Analysis

The following assumptions have been made.

Large multi-speciality hospital with complex requirements

All amounts are in ` lakhs (00,000).

Cost of OTS S/W	` 400.00
Maintenance cost of OTS S/W per year	20%
Training cost per person in OSS S/W (lump sum)	` 1.00
Salary cost per person per month (in case in-house)	` 0.75
Salary cost per person per month (in case outsourced)	`1.00
Total number of persons – implementation	40
Total number of persons – maintenance	20
Rate of inflation (%ri)	16%
Weighted Average Cost of Capital (1.5 x %ri)	24%

Calculations

	Y0	Y1	Y2	Y3	Y4	Y5
OTS S/W	(` 400.00)	(` 80.00)	(` 80.00)	(` 80.00)	(` 80.00)	(` 80.00)
OSS S/W – in-house	(` 40.00)	(` 360.00)	(` 198.00)	(` 217.80)	(` 239.58)	(` 263.54)
OSS S/W – outsourced	` 0.00	(` 480.00)	(` 240.00)	(` 240.00)	(` 240.00)	(` 240.00)

		D
NPV – OTS SW	(` 499.70)
NPV – OSS SW – in-house	(` 616.58)	` 116.88	19%
NPV - OSS SW – outsourced	(` 687.45)	` 187.75	27%

Mid-sized (300 bedded) multi-speciality hospital with simpler requirements

Cost of OTS S/W	` 40.00
Maintenance cost of OTS S/W per year	20%
Training cost per person in OSS S/W (lump sum)	`0.10
Salary cost per person per month (in case in-house)	` 0.30
Salary cost per person per month (in case outsourced)	`0.40
Total number of persons – implementation	10
Total number of persons – maintenance	5
Rate of inflation (%ri)	16%
Weighted Average Cost of Capital (1.5 x %ri)	24%

	Y0	Y1	Y2	Y3	Y4	Y5
OTS SW	(` 40.00)	(` 8.00)	(` 8.00)	(` 8.00)	(` 8.00)	(` 8.00)
OSS SW – in-house	(` 1.00)	(` 36.00)	(` 19.80)	(` 21.78)	(` 23.96)	(` 26.35)
OSS SW – outsourced	` 0.00	(` 48.00)	(` 24.00)	(` 24.00)	(` 24.00)	(` 24.00)

		D
NPV - OTS SW	(` 49.97)
NPV - OSS SW – in-house	(` 59.24)	` 9.27	16%
NPV - OSS SW – outsourced	(` 68.75)	` 18.77	27%

Conclusion

The analysis reveals that there is a 20% on average higher cost to client if they go in for open source software instead of OTC.

There is a pay-off/opportunity cost if the open source software happens to be World VISTA that is mature and proven. The implementation time for World VISTA is roughly 18 – 30 months. Notably, it has no billing module and uses MUMPS as its programming language.

Explication

· The ` 4 crores (` 400 lakhs) figure assumed for OTS S/W is based on the assumption that the hospital is a large hospital – else they would not opt for World VISTA at all in the first place

· COTS suppliers will charge an annual maintenance fee whose industry rate is 20% of cost of software

· These numbers are based on solutions as opposed to platforms

· Support provided is maintenance, upgrades within the same version (or even later, depending) and troubleshooting/help-desk at no extra cost during the validity period of the annual maintenance contract

· Comparative figures are uncovered if a simpler solution is considered

· In-house implementations will require training in the technology to be imparted before implementations take place

· S/W Engineers trained in MUMPS will demand a higher salary as compared to other technologies

· It is assumed that there is a 10% increase in salary per year for in-house personnel

· It is also assumed that outsourced companies will cost their resources on a higher figure but will neither charge the client for training that they will absorb it themselves instead nor for increase in salary as they have already factored that in when billing

· The attraction for outsourcing is to minimize the overall commitments, instead of just looking at overall costs – the outsourcing companies will take the responsibility of the entire HR while ensuring that the requisite number of personnel are continuously available to run the show