified the challenge faced by the organization due to
absence of any data compilation and data-storage software. This has led to inefficiency in the system
with outdated data being used (e.g. the older data led to acceptance of the project which actually had
the negative NPV). This incidents have become the regular occurrences which has started to pester
Mr. Satav.
Ms. Ruchira Kulkarni, VINSUNs CIO has proposed the use of ERP software to take care of the
challenges faced by the growing company. The two options available are ERP on cloud and ERP on
premise, with each option having its own advantage. She has also identified couple of vendor viz.
Codeautomations and Bluechip Corporations with the latter having many successful
implementations across the industry.
Seniors managers (Mr. Rajesh Lokhande and Mr. Subhash Deshmukh) are taking the option of
installing the ERP system negatively, citing various reasons like lack of training, not having a technosavvy employee structure, IT cost incurred, change in business process affecting the business, time
for acceptance of new system, cultural barriers, etc. On the other hand, Ms. Kanika Sharma (the
project manager) is supportive of the ERP system and prefers ERP on cloud with the plausible
reason of transferring the operational risk to the service provider and reaping the benefits at the
early stages.
Following are the sub-topics which clearly makes out the clear differentiation between the 2
platforms if VINSUN decides to go for ERP system.

CHALLENGES FACED BY VINSUN


VINSUN has been using the traditional methods of data collection, analysis and storage viz.
MS-Office tools. This has led to inefficiency in the operations of the company. This
inefficiency is getting visible as the company is growing in size both in terms of business and
employees. Lack of a data analytics and decision enabling tools has taken toll on the
profitability and consistency of the decisions. Following are the mentioned problems which
has aroused in VINSUN:
1. Information Overload has made management of information very difficult.
2. Data stored in MS-Excel and the compilation of the data is done manually which
requires enormous effort.
3. Lack of data integrity, redundancy and incompleteness.
4. No data backup means data lost can never be retrieved
5. Data analysis almost impossible as the historic data limited due to size.
6. Mixed feelings amongst employees towards ERP system with some employees feeling
threatened of losing the job due to ERP.
7. ERP was very expensive and VINSUN was a small organization. (ERP was very
expensive; much more than 2 3 % of the annual revenue set aside by Mr. Satav)

AKSHAY BORHADE, 4007/20

Vinsun: On-cloud or On-premise?

ICT FOR ORGANIZATIONAL EFFECTIVENESS

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
PROS
1. NO NEED FOR 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 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. HUGE INITIAL INVESTMENTS The price of an ERP system is quite high,
especially, for an organization like VINSUN who has mere 60 employees.
2. TRAINING OF EMPLOYEES 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 bore 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
PROS
1. INITIAL INVESTMENT LOW 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 TESTES 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. BUSINESS DISRUPTION LOW 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

AKSHAY BORHADE, 4007/20

Vinsun: On-cloud or On-premise?

ICT FOR ORGANIZATIONAL EFFECTIVENESS

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 REQUIRED Speed and Connectivity affect the usage of ERP, as no
connectivity or low speed means no ERP and hence no work.

ON-CLOUD OR ON-PREMISE?
Cost analysis has been done in the excel sheet attached and following is the summary of the results
obtained.
a. Initial Investments for each option
ERP ON PREMISE
BLUECHIP CORPORATIONS
CODEAUTOMATIONS
ERP ON CLOUD
CODEAUTOMATIONS

2692276.7
1189476.7
476925.8

b. Recurring annual cost for each option


ERP ON PREMISE
BLUECHIP CORPORATIONS
CODEAUTOMATIONS
ERP ON CLOUD
CODEAUTOMATIONS (for time period t)

255558.7
112758.7
52447.8+1.1*DS(t-1)

Where, DS(t-1) = Data storage cost of last year


From, the above analysis, it is evident that VINSUN should go for ERP on premise platform
provided by Codeautomations. The reason being long-term view, customization, less business
disruption during integration of business is kept in mind.
Though the initial cost for ERP on premise is higher, it can be recovered in few years and the annual
maintenance cost is constant. On the other hand, the maintenance cost for ERP on cloud increases
every year shown by equation above. The annual maintenance cost for 8 years for on-cloud platform
has been calculated in the excel sheet attached.

AKSHAY BORHADE, 4007/20

Vinsun: On-cloud or On-premise?

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