csc proprietary and confidential 1 olm nbf model outline steve coxon july 2013
TRANSCRIPT
CSC Proprietary and Confidential 1
OLM NBF Model Outline
Steve Coxon
July 2013
2
Content• Introduction - Purpose• OLM NBF Model Construct• Model Context• Model Principles• Model Versions• Model Overview - Operating Instructions• Model Overview - Price (& Revenue Determination)
• Market Price Input• Manual Input• Model Fee Uplift
• Model Overview - Cost• Manual Input• CST Files
• Risk Management• Standard Output• Model Support
3
Introduction: Purpose
• Purpose is to:• Introduce the OLM New Business Finance Model• Provide the context in which the model has been developed• Provide an outline of the proposed model methodology• Outline the process for using the model• Solicit feedback on the construction and use of the Model for OLM Business
Case purposes
OLM NBF Model ConstructOLM New Business Finance (NBF) Models are the recommended Financial Models to be used when compiling financial information for Business Case justification purposes at OLM Gate Reviews
The Model utilises standard cost categories and financial information presentation templates that reflect the manner in which CSC reports its ongoing operating performance
Model Construct
• Using a predefined ‘Rates’ file to establish the ‘Forecast Period’, ‘Currency’, ‘Overhead’, and Mark Up ‘Fee’ levels to derive indicative price and revenue if appropriate
• Using a predefined ‘Financial Management’ template to automatically align Offering financial information into Profit & Loss, Balance Sheet & Cash Flow templates, providing Financial Summaries and Metrics for evaluation purposes
• Providing three versions, ‘Manual’, ‘Basic’ and ‘Standard’, to eliminate unnecessary multiple File use where information is limited at the outset
• Providing additional options (to the standard NBF ‘Fee’ based methodology), to allow manual input or market based pricing details to be supplied, in additional to an additional option to manually input cost summaries,(rather than CST files for cost collection)
• Provide a Standard OLM Financial Summary ‘Output’ that details the information requirements for the OLM Gate Executive Presentation
• Provide additional Information to support Offering systems set up and Performance Reporting inc: ‘Resource Unit’ (RU) description. ‘Revenue Recognition’ details, and the SAP ‘WBS Structure’
CSC Proprietary and Confidential 5
OLM NBF Model
Context
6
Context• Each Offering environment for cost and pricing is unique………but a common framework
is required• Standardization is not possible at the ‘owner’ level……….but is at the OLM ‘process’ level?• Without guidance, a cost and pricing ‘smorgasbord’ will result…….so there is a need to
provide structure• The structure must facilitate each unique Offering……..provide direction not prescription
Concept• Standardize the offering OLM reporting requirement………..including Resource Unit (RU)
cost and price • Standardize the Financial Management (FM) methodology that delivers OLM reporting
and decision making information• Enable the ‘owner’ level to have cost & price build capability……..with the details
‘interfacing’ into the standard FM file structure
Solution• Use the existing CSC New Business Finance (NBF) files and methodology to provide
information structure, standardization and direction to enable a consistent financial output and OLM performance level
Model Context: Inform on ‘Standard’ Cost & Pricing ‘Capture’
7
Portfolio Management
Deliver BC / Updates
Prepare BC / Updates
Plan
Conceive
Model Context: Conceptual Overview
Financial Management
PRC File (Pricing / Revenue)
CST Cost File
FM File
(Financial P & L)
Financial Overview
Offering Cost Management
Infra structure /
BOM
Third Party
CSC Allocation
CST Cost File
Offering Specific ‘Back End’
Preparation’
NBF Files:Interface to the OLM Standard
Process
Offering Price Management
Resource Units
Target Market
Target Price
PRC Price File
OLM Standard ‘Front End’
Delivery
Offering Lifecycle Management
Portfolio Management
Portfolio Strategy
Portfolio Optimization
Portfolio Realization
G2G1 G4G3 G6 G7G5G0
Early Adopters
Launch Offering
Scope Offering
Generate Business
Case
Develop Offering
OptimizeOffering
Retire OfferingConcept
8
Cost Model
Pricing Model
Finance Pricing
OLM Project Cost
Project Manager
Market Launch Operate
Early Adopter Operate
Billing (RU’s) WBS Structure
Project Costs
Early Adopter Revenue
Market Launch
Revenue GeographyIndustry
OrganisationPortfolio
Offering LineOffering
SAP Reporting & Performance Management
Record & Report
PerformanceMetrics
Create Legal & Commercial Framework
Legal Commercial
Supply Chain Alliance Partners
Investment Request
Investment Request
Financial Justification
Financial Justification
Model Context: OLM Finance Overview
G2G1 G4G3 G6 G7G5
Scope Offering
Generate Business
Case
Retire Offering
Develop Offering
Early Adopters
Launch Offering
Optimize Offering
Gate 1Exec
Presentation
Gate 2Exec
Presentation
Gate 3Exec
Presentation
Gate 4Exec
Presentation
Gate 5Exec
Presentation
Gate 6Exec
Presentation
Gate 7Exec
Presentation
Offering Manager
Finance, Sales &
Marketing
Preliminary Business
Assessment
InvestmentRequest
PortfolioStrategy
Offering Metrics
Create Cost & Pricing Framework
Sales & DeliveryPerformance Management
Pipeline Management
NBF BC Models
CST
FM PRC
Sales & Marketing
Delivery
Performance Management
Financial Justification
Early Adopters& New
Customers
NBF Deal Models
CST
FM PRC
Business Case Business Case Business Case Business Plan Business Plan Retirement Plan
CSC Proprietary and Confidential 9
OLM NBF Model
Principles
10
• Standardisation – of the financial details on which investment decisions are made
• Defined Financial ‘Hurdles’ – RAG Dashboard for Portfolio & CSC Financial Criteria
• Standardisation – of the methodology to construct Business Case (BC) Financial Analysis
• Standardisation – of the cost categories to align with Operating Performance Reporting
• Market Based Pricing (P x Q) – catered for to derive forecast Revenue
• Manual Input Options – for price and cost to simplify file handling
• OLM Gate Profile – to support cost construct / views across the OLM ‘Gates’
• Prior Gate Comparison – To support ‘Gate’ stage forecast variance identification
• Revenue File Identification – to differentiate ‘Project’ & ‘Revenue’ generating cost files
• Supports ‘Bundled’ Offerings – by constructing cost ‘Towers’ to align with RU Pricing
• Alternate Cost Breakdown – using additional files to support differing views
• Resource Unit (RU) Description – to ‘expose’ the Offering billing / sales system set up
• Revenue Recognition Rules ***– defined to support financial reporting
• SAP WBS Details*** – defined to support system and contract set up
*** Under construction – to be developed as part of the SAP Transformation Project
Model Principles
CSC Proprietary and Confidential 11
OLM NBF Model
Versions
12
• Manual – using limited files to support direct input of cost / revenue• Direct input of Market price & volume to derive Revenue• Direct Input of cost details to derive Total Cost, (inc. Overhead)
• Basic – using CST (cost) file(s) to supplement the ‘Manual’ version• Option to Use NBF CST (cost) file(s) to provide cost• Option to use Model ‘Fee’ based ‘mark up’ to derive Revenue
• Standard ***– using the full suite of NBF models• Option to use alternative cost summary file• Option to use additional files to derive bundled component item prices
*** It is recommended that the additional functionality of the ‘Standard’ NBF model suite is only used with the support of an NBF team member
OLM NBF Model Versions
13
OLM NBF File Overview: Manual Version
Rates File
Input Required:
• Offering Name• Duration
• Country Location• $ Rate
Conversion
‘Manual’ Entry File Set:
• Rates File• FM File
• PRC File
FM File PRC File
Input Required:
• None
Input Required:
• Manual File Selection
• Price / Volume OR
• Revenue• Cost Summary
Financial Summary
Cost & Revenue Details
Standard Financial Output:
Executive Presentation Summary
14
OLM NBF File Overview: Basic Version
Rates File
Input Required:
• Offering Name• Duration
• Country Location• $ Rate
Conversion
‘Basic’ File Set:
• Rates File• FM File
• PRC File• CST File (For Replication)
FM File PRC File
Input Required:
• None
Input Required:
• Revenue / Cost File Use Selection
• Price / Volume OR
• Fee Based Revenue
• Cst Cost File(s) Link
Financial Summary
Cost & Revenue Details
Standard Financial Output:
Executive Presentation Summary
CST File(s)CST File(s)
CST File(s)CST File(s)
Input Required:
• Cost details ‘Mapped’ to
Standard CSC Cost Categories
Capital Summary Cost Summary
Cst File Replication
15
OLM NBF File Overview: Standard Version
Rates File
Input Required:
• Offering Name• Duration
• Country Location• $ Rate
Conversion
‘Standard’ File Set:
• Rates File• FM File
• PRC File• CST File (100)
• Advanced Analysis Files
FM File PRC File
Input Required:
• None
Input Required:
• Revenue / Cost File Use Selection
• Price / Volume OR
• Fee Based Revenue
• Cst Cost File(s) Link
Financial Summary
Cost & Revenue Details
Standard Financial Output:
Executive Presentation Summary
CST File(s)CST File(s)
CST File(s)CST File(s)
Input Required:
• Cost details ‘Mapped’ to
Standard CSC Cost Categories
Capital Summary Cost Summary
Cst Files (100 Available)
CCS_CURR File
PRC Unit Price
Volumes Master
Alternate Cost View
Advanced Pricing / Offering Breakdown – Contact NBF Team
in the USReview Detail
PRC Extract / Analysis
Files
CSC Proprietary and Confidential 16
OLM NBF Model
Operating Instructions
17
Model Overview: Operating Instructions To enhance the model users understanding and to ensure a robust and consistent output from this
model, additional information has been provided to educate and inform on its use
• File Overview• Financial Analysis (FA) Process
• Read Me Overview• User Guide
• Model Assumptions• Standard Colour Scheme
• User Guide Links• Standard Output
CSC Proprietary and Confidential 18
OLM NBF Model
Overview – Price(& Revenue Determination)
19
Model Overview: Market Price Input 1. Select ‘Market Price’ in the ‘Start’ Sheet 2. Define the ‘Resource Units’ (RU) (Billing Components) that are contained in the Offering
3. Input ‘Market Price’ for defined ‘RU’s’
4. Input ‘Volumes’ for defined ‘RU’s’
Derived Offering Revenue for defined ‘RU’s’ (P X Q)
Optional Entry for Target Cost level to derive ‘Productivity’
Targets for Evaluation purposes
20
Model Overview: Manual (Revenue) Input 1. Select ‘Manual Input’ in the ‘Start’ Sheet 2. Define the ‘Resource Units’ (RU) (Billing Components) that are contained in the Offering
3. Construct the ‘Revenue’ Forecast by adjusting the CST derived Revenue totals or inserting the required values into the tables provided
No Volume input required – Revenue Totals for Early Adopters & R & M used for Revenue forecast in the Financial Summaries
21
Model Overview: Standard ‘Model Fee Uplift’ 1. Select ‘Model Fee Uplift’ in the ‘Start’ Sheet 2. Define the ‘Resource Units’ (RU) (Billing Components) that are contained in the Offering
3. Establish the ‘Fee’ rate in the rates file via the Rate Table sheet as part of Model set up
No Volume input required – Revenue Totals for Early Adopters & R & M used for Revenue forecast in the Financial Summaries
4. Load / Link Cst files and define ‘Revenue’ files and any Early Adopter Discount 5. Revenue generated totals derived from applying
‘Fee’ rate to the Revenue ‘defined’ cost file
CSC Proprietary and Confidential 22
OLM NBF Model
Overview - Cost
23
Model Overview: Manual Input (1) 1. Select ‘Manual Input’ in the ‘Start’ Sheet
2. Input Summary Capex / Opex details for all OLM Gates and ongoing Run & Maintain
24
Model Overview: Manual Input (2)
3. Validate Capital & Offering Development & Operating Cost ‘PROFILE
5. Validate Consolidated Capital Costs
4. Validate Consolidated Development & Operating Costs
25
Model Overview: CST Files 1. Select ‘CST Files’ in the ‘Start’ Sheet
3. Define the Cst File structure in the ‘Cst Input’ sheet, select OLM stage ‘Tower’ and update Data
Links to the named files
For more information on Costing & CST Files see ‘OLM NBF Model Guidance – Costing’ Slideware
2. Define the Term, Currency and Location details in the ‘Rates’ File
4. Review / validate Cost & Derived Revenue Profile and Consolidated Cost totals
CSC Proprietary and Confidential 26
OLM NBF Model
Risk Management
27
• The classification and categorisation of risk is assumed to be a Portfolio specific activity
• The OLM NBF Model assumes the quantification of weighted risks is applied as a contingent value – added to the cost base as follows:
Risk Management
1. For ‘Manual Input’ - Defining a risk ‘premium’ % to be applied to the Offering Cost Profile
2. For ‘CST Files ‘ – Including an additional CST ‘Risk’ file which contains underlying assumptions and quantification as a % of the specific cost category where the risk occurs
CSC Proprietary and Confidential 28
OLM NBF Model
Standard Outputs
29
Model Overview: Standard Outputs
OLM Financial Justification Summary provides the template
required for the OLM Gate Executive Presentation
CSC Proprietary and Confidential 30
OLM NBF Model
Model Support
31
• For further Information or support for the use of this model please contact in the first instance:
• Steve Coxon• [email protected]• +44 (0)7760 494977
• For further information or support for the use of the New Business Finance (NBF) standard templates please contact:
• Victor Smiroldo• [email protected]• +1 703 641 3176 (Office)• +1 571 213 1057 (Mobile)
OLM NBF Model Support
CSC Proprietary and Confidential 32
OLM NBF Model
Thank You
33
Demonstration
OLM NBF Model Demonstration