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Deloitte SIBC
- 1. Fall 2014 DeloitteConsulting Project
- 2. Team A 2 Lucrecia Siman Classof 2017 Management Consulting Political Science Kyle McHugh Class of 2017 Finance Economics Monica Barboza Class of 2017 Management Consulting Portuguese
- 3. Team A 3 Tiphaine Delepine Classof 2017 Finance Elizabeth Principe Class of 2017 Finance Applied Math Lake Heckaman Class of 2017 Finance Mathematics
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- 5. Solving Atlas’s ERPissues will position Atlas for future success Atlas Energy (Oracle) Alberta Oil (SAP) Our solution Deloitte’s Task Standardize business processes Enhance business continuity Minimize change impacts Increase operational efficiencies Retain top talent Cut costs Employees : 7,000 Annual revenue : $9 billion Region: Canada Alberta Oil Employees : 12,000 Annual revenue : $13 billion Region: Canada, US Eastern Europe and North Africa Atlas Energy Inc
- 6. What is anERP system? ERP Business process management software Enterprise Resource Planning Automation and integration of data Improves effectiveness and productivity ERP modules include: HR, financials, supply chain, manufacturing, among others
- 7. 7 Potential Solutions Translate Albertato Oracle Translate Atlas to SAP Alternative Option
- 8. ERP Deployment Options Multiplesites or geographic locations Single Tier becomes too large and costly to customize, maintain and upgrade Increasing number of M&A’s entering or leaving the organization Two-Tier Drivers
- 9. What is atwo-tier ERP system? Two-tier ERP Corporate level ERP system acting as global standard Other subsidiary level ERP systems for divisions 1 2
- 10. 27% 32% 48% 0% 10% 20% 30% 40% 50% 60% 2009 2010 2011 Companiesconsidering a two-tier strategy Trend towards two-tier ERP According to Constellation Research, the amount of buyers considering two-tier ERP strategies is increasing consistently Two-tier ERP strategies have been gaining popularity since the 2008 recession Ventana Research found that 2/3 of companies with over 1000 employees use ERP systems from more than one vendor
- 11. Our solution: atwo-tier ERP Maintain Tier 1 ERP system at corporate level and continue operating multiple Tier 2 ERPs at the secondary level. This simplifies future acquisitions and sales of divisions. Oracle Hyperion Financial Management Atlas Energy (Updated Oracle) Alberta (SAP) Future Acquisitions Future Acquisitions External reporting Senior Management reporting
- 12. 12 Many companies havealready successfully adopted two-tier strategies Support for big and small business units •Solved a $2B problem – domestic and foreign subdivisions were in need of ERP •Lower TCO, under $100,000/year to operate Rapid global expansion efforts •140 locations worldwide running on different software systems •Streamlined management •Support for future expansion Fast growing company •$670 million between 2009 & 2010 •Two-tier ERP went live in 6 months •Plans for 26 international markets in 3 months
- 13. Establish Oracle Hyperion Financial ManagementSystem Update Oracle base system in Atlas Map data from SAP to Oracle How we will implement our solution
- 14. 14 Use comprehensive suiteto merge Oracle and SAP repositories Oracle Hyperion Financial Management Close Suite Data Relationship Management Administration tool Patches Hyperion Disclosure Management xBRL “Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers.” Charles Phillips Oracle President
- 15. 0% 5% 10% 15% 20% 25% 30% 35% 40% %ERPUSERSEXPERIENCINGSAVINGS SAVINGS AMOUNT SAVINGS FROMCLOUD USAGE 0-20% 21-40% 41-60% 61-80% Over 80% 15 Use cloud storage and computing to handle big data Lower ownership cost Higher return Total cost savings
- 16. 16 Benefits of atwo-tiered solution Minimal Disruption Human Resources Lower overall costs Mergers & Acquisitions Trends in Global Economy
- 17. 17 Two-tier helps maintainculture and retain top talent Retain Atlas’ top talent Take care of local issues Maintain unique culture of companies
- 18. Two-tier increases efficiencyand savings Minimal Disruption Training only for high-level management Business operations continue and improve Cost Savings Massive reduction in training costs Lower purchase price No lost revenue
- 19. Our solution willstreamline future M&A activities Lower cost Shorter time Ease of acquisition 33% reduction in implementation costs 50% decrease in full implementation time Large-scale ERP systems cannot keep pace with a changing environment
- 20. 20 Global economic trendswill yield increasing revenue streams for Atlas Canadian Dollar Weakens GDP’s increase/stay the same Foreign Countries Import Canadian Oil 0 5 10 15 Barrels per day (millions) Oil imports by country United States China Japan Germany Netherlands Canada There will be more revenue at stake, so more is saved when business operations are not halted
- 21. 21 Potential drawbacks ofa two tier system Complexity Operating systems from different manufacturers Upkeep Both systems will need periodic updates Industry Precedent First to deal with potential issues
- 22. Two-tiered solution addressesconcerns •Implementing a two-tier ERP system is less costly than converting all divisions to a single system •The unique culture of each division is not compromised and local issues are easily resolved •Standardizing top management while divisions remain separate facilitates future M&As •Low-level operations are not interrupted while high-level management is in training Disruptions are avoided M&A is prevalent in the oil industry Costs are minimized HR remains division- specific A two-tier ERP system creates standardization that promotes growth while facilitating interaction between divisions.
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- 26. 26The Economist, EIA EnergyTrends in the Near Future Proven reserves of natural gas up by ~30 trillion cubic feet Consumption of coal Consumption of oil Coal preserves Price of natural gas Growth Decline
- 27. 27Source: Stikeman Elliott2014 Energy M&A Trends in Canada Canadian M&A Energy Trends Resistance to proposed pipeline projects will continue Increase in consolidation and M&A of smaller companies expected to continue in 2014 Low natural gas prices and oversupply have led many industry leaders to sell assets
- 28. 28Source: IBIS Energy Trends– Industry Overlook To 2019, industry revenue of global oil and gas is forecast to grow at an annualized rate of 4.3% to $5.6 trillion A steady increase in price of energy production is expected, as the world economy recovers from recession Industry employment is projected to increase over next 5 years, a sign of positive growth
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- 30. Areas for growth Developmentof midstream infrastructure Crucial for efficient delivery of growing supplies to markets Atlas Pipeline Partners Leading MLP operating 14 plants Increasing global demand for oil and natural gas Global oil consumption grew by 1.4% in 2014 US natural gas consumption grew by 2.4% (larger than the global increase of 1.4%) Global oil production increased by .6% Global natural gas production increased by 1.1% BP, The Energy Collective, INGAA Foundation Energy Trends
- 31. 31 Oil production isgrowing rapidly in North America 2012 2015 2020 2025 2030 2035 North America 0% 16% 30% 33% 35% 37% Europe & Eurasia 0% 0% -2% -4% -6% -5% Africa 0% -3% 5% 4% 3% 4% -10% 0% 10% 20% 30% 40% Oil Production Projection North America Europe & Eurasia Africa New deposits found in Canada 37 % growth by 203 High growth investments
- 32. 32Bp.com Africa is thenext big thing in natural gas 0% 20% 40% 60% 80% 100% 120% 140% 160% 2012 2015 2020 2025 2030 2035 Natural Gas Production Projection North America Europe & Eurasia Africa Drawbacks • Lack of infrastructure and stability Highlights • Africa shows over 140% growth by 2035 Conclusion • If infrastructure can be secured, investment recommended
- 33. Share of TotalOil Consumption 2013 Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full- 25% 7% 21%9% 4% 34% Consumption North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific
- 34. Share of TotalOil Production 2013 Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full- 19% 9% 20% 32% 10% 10% Production North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific
- 35. 35Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full- Oil Change2013 over 2012 North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific WORLD Production 8.70% 0.20% 0.20% -0.70% -5.70% -1.70% 0.60% Consumption 1.30% 4.40% -0.40% 2.20% 3.20% 1.50% 1.40% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% Percentage
- 36. 36Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full- Energy Industry2013 BP Statistics +2.7% growth in NA gas consumption, with above- average growth +1.1% growth in global gas production +1.1m b/d growth of US oil production, the largest in the world 6.3m b/d China’s net oil imports, the world’s second largest Global oil trade in 2013 grew by 1.7% or 0.9 million b/d
- 37. 37http://www.srr.com/article/trends-and-challenges-oil-and-gas-industry Oil and GasIndustry New Technologies Focus on developing technological solutions, increasing the world’s producible reserves. Development of the Subsea Oilfields Moving processing to the ocean floor reduces infrastructure costs and production costs, greatly improving return on investment. The Shale Play Exploitation of shale basins using hydraulic fracturing and horizontal drilling techniques has increased U.S. crude output. Enhanced Oil Recovery Boosting oil recovery could unlock around 300 billion barrels of oil, reducing the risk and the infrastructure cost.
- 38. 38International Journal ofProduction Economics, An AHP-based approach to ERP System selection, Wei, 2004 Components of Enterprise Resource Planning Human Resource Management Customer Relationship Management Manufacturing Resource Planning Supply Chain Management Financial Resource Management • Cloud Data Storage • Social Media • Mobile Accessibility • Two-Tier Trending Towards
- 39. ERP Global Advantage IntegratedERP systems allow access to real time data and the ability to standardize metrics to find inefficiencies faster and easier Integration of Supply Chains with ERP allows Atlas to see where their inventory is throughout the entire supply chain (allows for planning and resupply more quickly) Connecting to cloud computing ERP services would allow global connection throughout company, reducing necessity for the same job roles in differing location (allows a reduction in employees)
- 40. 40 Comparing Oracle andSAP ERP systems Oracle •Low market share •Need more through vetting SAP •Customization cumbersome •High personnel requirement 90% of users realize ROI in 5 years Software is trending towards cloud and big data Projects have a larger scope and scale Moving toward increased IT capabilities
- 41. 41http://www.futurismtechnologies.com/blog/benefits-erp-software-energy-oil-gas-industries/ Competitiveness through ERP Oiland gas exploration and production is an extremely expensive enterprise. ERP Easy integration: costs and schedules Risk management: contingency plans Efficient project management: within the budget and on time Simplification of large projects: like joint ventures and international Provides assistance in new employee training: critical and technical To reduce this heavy burden, a variety of methods are used to improve management of oil and gas production.
- 42. 42 Instillation of High-LevelSystem A high level system allows for vital operations to be integrated, while day-to-day operations are fully functional How Does it Work? Companies essentially act as independent and separate entities Maintain current ERP systems while making necessary upgrades and patches Use the high-level system to manage vital operations like accounting software, financial systems, and production planning
- 43. 43Source: http://www.eia.gov/todayinenergy/detail.cfm?id=15251 Need forMinimal Disruption With low volatility, North American oil is primed for high sales, meaning minimal disruption is a must Atlas Net daily production of 261.3 million equivalents per day (6% increase over 2014 Q1) 33% Increase in Q2 to 2,100 barrels per day 20% increase in production capacity Alberta Strong economic growth with an expected trend of 3% growth Massive spending on oil sands projects is now translating into sharply higher production and exports With more takeaway capacity (given by Atlas) Alberta can raise prices and turn a higher profit margin
Editor's Notes
- #5 Still needs to be updated
- #6 Add profit margin to not confused canadian vs USD
- #7 Business process management software Automation and integration of data Improves effectiveness and productivity
- #10 Organizations keep their existing Tier-1 ERP systems at the corporate level while allowing divisions or business units to select a second ERP system. **EXPLAIN DIFFERENCE BETWEEN TWO-TIER AND TIER 2
- #11 Maybe move to the appendix
- #12 We are keeping both ERP systems, but will identify the core (primary) system that will be used to consolidate the financials and other key elements into. The other ERP system stays in place as a secondary and information is fed periodically from the secondary system to the primary system. We chose Oracle as the core/primary based on our analysis of the two systems and companies. The financials will all be flowing though the Oracle Hyperion Financial Management system. For HR, we will currently keep the modules as is within each company allowing them to each fit their specific needs and clients. In the short term, we will do reporting in a reporting database and ensure that information is formatted in a standardized way, but in the long term we will move HR to a cloud-based system called WorkDay that many divisionalized companies (such as Danaher and Trimble) are adopting. With other operations and modules, we will continue running them as they are, but continually asses them and determine the best decisions from there.
- #13 Land O Lakes http://searchcio.techtarget.com/news/2240175465/Multi-vendor-ERP-strategy-fixes-2-billion-problem Qualcomm http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Key-Questions-Executive-Ask-About-Cloud-Computing-ERP.pdf Groupon Source: http://www.zdnet.com/blog/btl/netsuite-steps-up-large-enterprise-push-lands-qualcomm-groupon-partners-with-accenture/48496 http://www.netsuiteblogs.com/can-erp-keep-up-with-the-speed-of-business
- #14 Step 1: Establish the Oracle Consolidation Module, may need to create separation if Atlas already has it Step 2: Map data to seamlessly transfer from SAP module to the consolidation module Step 3: Update the outdated Oracle ERP system in Atlas
- #15 Oracle.com Oracle.com Oracle.com
- #16 Oracle.com; panorama-consulting.com
- #19 Plan integration of newly merged company (Alberta Oil) Reducing Costs Increased Operational Efficiency Retaining Top Talent Time Efficient Eliminates chances of user error Servicing of local needs Compliance for a specific product or for a different country Simplicity when buying and selling companies Parameterized configuration simplifies any necessary customization No need for training acquisition with new system implementation Minimal disruption Cost Savings Person-days used instead to generate revenue Leverages existing systems Reduces installation and maintenance efforts for IT Eliminates need for complex and costly integrations Improves companies' ability to negotiate better licensing terms Intuitive user interface minimizes training costs Business operations continue, no lost revenue Sources: Gartner Research; http://na.sage.com/~/media/category/sna/assets/lp/sagebusinessknows/Documents/resources/Sage_ERP_Two_Tier_Strategy.pdf; http://www.erpsoftwareblog.com/; http://blog.softwareinsider.org
- #20 Plan integration of newly merged company (Alberta Oil) Reducing Costs Increased Operational Efficiency Retaining Top Talent Time Efficient Eliminates chances of user error Servicing of local needs Compliance for a specific product or for a different country Simplicity when buying and selling companies Parameterized configuration simplifies any necessary customization No need for training acquisition with new system implementation Minimal disruption Cost Savings Person-days used instead to generate revenue Leverages existing systems Reduces installation and maintenance efforts for IT Eliminates need for complex and costly integrations Improves companies' ability to negotiate better licensing terms Intuitive user interface minimizes training costs Business operations continue, no lost revenue Sources: Gartner Research; http://na.sage.com/~/media/category/sna/assets/lp/sagebusinessknows/Documents/resources/Sage_ERP_Two_Tier_Strategy.pdf; http://www.erpsoftwareblog.com/; http://blog.softwareinsider.org
- #21 http://databank.worldbank.org/data/views/reports/tableview.aspx http://www.indexmundi.com/map/?v=93 http://www.bmonesbittburns.com/economics/forecast/ca/cdamodel.pdf
- #23 Minimal disruption: Two-tier ERP minimizes disruptions to lower level operations HR: only top level management Costs: M&A: Standardizing top management while divisions remain separate facilitates future M&As
- #27 http://www.eia.gov/countries/country-data.cfm?fips=US Although consumption fo coal is increasing, the preserves are decreasing, leaving natural gas a stronger option.
- #28 In the global energy industry, the “shale revolution: has had a significant impact on both the US and Canadian market. Unfortunately, there has been great resistance to pipeline projects in Canada that would be necessary in order to access refineries and expand into new markets that is setting the country behind the US. After the great increase of global energy mergers and acquisitions in 2012, there was a decline in those that occurred globally, as companies chose to focus on their current assets instead of acquiring new ones. Despite this overall global trend of a decline in M&A, there was an overall increase in company consolidation and M&A of smaller energy companies in Canada, which is a trend that is expected to continue in 2014. This upward trend for Canadian energy M&A is particularly surprising as many industry leaders have sold their natural gas assets due to low prices and an oversupply for the market, leading to even greater market overcrowding. While large industry leaders are turning towards light oil, there is still a market for M&A despite the overcrowding that has been occurring.
- #30 http://www.eia.gov/consumption/manufacturing/reports/2010/ng_cost/ Highlights decrease of natural gas prices
- #33 Pharmacy networks allow the PBM to cut the cost of prescriptions by getting basically “group discounts” on drugs. Plan design is how the PBM sets up your given plan for prescription drugs so that each individual person will have the best financial plan for them. Electronic prescribing gives the clinical professionals lots of information that they can use to better prescribe things to patients and therefore stem costs before they can get out of hand. PBM’s can get their uninsured clients the same price as the insured clients using a pharmacy discount card, to help them out as much as possible. This is due to the large amount of clientele that they can bring in.
- #37 http://www.ey.com/GL/en/Industries/Oil---Gas: EY Oil and Gas trends Oil and gas companies have seen significant increases in drilling, service, production and operating costs over the past decade. More complex operations generally mean more costly operations. The most common initiatives for companies were to optimize processes and embed controls. Typically, companies in the oil and gas sector seeking to contain costs will focus heavily on third-party spend, headcount, shared services, IT efficiencies and outsourcing.
- #38 WORKFORCE CHALLENGES The oil and gas industry is facing a shrinking talent pool for those with specialized expertise. A large percentage of the individuals who have the institutional and technological “know-how” of their organization’s specific risks and operations are looking toward retirement. Nearly 90 percent of senior human resources executives at 22 top international oil and gas companies believe this problem is one of the top business issues facing their companies1.
- #39 ERP is a business management software that a company can use to collect, store, manage and interpret data from various business activities
- #40 http://www.microsoft.com/en-hk/dynamics/industries/manufacturing-erp-supply-chain.aspx
- #42 Five Challenges With ERP Implementations in the Oil and Gas Industry: http://panorama-consulting.com/five-challenges-with-erp-implementations-in-the-oil-and-gas-industry/
- #44 http://www.finance.alberta.ca/publications/budget/budget2014/fiscal-plan-economic-outlook.pdf http://www.prnewswire.com/news-releases/atlas-energy-lp-reports-operating-and-financial-results-for-the-second-quarter-2014-270403531.html