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

2

Edgewater Ranzal Overview

3

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

4

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

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 ModelAssessment & Opportunity

8

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

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 & CustomersUser

CountsData

VolumesFrequency

Of Use

100’s

1000’s

10K’s

1 MM’s

Qtrs

Monthly

Weekly

Daily

11

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

12

Overview of Oracle Business AnalyticsProfitability 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

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

18

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

19

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

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 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

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 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

23

Trace Allocation

Allocation Source

Acme Corporation

Acme Corporation

Service 1

Service

Key Output - Client Profitability Trace Allocations

24

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

•

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

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

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 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

14

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

SourceEden 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

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.

•

Summary - Project Outcomes

37

Closing and Q&A

38

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 10604US: +1-914-253-6600 E-mail: info@ranzal.com

40

Mike KilleenSr. Vice President of Technology

mkilleen@ranzal.com