2. Line of business: providing electrical & civil services across India
Incorporated in 2002
Clients: production & services industries, telecom companies, commercial buildings,
institutional campuses, residences, hospitals etc.
3. Challenges in terms of information overload
Input cost calculations were not readily available, outdated
Lack of data integration; redundancy and incompleteness of data
Data back-up not being maintained properly
4. ‘To find a way to access accurate information more rapidly’
Decision Point
Whether to implement ERP system or not?
5. Pros
Greater efficiency
Allows focus on core activities
Facilitates adoption of best practices
Eliminates losses from outdated information
Back-up can be accessed anytime
Cons
May be more costly than beneficial
Employees’ resistance
6. Implement ERP on premise (Bluechip corporation)
Implement ERP on premise (Codeautomations)
Implement ERP on cloud (Codeautomations)
7. Bluechip
Pros: Track record of successful implementation, customization options
Cons: Services offered only on premises, cost way over the budget
Codeautomations
Pros: Cost effective, both on cloud & premise
Cons: Start-up company, risk of failure
8. A few key managers are sceptical about the results associated with the roll-out
There is no measure to quantify the returns yet
Budget constraint: 3% of sales = 13,53,000
If approved, choice of cloud or premises is difficult because
Cloud database could compromise security
Premise database results in additional costs
9. COST OBJECT
PER UNIT COST # OF UNITS
TOTAL COST
HARDWARE
INITIAL COST
WORKSTATION
WORKSTATION UPS
LAPTOP
SERVER
BACK-UP SERVER
SERVER UPS SYSTEM
34950
3715
66244
100000
100000
3875
6
6
2
1
1
2
209700
22290
132488
100000
100000
7750
572228
INITIAL COST
ERP APPLICATION SOFTWARE
CONSULTING
DEPLOYMENT COST
TRAINING
120000
80000
520000
180000
8
1
1
1
960000
80000
520000
180000
1740000
INITIAL COST
ROUTER
NETWORK INFRA SET-UP
15479
120000
1
1
15479
120000
SOFTWARE
NETWORK
INITIAL ROLL-OUT COST
2447707
HARDWARE ONGOING MAINTAINANCE COST
SOFTWARE ONGOING MAINTAINANCE COST
NETWORK
ROUTER MAINTAINANCE
NETWORK INFRA MAINTAINANCE
2 MBPS INTERNET LINE
TOTAL ONGOING COST
57222.8
172800
1547.9
12000
11988
255558.7
10. COST OBJECT
PER UNIT COST
# OF UNITS
TOTAL COST
HARDWARE
INITIAL COST
WORKSTATION
WORKSTATION UPS
LAPTOP
SERVER
BACK-UP SERVER
SERVER UPS SYSTEM
34950
3715
66244
70000
70000
3875
6
6
2
1
1
2
209700
22290
132488
70000
70000
7750
512228
SOFTWARE
INITIAL COST
ERP APPLICATION SOFTWARE
INSTALLATION COST
30000
200000
8
1
240000
200000
440000
INITIAL COST
ROUTER
NETWORK INFRA SET-UP
15479
120000
1
1
15479
120000
NETWORK
INITIAL ROLL-OUT COST
1087707
HARDWARE ONGOING MAINTAINANCE COST
SOFTWARE ONGOING MAINTAINANCE COST
NETWORK ROUTER MAINTAINANCE
NETWORK INFRA MAINTAINANCE
2 MBPS INTERNET LINE
TOTAL ONGOING COST
51222.8
36000
1547.9
12000
11988
112758.7
11. COST OBJECT
PER UNIT COST # OF UNITS
TOTAL COST
HARDWARE
INITIAL COST
WORKSTATION
WORKSTATION UPS
LAPTOP
34950
3715
66244
6
6
2
209700
22290
132488
364478
INITIAL COST
ROUTER
15479
1
15479
HARDWARE
SOFTWARE
STORAGE
NETWORK
ONGOING MAINTAINANCE COST
ONGOING MAINTAINANCE COST
DATA STORAGE COST
ROUTER MAINTAINANCE
2 MBPS INTERNET LINE
36447.8
192000
60000
1547.9
11988
NETWORK
INITIAL ROLL-OUT COST
379957
TOTAL ONGOING COST
301983.7
12. Initial roll-out cost of Bluechip’s quotations is way over the budget (i.e. 13,53,000)
Cheapest option is to take Codeautomations’ services on cloud
But wait, what about the ongoing
costs?
13. ON PREMISE
ON CLOUD
YEAR
COST
0
1
2
3
4
5
PVF (0.12,N)
1087707
112759
112759
112759
112759
112759
PRESENT VALUE OF COSTS OVER 5 YEARS
PRESENT VALUE
1
1087707
0.8929
100682.5111
0.7972
89891.4748
0.7118
80261.8562
0.6355
71658.3445
0.5674
63979.4566
1494180.643
YEAR
COST
0
1
2
3
4
5
PVF (0.12,N)
379957
301984
307984
314584
321844
329830
PRESENT VALUE
1
379957
0.8929
269641.5136
0.7972
245524.8448
0.7118
223920.8912
0.6355
204531.862
0.5674
187145.542
PRESENT VALUE OF COSTS OVER 5 YEARS
1510721.654
14. From the financial point of view, Codeautomations’ service on premise is the cheapest
in the long term
However we still need to consider other factors such as organisational acceptance &
risk of failure