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![Big Data ≠ Profitability
Only a few leading firms are using Big Data to drive profitability, even
though they have developed the ability to capture and correlate data
“Profitability should not be conflated with
omniscience. […] Big Data has arrived, but
Big Insights have not!"
Financial Times Magazine „Big data: are we making a big mistake?‟ Tim
Harford. 28 March 2014](https://image.slidesharecdn.com/aptitudesoftwarecfochallenges-140513052919-phpapp01/85/Aptitude-software-cfo-challenges-7-320.jpg)
Uploaded byRoss E. Chapman
Aptitude software cfo challenges
This document discusses the challenges facing Chief Financial Officers in using big data and analytics to drive profitability. It notes that while data volumes and business complexity have increased, most companies are still not effectively leveraging big data for financial insights. It presents a case study of a retail brokerage that was unable to accurately calculate customer and product profitability using legacy systems. The document concludes that an in-database allocation engine could help companies analyze costs and profitability at a highly granular level, empowering CFOs and executives to make strategic decisions.
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Aptitude software cfo challenges
- 1. Chief Finance OfficersEmbrace Big Data Technology to Unlock Financial Insight
- 2. • Leading globaland retail banks across US and EMEA • Biggest names in digital media and entertainment • The world‟s largest telecom operators • Technology noted as visionary by leading analyst firms • Our finance applications help our customers to centralise control and financial reporting to empower decision making • Expertise in deliver high performance finance engines, using in-database & in-memory processing to deliver results quickly • Over 15 years of experience delivering finance transformation projects across industries About Aptitude Software Aptitude Software combines finance expertise) with leading Big Data technology to help our customers achieve new levels of financial insight, control and transparency
- 3. The CFO‟s 2014Juggling Act: Reduce Costs While Driving Profits As we transition from downturn to growth, enterprises are focused on delivering profitability, but not while losing control of costs
- 4.
- 5. Business is MoreComplex Than Ever • More products • More customers • More channels • More competition • More systems • More data 0% 10% 20% 30% 40% 50% 60% More than twice as many? More than 50% more? Between 10% and 50% more The same Less 0% 5% 10% 15% 20% 25% 30% 35% 40% More than twice as many? More than 50% more? Between 10% and 50% more The same Less Number of Products Versus 5 Years Ago Number of Customers Versus 5 Years Ago
- 6. The Charge tothe CFO: “Do More With Less” Chief Executives regard CFOs as their „second in command‟, because of the importance of financial control and financial insight Gartner „Survey Analysis: CFOs' Top Imperatives From the 2013 Gartner FEI CFO Technology Study‟, John E. Van Decker, 2 May 2013 0 10 20 30 40 50 60 70 Facilitate analysis and decision making Ongoing monitoring of business performance Creating an effective environment for sharing relevant information Quality of data used for business decisions Measuring product and customer profitability % of respondents CFOs' Top Imperatives for Enterprise Technology Investment 2013-2014
- 7. Big Data ≠Profitability Only a few leading firms are using Big Data to drive profitability, even though they have developed the ability to capture and correlate data “Profitability should not be conflated with omniscience. […] Big Data has arrived, but Big Insights have not!" Financial Times Magazine „Big data: are we making a big mistake?‟ Tim Harford. 28 March 2014
- 8. What Does “BigData” Mean to the CFO? There is a large gap between recognized importance (of using data) and its actual use… particularly in Finance ! IBM „Pushing the frontiers‟ CFO Insights from the Global C-suite Study. February 2014 Capabilities/tools used to support Finance Intuition Spreadsheet ERP Analytic tool 14% 52% 19% 15% 50% 100%0%
- 9. Generating Insight intoProfitability of Individual Customers is Complex Calculating profitability accurately requires granular data, a multitude of complex allocation methodologies, and a massive amount of processing
- 10. Case Study: LeadingRetail Brokerage • Leading US retail brokerage wanted to determine cost and profitability drivers for different product offerings • Existing finance/allocation systems were geared towards serving reporting needs and aggregated data • Packaged app couldn‟t handle the volume and variety of data necessary to run calculations Customer Challenges › Legacy allocation systems › Used for financial reporting purposes › 12 hour set-up time › +24 hour batch window › Required custom coding to change allocation routines › Lack of transparency into logic › Lack of flexibility to 36 hrs !!!
- 11. A Big DataKiller Application Enterprises that can calculate the detailed profitability of customers, products, channels in minutes rather than days have a distinct competitive edge
- 12. Understanding Cost andProfitability The need for profitability insight exists across industries (although taking different forms) Financial services Ensuring targeted offers are profitable. Making smart investments in mobile banking. Calculating non-traditional business metrics e.g. household profitability. CFO & LOB EXECUTIVE MANAGEMENT Telecommunications Making infrastructure investment decisions – allocating cost of base stations by product/customer usage. Profitability of individual components of products bundles. Healthcare Regulatory reporting to understand cost to serve patients, profitability of total delivery. Understanding cost of care. Driving profitability within the constraints of regulation (medical loss rations etc.) Retail Understanding warehouse activity and occupancy costs per product (SKU) and product instance profitability. Direct product profitability. Vendor profitability. Optimizing supply chains and warehousing cost.
- 13. Aptitude Allocation Enginefor Profitability Insight Makes Possible the Previously Impossible • Measure cost and profitability at levels of detail, flexibility and speed never before possible • Addresses depth and scale of insight not met by ERP systems or packaged applications • Enables CFOs and business leaders to leverage data to drive strategic decision making Designed to run in-database on leading Enterprise Data Warehouses – optimized for Big Data!
- 14. Summary: CFO Challenges •Leading enterprises are now heavily focused on driving profitable growth – this is the new imperative – Complexity, volume and competition make this difficult • Enterprises rely on Finance teams to: – Close the books quickly and accurately – of course – But NOW to deliver financial insight and drive profitability • Leading CFOs know to be data-driven and look to Big Data technologies to achieve their goals
Editor's Notes
- #2 CFO’s have been criticised for being backward looking, behind the curve (in just reporting the results after the fact) and not driving enhanced business value and improved margin for the enterpriseThe CFO faces many problems and pressures: Too much time spent on data collection, integration, validation and reconciliation Fragmented processes used to generate GL entries (that are summarised, lacking detail and attribution) Decision making and financial controls are limited by IT complexity and lack of trusted detail Poorly linked financial and non-financial data holds back insight into profitability Moving targets to comply with new regulations Pressure from the business to implement new business models within financial systemsAll while: Reducing enterprise cost Making faster decisions Increasing transparency and control Delivering value added analyticsThe answer is clear: CFO’s are embracing the data warehouse Unlocking profitability insight from Big Data Making the warehouse the single source of financial truthThese were the drivers for our software business and partnership with Teradata
- #3 Aptitude Software is a software company focused on enabling CFO’s and other Business Leaders of large enterprises to achieve new levels of financial insight, control and transparency with their Big Data – linking insight to the business model, business performance and P&L.We combine Big Data technology (Aptitude) with Finance Expertise to create a Single Source of Financial Truth [in the warehouse] and transform CFO and Business Leaders decision making, and operational control, for (i) quick executionand (ii) competitive advantageWe do this by delivering Specialist, and Business Focused, Finance Engines to address (a) new regulations, (b) new business models and (c) the difficult 20% of pressing business requirement not met by ERP (that holds 80% of the value)Today we are going to talk about how the data warehouse, with optimized in-database applications, can be that backbone of financial insight for the CFO and make the CFO a value creator for the enterprise.
- #7 Gartner backs the previous slide up by clearly showing that the top imperatives for a CFO are nearly all linked to Profitability InsightProfitability conscious decision makingBusiness performance monitoringSharing profitability driver informationQuality of data used in decisions – have it tied to an underlying profitability model owned by the CFOMeasuring product and customer profitability This drives the CFO and Business Leaders to centralize data and profitability processing [in the warehouse] to explore sensitivity, ‘what if’ and provide essential and valuable decision support from the warehouse investmentFor the first time – the CFO can start to trust and use the data warehouse by bringing in the GL costs and revenue for detailed allocation at a transactional level – a Single Source of Financial TruthGenerating insights from this transactional data is a top priorityOther studies show that CIOs have also shifted their focus onto profitability analysisDespite the overwhelming recognition of the importance of measuring profitability, we know from our experience that many firms can NOT do this quickly and at the level of detail the modern enterprise requiresThis is what we have solved with our Teradata in-database Aptitude Allocation Engine for Profitability Insight
- #9 So, what does Big Data mean to the CFO…Leading companies recognize the need to be data-centric and the opportunity of Big Data, BUTis a large gap between recognized importance (of using data) and its actual useThis C-Suite study highlights an astonishing 66% of Finance decisions are only supported by intuition and spreadsheets!Together, Teradata and Aptitude Software, are driving the focus, capability and best practice towards the use of specialist (centralized) analytical warehouse applications such as the our Allocation Engine for Profitability Insight