Improve Performance with Enhanced Insight into Profitability and Costs using HPCM
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The document discusses the offering of business analytics solutions using Oracle EPM, BI, and Big Data technologies, emphasizing profitability and cost management. It details Edgewater Ranzal's capabilities, case studies, and the Hyperion Profitability and Cost Management (HPCM) solution's impact on improving decision-making and financial outcomes for clients. Key topics include challenges in profitability management, the need for timely and accurate data, as well as the application of robust analytics to understand cost drivers and enhance client profitability.
Improve Performance with Enhanced Insight into Profitability and Costs using HPCM
- 1. Business Analytics Solutions Provider Using Oracle EPM, BI, and Big Data Technologies Oracle EPM Day NYC Improve Performance with Enhanced Insight into Profitability and Costs Utilizing HPCM Mike Killeen, Oracle Ace, Sr. Vice President, Technology Francis Mabutas, Program Manager, MMC FIS Nov 12, 2015
- 2. Agenda Introductions The Need for Profitability Management Profitability and Cost Management Solution Overview Profitability Management Case Study Closing and Q&A 2
- 3. Edgewater Ranzal Overview 3 Oracle Platinum Consulting Partner - 100% EPM/BI Focus 190+ Full time EPM/BI Billable Consultants US, Canada and the United Kingdom Experience & Success Founded in 1996 1,700+ Oracle EPM & BI successful projects Depth & Breadth of Service Offerings Full EPM/BI Platform Product Delivery Visioning & Roadmaps, Full Life Cycle Implementations, Tech Review & Assessments, Staff Augmentation EPM/BI Solution Experts Oracle ACEs Across EPM/BI Platform Customer Advisory Boards, Beta Testing, Certification Exam Development 18+ Years 850+ Clients 1700+ Projects
- 4. 4 Service Offerings Customized & 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 Capability 15 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 Business Intelligence Enterprise Planning & Analytics Infrastructure Training & Support Services Advisory Data Services Profitability & Cost Management
- 5. The Need for Profitability Management 5
- 6. Profitability Management Goal - Delivery of Strategic P&Ls 6
- 7. What’s the Potential Value? – Oracle’s Profit Focused Enterprise TM Assessment 7 Slide Reprinted with Permission of Oracle Corporation
- 8. PFETM Outcome – Maturity Model Assessment & Opportunity 8 Slide Reprinted with Permission of Oracle Corporation
- 9. Profitability Challenge #1 - Statutory Reports are not Timely or Detailed Enough Financial transactions Financial Data Consolidation (GL or HFM) Accumulator Bottom-line Results Organizational P&L 9 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?
- 10. 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 10
- 11. 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 & Customers User Counts Data Volumes Frequency Of Use 100’s 1000’s 10K’s 1 MM’s Qtrs Monthly Weekly Daily 11
- 12. Outcomes: Expectations of a Profitability Management Solution Reliability Visibly defensible profitability and cost results through transparency & audit/control Agility Timely 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 12
- 13. Overview of Oracle Business Analytics Profitability Management Solution 13
- 14. BI Foundation: Info Delivery EPM Apps: Information Generation Master Data, Data Quality & Data Integration Tools: Information Management Oracle Business Analytics – EPM/BI Software Architecture 14
- 15. Solution Element: Hyperion Profitability & Cost Management (HPCM) Packaged Profitability functionality Business User-Driven application Tightly integrated with the full Hyperion EPM Suite 15
- 16. 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 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! 16
- 17. 17 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 Operational Profitability "BI" Shd Svcs Expense Allocations Inter Unit Charges (e.g. Xfer Pricing, Contractual Charges) Division Services Fully 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
- 18. 18 HPCM Has Multiple Model Types to Solve Different Allocation Problems Version 11.1.1.1 Version 11.1.2.0 Version 11.1.2.4 Management Ledger Fully Allocated P&LClient Profitability via ABC Fund Profitability HFM/GL Actuals Planning Bgt/Fcst BI Reporting Tool
- 19. 19 Client Case Study Profitability Management Business Drivers & Outcomes
- 20. 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 Charter Delivery of an Enhanced Client Profitability Solution to Support US Outsourcing Business Solution 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 20
- 21. 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 21
- 22. Client Outsourcing Solution Requirements Initial Client Profitability Delivery 1. Establish Alternative View of Global Client P&L for Outsourcing 2. Built a Tactical Excel Solution to Validate Potential Cost Methods 3. Allocations Moved Fully Allocated P&L views down to a Client and Service Level Business Requirements – Mandated by Client US Outsourcing Business 1. Accuracy, Transparency, and Relevance in Cost Allocation Methods 2. Timely, Accurate Data 3. Flexibility in Costing Methodology (e.g. Cost Pools and Drivers) Technical Requirements – Mandated by Client Finance Info Systems 1. Business User Enabled 2. Automated Solution 3. Fits into FIS Technology Strategy and Operating Model 22
- 23. 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 MercerAllocations $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 - 2014 Acme Corporation USD 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 MercerAllocations $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 - 2014 Acme Corporation USD Key Output - Client Profit & Loss Statement by LOB 23
- 24. Trace Allocation Allocation Source Acme Corporation Acme Corporation Service 1 Service Key Output - Client Profitability Trace Allocations 24
- 25. Client Profitability Analysis – Real Outcomes Timely , Accurate Data for Contract Renewal & New Business Pricing Identify Non Standard Clients to Support Contractual Fees Contractually change client behavior and share in cost savings Cost to Serve Analysis – Real Outcomes Operations Managers Understand Cost Drivers of Business Employee Utilization supports Hiring and Organization Decisions Identification of Six Sigma Process Improvement Opportunities • Business Outcomes: 6 Months Later 25
- 26. 26 Client Case Study Implementation Details
- 27. Rapid Prototypes Delivered First Prototypes used for Validations Implementation Approach 27 Parallel, Iterative Development Utilize EPM Shared Dimensions
- 28. Client Resources Business Operations Business Area Finance Business Area Info Services Finance Infrastructure Solutions Edgewater Ranzal Resources Solution Architecture HPCM & Planning Delivery Training Delivery Implementation Timeline – 6 Months 28
- 29. Attribution Planning HPCM Cost Allocations Budget Planning Application Oracle Hyperion Planning Hyperion Profitability & Cost Management Microsoft Excel Allocation Control Set POV Variables Load Costs Load Driver Metrics Adjust Data Load Pools Update Allocation Rules Run Allocs Validate Publish Rates Metrics Mart Global Client Profitability mIdeas Time Entry Labor Rates Operational Stats Loader Files Client Profitability Solution Architecture 29
- 30. Client HPCM Model Requirements 30
- 31. 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 31
- 32. Source Stage Process Target Stage Service 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 1 4 4 HPCM Model Elements 32
- 33. HPCM Driver Definitions and Selections 33 • Easily add & assign new drivers with preconfigured formula types • Create compound drivers
- 34. HPCM Model Validation – Stage Balancing Report & Excel Export 34
- 35. Trace Allocation Allocation Source Eden Corporation AA Football Madrid Hospital Jackson Bikes HPCM Model Analysis – Cost To Serve Trace Allocations 35
- 36. Trace Allocation Allocation Source HPCM Model Analysis – Client Profitability Trace 36
- 37. Information Delivery – Client P&L by Service Line 37
- 38. Flexibility Business Users can Run Multiple Versions to assess impact of business changes Business Power User facing application – limited IT involvement in running the model Accuracy Profitability Workflows are now an automated, repeatable processes Meaningful cost drivers and methods for cost pools ensures greater acceptance of published results Speed Business 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 Transparency Excellent visibility throughout the allocation process. Operational Managers now understand client profitability and cost to serve via the analytical platform. Summary - Project Outcomes 38
- 40. 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 40
- 41. Closing and Q&A Edgewater Ranzal Contact Info: 108 Corporate Park Drive, Suite 105, White Plains, NY, USA 10604 US: +1-914-253-6600 E-mail: info@ranzal.com 41