Improve Performance with Enhanced Insight into Profitability and Costs Utilizing HPCM

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
Introductions
The Need for Profitability
Management
Profitability and Cost Management
Solution Overview
Profitability Management Case Study
Closing and Q&A
2

Edgewater Ranzal Overview
3
Oracle Platinum Consulting Partner - EPM, BI & Big Data 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 & Big Data Platform Product Delivery
Visioning & Roadmaps, Full Life Cycle Implementations,
Tech Review & Assessments, Staff Augmentation
EPM, BI & Big Data Solution Experts
Oracle ACEs Across EPM, BI & Big Data Platforms
Customer Advisory Boards, Beta Testing, Certification Exam Development
18+ Years
850+ Clients
1700+ Projects

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

The Need for Profitability Management
5

Profitability Management Goal - Delivery of
Strategic P&Ls
6

What’s the Potential Value? – Oracle’s
Profit Focused Enterprise TM Assessment
7
Slide Reprinted with Permission of Oracle Corporation

PFETM Outcome – Maturity Model
Assessment & Opportunity
8
Slide Reprinted with Permission of Oracle Corporation

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?

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

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

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

Overview of Oracle Business Analytics
Profitability Management Solution
13

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

Solution Element: Hyperion Profitability
& Cost Management (HPCM)
Packaged Profitability
functionality
Business User-Driven
application
Tightly integrated with
the full Hyperion EPM
Suite
15

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!
16

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
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&L
Client Profitability
via ABC
Fund
Profitability
HFM/GL
Actuals
Planning
Bgt/Fcst
BI
Reporting

19
Client Case Study
Profitability Management
Business 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 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

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

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 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 Finance Info Systems (FIS)
1. Business User Enabled
2. Automated Solution
3. Fits into FIS Technology Strategy and Operating Model
22

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

Trace Allocation
Allocation
Source
Acme Corporation
Acme Corporation
Service 1
Service
Key Output - Client Profitability Trace
Allocations
24

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
Client Case Study
Implementation Details

Rapid Prototypes Delivered First
Prototypes used for Validations
Implementation Approach
27
Parallel, Iterative Development
Utilize EPM Shared Dimensions

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
Results
Metrics Mart
Global Client
Profitability
BI Reporting
mIdeas
Time
Entry
Labor
Rates
Operational
Stats
Loader
Files
Client Profitability
Solution Architecture
28

Client HPCM Model Requirements
29

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
30

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
31

HPCM Driver Definitions and Selections
32
• Easily add & assign
new drivers with
preconfigured
formula types
• Create compound
drivers

HPCM Model Validation –
Stage Balancing Report & Excel Export
33

Trace
Allocation
Allocation
Source
Eden Corporation
AA Football
Madrid Hospital
Jackson Bikes
HPCM Model Analysis –
Cost To Serve Trace Allocations
34

Trace
Allocation
Allocation
Source
HPCM Model Analysis –
Client Profitability Trace
35

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
37

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
39

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
40
Mike Killeen
Sr. Vice President of Technology
mkilleen@ranzal.com

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