Comparison of merits and demerits of alternative processing site and Different type of sites

Unique Enterprises is a large scale manufacturer of mobile parts and accessories. It has acquired a new ERP to integrate different departments. It is also planning to connect with its customers and suppliers through extranet. Consequently the management is reassessing its alternative processing facilities.

  • Compare the respective merits and demerits of having own alternative processing site or engaging a third party service provider.
  • Differentiate between a hot site, cold site and a warm site. Which type of facility would you prefer in the above situation and why?

Comparative merits of having own alternative processing site than engaging third party service providers

  • It will comprise of one time fixed cost rather than monthly variable cost over a long duration.
  • Own alternative processing site can be made at a convenient location for the company rather than having to adjust when and where basis of third service provider.
  • No dependency on any organization, Unique Enterprises can test its alternative processing arrangement when it suits.
  • Standardizations can be managed. Own alternative processing site can have same level of controls as primary site.
  • All hardware, software and other resources are readily available.
  • Same level of security as that of the original site may easily be observed at own alternative processing site. / In case of engaging third party for alternative processing arrangements, risk to confidentiality of data increases.

Comparative demerits

  • Own alternative processing site will be very costly to manage.
  • As one is never sure when an alternative processing site might be required so a situation can arise when Unique Enterprise might not require its alternative processing site for years.
  • Own alternative processing site will be hard to manage and maintain, in terms of operations, human resource and hardware.
  • In case of own alternative processing site, all resources required might not be available and require sometime for implementation based on SLA signed with third party service provider.
  • Third parties offering alternative processing arrangements have experts for handling disastrous situations and managing recovery/alternative processing sites. There is high risk that company’s may not be able to manage the alternative processing site like third party experts due to their little or no exposure in this field.

(b) A hot site usually has a full computer systems as well as near-complete backups of user data. It takes few minutes to few hours to attain full working condition.

A warm site has hardware and connectivity already established, though on a smaller scale than the original production site. It has backups on hand; therefore, it requires few days to be put at full condition.

A cold sites has only basic environment i.e. electrical wiring, air conditioning, flooring etc. . This site is ready to receive equipments but does not offer any components at the site in advance of the need. So to upgrade this site to full working condition may require several weeks.

Recommendation for alternative processing site

Discontinuation of operations for more than a few hours may prove very costly to UE. Unavailability of the system means the:

  • departmental working will be stopped as all the departments will be working on the same data under the new ERP.
  • company will not be able to meet the demands of its customers and place timely orders to its suppliers who will be connected to the company’s system via extranet.

Since a hot site takes minimum time to resume the operations, hence it would be most suitable choice for the UE.

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