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Business Analytics Solutions Provider Using Oracle EPM, BI, and Big Data Technologies
Oracle EPM Day Boston
Improve Performance with Enhanced Insight into Profitability and Costs Utilizing HPCM
Mike Killeen, Oracle Ace, Sr. Vice President, Technology
Jan 14, 2016
Agenda
IntroductionsThe Need for Profitability ManagementProfitability and Cost Management Solution OverviewProfitability Management Case StudyClosing and Q&A
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Edgewater Ranzal Overview
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Oracle Platinum Consulting Partner - EPM, BI & Big Data Focus190+ Full time EPM/BI Billable Consultants US, Canada and the United Kingdom
Experience & SuccessFounded in 19961,700+ Oracle EPM & BI successful projects
Depth & Breadth of Service OfferingsFull EPM, BI & Big Data Platform Product DeliveryVisioning & Roadmaps, Full Life Cycle Implementations, Tech Review & Assessments, Staff Augmentation
EPM, BI & Big Data Solution ExpertsOracle ACEs Across EPM, BI & Big Data PlatformsCustomer Advisory Boards, Beta Testing, Certification Exam Development
18+ Years850+ Clients
1700+ Projects
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Service OfferingsCustomized & Core Product Training Delivery
Profitability Project Initiation & Analysis Services
Partnership with Oracle to deliver Profit-Focused Enterprise TM ROI Service
Multi-Phase, Multi-Product Strategic Roadmaps & Visioning
Future State Process Definition
Costing Requirements Analysis & Proof of Concept Development
Full Life Cycle Application Delivery By Type:
Shared Service Costing & Charge Backs
Operational Transfer Pricing & Inter-Unit Charges
Global Expense Allocations - Dept & Project
Management Profitability – Segment, Region & LOB
Operational Profitability – Client, Product & Service
Tuning, Optimization & Upgrades – EPM 11.1.1.1 thru11.1.2.4
Post Go Live & Managed Service Contracts
Project Experience & Resource Capability15 Experienced Full Time Consultants in the U.S. and EMEA
Over 20 HPCM projects delivered (100 Total)
Comprehensive approach incorporates other tools such as DRM, FDMEE & OBIEE
Close Relationships with Oracle Development – involved in initial Product Architecture
Internal Lab available for POCs, Project Jump Starts & Exalytics Benchmarking
Profitability & Cost Management Service Offerings
Consolidation& Reporting
BusinessIntelligence
EnterprisePlanning &Analytics
Infrastructure
Training &Support Services
AdvisoryDataServices
Profitability& Cost
Management
The Need for Profitability Management
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Profitability Management Goal - Delivery of Strategic P&Ls
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What’s the Potential Value? – Oracle’s Profit Focused Enterprise TM Assessment
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Slide Reprinted with Permission of Oracle Corporation
PFETM Outcome – Maturity ModelAssessment & Opportunity
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Slide Reprinted with Permission of Oracle Corporation
Profitability Challenge #1 - Statutory Reports are not Timely or Detailed Enough
Financialtransactions
FinancialData
Consolidation(GL or HFM)
Accumulator Bottom-line Results
Organizational P&L
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What defines a profitable customer?
What is the profit contribution of a product or a service?
What does it cost to sell to or to service customers?
What proportion of resources does a specific customer consume?
Why hasn’t increased revenue resulted in increased profitability?
Profitability Challenge #2 - Indirect Cost Assignment to Products, Services & Customers
No Standard Process
Standard, accepted process
Indirect Costs are tracked against supply side structures, not demand side needs. This makes measurement difficult
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Profitability Challenge #3 - Ensuring Consistent Performance as Users, Data Volumes, & Frequency of Use Increases
Sales/ Product Managers
Cost Center Managers
LOB Execs
Finance10’s
100’s
1000’s
1000’s
LOB/Functions
Segments/Entities
Departments
Products & CustomersUser
CountsData
VolumesFrequency
Of Use
100’s
1000’s
10K’s
1 MM’s
Qtrs
Monthly
Weekly
Daily
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Outcomes: Expectations of a Profitability Management Solution
ReliabilityVisibly defensible profitability and cost results through transparency & audit/control
AgilityTimely reflection of results to be actionable
Relevance An ability to Allocate resources to the most important opportunities
Financial Results
Revenue & Cost Models
Operational Results
FP&A
Senior Management
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Overview of Oracle Business AnalyticsProfitability Management Solution
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BI Foundation: Info Delivery
EPM Apps: Information Generation
Master Data, Data Quality & Data Integration Tools: Information Management
Oracle Business Analytics – EPM/BI Software Architecture
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Solution Element: Hyperion Profitability & Cost Management (HPCM)
Packaged Profitability functionality
Business User-Driven application
Tightly integrated with the full Hyperion EPM Suite
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Why HPCM? To Meet these Key Requirements…
Flexibility• Analyze different
contractual approaches to yield optimal mix of services versus costs incurred by the client.
• Provide What-If Capabilities to assess impact of key business decisions on bottom line
Audit & Accuracy
• Provide key stakeholders confidence in the numbers produced and methodologies employed to ensure compliance.
Speed• Ensure data is
timely enough to be actionable
• Ensure system provides “speed of thought” response in reporting and analysis to support Ad-Hoc questions
Transparency• Allow managers to
understand cost to serve and client profitability
• Understand why some clients are profitable and others are not, and what can be done to change business behavior
Organizations need information management solutions to address the challenges. These needs can be abbreviated as F-A-S-T!
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Group Services (e.g. Property, Controllership, IT)
Product Profitability
Customer Profitability
Group Overhead (e.g. CEO)
Division 3
Division Overhead
Fully Allocated P&L(e.g. Product Line, Channel, Region)
Group HQ
OperationalProfitability
"BI"
Shd Svcs
ExpenseAllocations
Inter Unit Charges (e.g. Xfer Pricing, Contractual Charges)
Division ServicesFully Alloc
P&L"Thin
Ledger"
Inter Unit“Regulatory”
Division 2
Division Overhead
Fully Allocated P&L(e.g. Product Line, Channel, Region)
Division Services
Division 1
Division Overhead
Fully Allocated P&L(e.g. Product Line, Channel, Region)
Division Services
Multiple HPCM Use Cases
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HPCM Has Multiple Model Types toSolve Different Allocation Problems
Version 11.1.1.1 Version 11.1.2.0 Version 11.1.2.4
Management LedgerFully Allocated P&L
Client Profitabilityvia ABC
Fund Profitability
HFM/GLActuals
PlanningBgt/Fcst
BIReporting
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Client Case Study
Profitability ManagementBusiness Drivers & Outcomes
Client & Project Background
Client is a global consulting leader in talent, health, retirement and investments; helps clients around the world advance the health, wealth and performance of their most vital asset – their people.Over 20,000 employees based in more than 40 countries.Global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital.
Project CharterDelivery of an Enhanced Client Profitability Solution to Support US Outsourcing BusinessSolution would replace a tactical Excel Model that wasn’t timely or accurate enough to support business decisions such as adding/redeploying employees and adding/losing clients.Solution needed to be Business User Enabled and meet corporate standards
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Client Outsourcing Business Challenges
Outsourcing business model is different than traditional consulting – longer contracts & volume based cost drivers.
Bad contractual decisions can lead to recurring unprofitable results
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Outsourcing Solution Requirements
Initial Client Profitability Delivery1. Establish Alternative View of Global Client P&L for Outsourcing 2. Built a Tactical Excel Solution to Validate Potential Cost Methods3. Allocations Moved Fully Allocated P&L views down to a Client and Service Level
Business Requirements – Mandated by Outsourcing Business1. Accuracy, Transparency, and Relevance in Cost Allocation Methods2. Timely, Accurate Data3. Flexibility in Costing Methodology (e.g. Cost Pools and Drivers)
Technical Requirements – Mandated by Finance Info Systems (FIS)1. Business User Enabled2. Automated Solution3. Fits into FIS Technology Strategy and Operating Model
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Service 1 Service 2 Service 3 Service 4 All Services
Core Revenue $0 $0 $0 $0 $0 OOS $0 $0 $0 $0 $0 Other Revenue $0 $0 $0 $0 $0 Client Revenue (Total Input) $0 $94,811 $0 $0 $94,811 Total Revenue $0 $94,811 $0 $0 $94,811
Cost of Delivery Call Center $0 $123,018 $0 $0 $123,018 Client Services $0 $131,360 $0 $0 $131,360 Comms-Fulfillment-Postage $0 $27,887 $0 $0 $27,887 OSI - Support Mgmt $0 $1,396 $0 $0 $1,396 Trust and Treasury $0 $49,539 $0 $0 $49,539 Implementation Amortization $0 $0 $0 $0 $0 Total Cost of Delivery $0 $333,199 $0 $0 $333,199
Function and Support Function $0 ($1,499) $0 $0 ($1,499) IT - Run the Business $0 $0 $0 $0 $0 IT - Change the Business $0 $0 $0 $0 $0 Support $0 $66,900 $0 $0 $66,900 Total Function and Support $0 $65,401 $0 $0 $65,401
Allocations MGTI Allocations $0 $112,599 $0 $0 $112,599 Facilities Allocation $0 $112,124 $0 $0 $112,124 Other Mercer Allocation $0 $256,273 $0 $0 $256,273 Total Mercer Allocations $0 $480,997 $0 $0 $480,997
Total Expense $0 $879,596 $0 $0 $879,596
NOI $0 ($784,786) $0 $0 ($784,786) NOI% 0.0% (827.7%) 0.0% 0.0% (827.7%)
Actual - January - 2014Acme CorporationUSD
Service 1 Service 2 Service 3 Service 4 All Services
Core Revenue $0 $0 $0 $0 $0 OOS $0 $0 $0 $0 $0 Other Revenue $0 $0 $0 $0 $0 Client Revenue (Total Input) $0 $94,811 $0 $0 $94,811 Total Revenue $0 $94,811 $0 $0 $94,811
Cost of Delivery Call Center $0 $123,018 $0 $0 $123,018 Client Services $0 $131,360 $0 $0 $131,360 Comms-Fulfillment-Postage $0 $27,887 $0 $0 $27,887 OSI - Support Mgmt $0 $1,396 $0 $0 $1,396 Trust and Treasury $0 $49,539 $0 $0 $49,539 Implementation Amortization $0 $0 $0 $0 $0 Total Cost of Delivery $0 $333,199 $0 $0 $333,199
Function and Support Function $0 ($1,499) $0 $0 ($1,499) IT - Run the Business $0 $0 $0 $0 $0 IT - Change the Business $0 $0 $0 $0 $0 Support $0 $66,900 $0 $0 $66,900 Total Function and Support $0 $65,401 $0 $0 $65,401
Allocations MGTI Allocations $0 $112,599 $0 $0 $112,599 Facilities Allocation $0 $112,124 $0 $0 $112,124 Other Mercer Allocation $0 $256,273 $0 $0 $256,273 Total Mercer Allocations $0 $480,997 $0 $0 $480,997
Total Expense $0 $879,596 $0 $0 $879,596
NOI $0 ($784,786) $0 $0 ($784,786) NOI% 0.0% (827.7%) 0.0% 0.0% (827.7%)
Key Output - Client Profit & Loss Statement by LOB
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Trace Allocation
Allocation Source
Acme Corporation
Acme Corporation
Service 1
Service
Key Output - Client Profitability Trace Allocations
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Client Profitability Analysis – Real OutcomesTimely , Accurate Data for Contract Renewal & New Business Pricing Identify Non Standard Clients to Support Contractual FeesContractually change client behavior and share in cost savings
Cost to Serve Analysis – Real OutcomesOperations Managers Understand Cost Drivers of BusinessEmployee Utilization supports Hiring and Organization DecisionsIdentification of Six Sigma Process Improvement Opportunities
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Business Outcomes: 6 Months Later
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Client Case Study
Implementation Details
Rapid Prototypes Delivered First
Prototypes used for Validations
Implementation Approach
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Parallel, Iterative Development
Utilize EPM Shared Dimensions
AttributionPlanning
HPCMCost Allocations
Budget Planning Application
Oracle Hyperion Planning
Hyperion Profitability & Cost Management
Microsoft Excel
Allocation Control
Set POV Variables
Load Costs
Load Driver Metrics
AdjustData
Load Pools
Update Allocation
Rules
Run Allocs
Validate
Publish Results
Metrics Mart
Global ClientProfitabilityBI Reporting
mIdeas
Time Entry
LaborRates
Operational Stats
LoaderFiles
Client Profitability Solution Architecture
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Client HPCM Model Requirements
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AccountSegment DataType
Stage 1 - Finance
Stage 2 – Line Item
Stage 3 - Intra Process
Stage 3 - Process
Stage 4 - Service
HPCM allocates Costs & Revenue Pools through one or more stages in a top down capacity
Stage - Step in the allocation process that has similar pool characteristics
Separate stages enable traceability.
Cost PoolSegment Process
Cost PoolSegment Process
ClientService
Cost PoolSegment Line Item
HPCM Model Architecture
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Source StageProcess
Target StageService
Segment
Cost Pool
Process
Service
ClientDriver
Driver Selections – Defines what Driver Definitions to use against the Source stage, typically the dimension identified as the driver definition.
Assignment Rules Definitions– Defines the member combination in the target dimension for the assignment.
Assignments– Defines the source dimension combination and the target Assignment Rule
Driver Definitions – Create an allocation formula/methodology that references a loaded metric within the model.
1
2
3
4
2 3
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HPCM Model Elements
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HPCM Driver Definitions and Selections
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• Easily add & assign new drivers with preconfigured formula types
• Create compound drivers
HPCM Model Validation – Stage Balancing Report & Excel Export
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Trace Allocation
Allocation
SourceEden Corporation
AA Football
Madrid Hospital
Jackson Bikes
HPCM Model Analysis – Cost To Serve Trace Allocations
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Trace Allocation
Allocation
Source
HPCM Model Analysis – Client Profitability Trace
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FlexibilityBusiness Users can Run Multiple Versions to assess impact of business changesBusiness Power User facing application – limited IT involvement in running the model
AccuracyProfitability Workflows are now an automated, repeatable processesMeaningful cost drivers and methods for cost pools ensures greater acceptance of published results
SpeedBusiness Users Can answers questions that impact operational and pricing decisions quickly.Reporting Analytical Platform supports speed of thought ad-hoc reporting as well as user guided analysis
TransparencyExcellent visibility throughout the allocation process. Operational Managers now understand client profitability and cost to serve via the analytical platform.
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Summary - Project Outcomes
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Closing and Q&A
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Does your company understand the true costs of its products or services?
Are costing models transparent enough? Can you easily trace back the assigned costs to the activities and line item expenses that drive them?
Do your costing methods operate at the right level of detail?
Are you satisfied that you are allocating shared services (e.g. IT/HR) accurately?
Are people spending too much time maintaining our costing models and other elements of our costing system?
Can people in your company quickly test how changes to commodity, input costs, lower or higher volumes will affect our profitability?
Are you getting answers from our costing systems fast enough to be actionable? Would reducing this process time improve our competitiveness or profitability?
Is all of the data that you need to understand true costs available in a single ERP system? If not, what are the initial and ongoing costs of integrating that data into your ERP system?
Self-Evaluation Questions
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Closing and Q&A
Edgewater Ranzal Contact Info:
108 Corporate Park Drive, Suite 105, White Plains, NY, USA 10604US: +1-914-253-6600 E-mail: [email protected]
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Mike KilleenSr. Vice President of Technology