Vinsun ERP Problem2. Evaluate TCO (Total Cost of Ownership) over a period of five years for the options available to VINSUNThe Total Cost of Ownership of Vinsun for the three alternative are given below in the table :Item Bluechip's on Premise ERP CodeautomationPremise ERP CodeautomationCloud ERP

Workstation x6 209700209700209700

Workstation UPS x6 222902229022290

Laptops x2 132488132488132488

Server 10000070000

Backup up server 10000070000

Server UPS x2 77507750

Initial Hardware cost 572228512228364478

Hardware maintenance (yr 1) 57222.851222.836447.8

ERP Software x8 960000240000

Consulting 80000

Deployment/ Installation cost 520000200000

Training 180000

Service Fee x8 x12 192000

Data Storage Cost 60000

Software Cost 1740000440000192000

Software maintenance (yr 1) 17280036000

Network

Router 154791547915479

Infra set up 120000120000120000

Router maintenance1547.91547.91547.9

Infra maintenance120001200012000

Internet 119881198811988

Total network yr1 161014.9161014.9161014.9

Total year 1 cost 2703265.71200465.7813940.7

Five year cost

364478

Hardware Initial572228512228364478

Hardware yearly Maintenance rate x5 286114256114182239

Software Initial 1740000440000960000

Software yearly Maintenance rate x5 8640001800000

Data Storage Cost (compound) 366306

Network Router and infrastructure setup135479135479135479

Router maintenance x5 7739.57739.57739.5

Net Infrastructure Maintenance X5 600006000060000

Internet x 5 599405994059940

Total Cost of Ownership(Yr 5) 372550116515012136182

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.