The document summarizes a presentation on profitability management using Oracle's Hyperion Profitability and Cost Management (HPCM) solution. It provides an agenda for the presentation including an introduction to profitability management needs, how HPCM enables profitability management, a case study, and Q&A. It also provides an overview of the consulting partner Edgewater Ranzal and their experience delivering EPM and BI projects including HPCM. [END SUMMARY]

1. Dallas EPM Showcase
Profitability Management with HPCM
Mike Killeen
Vice President of Technology
mkilleen@ranzal.com
Dallas, TX, Feb 18, 2014

2. Agenda
►
Introduction
►
The Need for Profitability Management
►
How HPCM Enables Profitability Management
►
Profitability Management Case Study
►
Closing and Q&A

3. Edgewater Ranzal Overview & Differentiators
►
Oracle Platinum Consulting Partner - 100% Focus on Oracle/Hyperion Business Analytics (EPM/BI)
–
►
175+ Full time EPM/BI Billable Consultants throughout the US, Canada and the United Kingdom
EPM & BI Experience & Success
–
►
1,500+ Oracle EPM & BI projects successfully delivered since our founding in 1996
Depth & Breadth of EPM & BI Service Offerings
–
►
Product Experts across the full EPM/BI Suite - Planning, HFM, HSF, HPCM, Essbase, OBIEE, DRM, FDMEE
–
Visioning & Roadmaps, Full Life Cycle Implementations, Tech Review & Assessments, Staff Augmentation
Additional Value Added Service Offerings
–
Exalytics – Installation, Configuration & Benchmarking Services
–
Infrastructure Services – Design, Configuration, Performance Tuning & Upgrades
–
Support Services – Remote Help Desk, Lev 1 Support, Patch release Support
–
Training Services - Customized and Pre-Packaged EPM/BI Training Delivery
►
3 Ranzal Oracle ACEs Across EPM/BI Platform (Planning/BI, HFM & FDMEE)
►
Co-Development Efforts with Oracle Product Management
•
•
•
►
Workforce Planning
Balance Sheet Planning
Capital Planning & PFP
•
•
•
HFM
Financial Close Mgmt
Disclosure Management
Customer Advisory Boards, Beta Testing, Certification Exam Development
•
•
•
HPCM
HSF
FDMEE/ERPi & EPMA

4. Edgewater Ranzal EPM & BI Service Offerings
Dashboards & Scorecards, Financial Analytics &
Reporting, Operational Analytics, What-if Analysis,
Query & Reporting, Visual Exploration
Financial performance, Legal,
Segment & Mgmt Reporting, Financial Close
HFM Optimization, Performance Lab
SOX Compliance Support
Installation, Upgrades, Migration,
System Monitoring, Backup and
Recovery, Disaster Recovery, Load
Testing, Hardware Sizing, Exalytics
Benchmarking
Data Integration, Financial Data
Management, Data Warehousing,
Master Data Management &DRM,
ETL Services, Automation
Strategic Finance, Planning, Budgeting,
Forecasting, Workforce Planning, Capital
Planning, Project Financial Planning
Business
Intelligence
Consolidation
Enterprise
Planning
Costing &
Profitability
Mgmt
Infrastructure
Data
Services
Key Teach Course Delivery: Planning, Essbase, Financial
Reporting, Smart View, HPCM, HFM, FDM, DRM, OBIEE
Custom Training Delivery: Process & Reporting
HPCM Standard & Detailed Models,
Waterfall Allocations, Activity Based
Costing, Customer, Product & LOB
Profitability
Project
Management
Training &
Support Services
Project/Program Mgmt, EPM Road Maps,
Application Reviews, Business Requirements,
Process Change, Documentation
Support Services – Infrastructure &
Application Support Contracts

5. Edgewater Ranzal EPM & BI Service Offerings
Dashboards & Scorecards, Financial Analytics &
Reporting, Operational Analytics, What-if Analysis,
Query & Reporting, Visual Exploration
Ranzal has a long history of delivering Profitability Management Solutions
Financial performance, Legal,
Segment & Mgmt Reporting, Financial Close
1998 - Custom Essbase
HFM Optimization, Performance Lab
SOX Compliance Support
BSO Profitability Apps (5.x) Strategic Finance, Planning, Budgeting,
Business
Forecasting, Workforce Planning, Capital
Intelligence
Planning, Project Financial Planning
2004 - Custom ASO/BSO Profitability Apps (7.x) – “Angel/Demon Customers”
Installation, Upgrades, Migration,
2007 – and
System Monitoring, BackupPaid
Recovery, Disaster Recovery, Load
Testing, Hardware 2009Exalytics
Sizing, – First
Benchmarking
Enterprise
EngagementConsolidation
with Hyperion Dev to review HPCM (Project Oslo)
Planning
HPCM Standard & Detailed Models,
HPCM Implementation replacing HBM (11.1.1.3) Waterfall Allocations, Activity Based
Costing &
Infrastructure
Profitability
Mgmt
2012 – Co-Developed Key Teach HPCM Training Course
Data Integration, Financial Data
Today – 20 Successful
Management, Data Warehousing,
Master Data Management &DRM,
ETL Services, Automation
Data
Costing, Customer, Product & LOB
Profitability
(11.1.2.1)
Project
Services
Management
HPCM Project Implementations
Key Teach Course Delivery: Planning, Essbase, Financial
Reporting, Smart View, HPCM, HFM, FDM, DRM, OBIEE
Custom Training Delivery: Process & Reporting
Training &
Support Services
Project/Program Mgmt, EPM Road Maps,
Application Reviews, Business Requirements,
Process Change, Documentation
Support Services – Infrastructure &
Application Support Contracts

6. The Need for Profitability Management

7. Profitability Management Goal – Delivery of Strategic P&Ls

8. Profitability Challenge #1 Statutory Reports are not Timely or Detailed Enough
Financial
transactions
Consolidation
(GL or HFM)
Organizational P&L
Financial
Data
Accumulator
Bottom-line
Results
• What defines a profitable
customer?
• What is the profit
contribution margin 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?

9. Profitability Challenge #2 Indirect Cost Assignment to Products, Services & Customers
Standard,
accepted
process
No Standard 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
User
Counts
Products & Customers
Data
Volumes
Frequency
Of Use
Sales/Product
Managers
1000’s
1 MM’s
Daily
10K’s
Cost Center
Managers
Weekly
1000’s
Monthly
100’s
Qtrs
Departments
1000’s
LOB Execs.
100’s
LOB/Functions
10’s
Finance
Segments/Entities

11. Profitability Management Solution Elements
Financial P&L
Operational
Product P&L by Activity
Data
Source
Data
Meaningful
Attributions &
Allocations
Reporting & Analysis

12. Source Data - Financial P&L
►
Legend
C
Customer Specific Costs
P
Product Specific Costs
F
Financial/Overheads
►
Type
C/P
P&L Line
Units Sold
C/P
C/P
Gross Sales
Less Disc, Rtrns & Allow.
Net Sales
$ 1,000
$
(20)
$ 980
C/P
F
COGS @ Std
COGS @ Var
Less: Total COGS
$
$
$
400
23
423
41%
2%
43%
$
557
57%
Selling & Marketing Exp
$
G&A Exp
$
Less: Total Operating Exp
$
150
100
250
15%
10%
26%
Operating Income
$
Depreciation & Amortization$
Other Inc/(Exp)
$
Net Income Before Taxes $
307
(75)
(50)
182
31%
-8%
-5%
19%
Less: Income Taxes @ 40% $
Net Income After Taxes $
73
109
7%
11%
Gross Profit
P/F/O
F
F
F
$
% of Rev
100
102%
-2%
100%
Raw Materils,
Labor, Freight In,
Mfg Ovhd
Mfg Plant
Departmental Exp
Variances
►
►
Dept Costs:
Accounting
Mgmt
IT
►
►
Core Statutory Fields
►
Account
►
Company/Legal Entity
►
Affiliate/Partner
High Level Management Fields
►
Cost Center/Department/Geography
►
Profit Center/Product Line/Channel
►
Project and Related Attributes
While some elements of product profitability
and customer profitability may be present, they
are typically at a much higher level (e.g. many
SKUs rolling up to a Product Line, or many
Customers rolling up to a Channel)
Significant manual effort may be involved in
achieving this (e.g. Thick G/L, XL, Manual
Journals)
Complete Financial Results also occur at the
close, where its often too late to react
Need to be more detailed, timely, transparent
& automated to be actionable

13. Source Data – Sample Operational Data
INVOICE
SHIPPED TO
SHIP DATE 11/01/2004
INVOICE DATE 11/01/2004
SOLD TO
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
SHIP NO.
PURCHASE ORDER NO.
CUST. NO.
SALES DIST.
TEST ORDER #1
S901999
B901999
2377
ORDER DATE
DELIVERY DATE
CARRIER
ACCT. AT CUST.
MM/DD
MM/DD
11/01
11/11
1202
Customer pick-up
QUANTITY
UNITS
PRODUCT CODE
700
CA
CA
CA
CA
CA
CA
4100000295
4100000295
4100000295
Data
4100000295
4100000295
Customer
- By Customer
- Bill To/Sold To
- Shipped To
- By Market
- Mkt (Channel)
- Sales ID
- Shipped To
DATE INV’D
11/01/04
PLEASE SHOW THIS INVOICE NUMBER
2002009999
WHEN REMITTING
SALES ORDER
199299888
DESCRIPTION
4100000295
700
700
700
700
700
TERMS: FROM INVOICE DATE
2% 15 days
DIRECT INQUIRIES TO:
Net 16, USD
1 (800) 999-9999
UNIT PRICE
TBAH 24/500
Sources:
75.35
Efficiency Allowance 333333
SpecAllow-OI RateCs 654737
Freight-Backhaul
Order Mgmt, A/R, Billing, Trade Spending
Fuel Allow Percent
Unload Allowance
Product
- Category
- Sub-Category
- Brand
- Sku
Time
- Year
- Quarter
- Month(5-4-4)
- Week
- Day
AMOUNT
apps
52,745.00
0.050.501.086%
0.04-
35.00350.00155.749.3428.00-
Accounts
- Net Sales Dollars
- Gross Sales Dollars
- Less: Cash Disc
- 2% 15 days
- Efficiency Allow
- Spec Allow, etc
Attributes
Quantity
- SKU A
(Case = 12)
- SKU B
(Case = 1000)

14. Meaningful Allocations – Varying Approaches by Line Item
P&L Line Items
Typical Dimensionality
Allocation Method & Drivers Used
•Revenues, Returns
•Discounts, Allowances, Accruals
•Customer By Product
•Customer Specific
•Invoice Details
•% Net Sales to Product
•COGS
•Inventory Charges
•Customer By Product
•Product Specific
•Invoice Details
•% Net Sales to Customer
•Operating Expense - Labor
•Operating Expense – Non Labor
•Org Channel or Product Line
•% Time Spent (Activities, Employee)
•% Net Sales to Customer
•Selling Expense
•Marketing Expense
•Org, Channel
•Org, Product Line
•Rep Commission, % Net Sales
•Initiatives, Trade Spend $
•Shared Services (IT, Fin, HR)
•Corporate Overhead
•Organization
•Overall Corporate
•Service Catalog, Projects, Mgmt Fee
•FTEs, Net Revenue, Square Footage
14

15. Reporting & Analysis: Interactive Analysis via Dashboards

16. Reporting & Analysis: Interactive Analysis via Dashboards

17. Outcomes: Expectations of a Profitability Management Solution
►
Reliability
– Visibly defensible profitability and
cost results through transparency &
audit/control
►
Senior
Management
Agility
FP&A
– Timely reflection of results to be
actionable
►
Relevance
– An ability to Allocate resources to
the most important opportunities
Operational
Results
Financial
Results
Revenue &
Cost Models

18. Overview of Oracle Business Analytics
Profitability Management Solution

19. Oracle Business Analytics – EPM/BI Software Architecture
EPM Apps: Information Generation
BI Foundation: Info Delivery
Master Data, Data Quality & Data Integration Tools: Information Management

20. Solution Element: Hyperion Profitability & Cost Management (HPCM)
• Packaged Profitability functionality
• Computes Profitability for Units, Segments and Services
• Pre-Built Framework for profitability modeling:
• Pre-built Measures dimension
• Support for Multiple Cost Allocation methodologies
• Pre-Built Validation reporting
• Graphical Interactive Traceability Maps
• Genealogy Reporting shows flow from any stage to any stage
• A User-Driven application
• Measures, Allocates and Assigns Cost and Revenues via User
Defined Rules
• Finance User-facing Administration
• Provides Scenario Modeling for Decision Making
• Tightly integrated with the full Hyperion EPM Suite
• Shared Data and Master Data via EPMA
• Shared Reporting Tools like Financial Reports & Smart View
• Proven Technology Stack
20

21. Why HPCM? To Meet these key requirements…
Organizations need information management
solutions to address the challenges. These needs
can be abbreviated as F-A-S-T!
Flexibility
• Analyze different
chargeback
approaches to yield
optimal mix of
services versus costs
incurred by the
shared service center.
• Rapidly evolve
methodologies as
the maturity model
of the shared service
center evolves.
Audit & Control
• Provide key
stakeholders
confidence in the
numbers produced
and methodologies
employed to ensure
compliance.
Shared
Methodology
• Define consistent
allocation and charge
back methodology
across all
management cycles.
• Ensures consistent
comparisons when
reviewing and
updating
methodology result
and planning for
future management
cycles.
Transparency
• Give Units the detail
costs they incur for
the service
consumed.
• Compare
effectiveness of
internal unit services
with those of
external providers to
ensure efficiency.

22. HPCM Workflow and Architecture
Master Data & Data
Integration Management
• Create & Manage
Dimensions &
Hierarchies
• Deploy the Application
• Define Data Integrations
from Source Systems
• Manage User Security
Model Development
Create & Manage the Business
Model:
1. Define the Stages
Model Execution
Execute a Model POV:
1. Load Cost/Revenue Data
2. Load Driver Metric Data
2. Create a Model Point-OfView (POV)
3. Validate Model Inputs
Published Reports &
Interactive Analytics
Produce Management and
Performance Reports:
• Financial Results Books
• Margin Analysis
4. Execute Calculations
3. Define the Drivers
4. Define Assignment Rules
5. Assign Drivers
• Cost & Revenue
Contribution Analysis
5. Trace Allocations & Validate
Model Results
• What-If Scenarios
6. Publish the Model POV
• Genealogy Reports
6. Create Assignments
Dimensions
Hierarchies
Attributes
Enterprise Performance
Management Architect
(EPMA)
Stages
Drivers
Assignments
Essbase
Calculation
Cube
(BSO)
Essbase
Reporting
Cube
(ASO)
Hyperion Profitability & Cost
Management
(HPCM)
Financial Reports, Smart View,
Business Intelligence Foundation

23. Demo - Define POV, Business & Driver Metrics in EPMA
POV Dimensions
Business Dims
Driver Metrics

24. Demo - Business User Defines Stages in HPCM for Allocation Flow
Stage definition is wizard
driven, and provides the
appropriate selections for
stage creation.

25. HPCM: Direct and Indirect (Genealogy) Allocations via Stages

26. HPCM Model Definition Components
Source Stage
Project Detail
Target Stage
Customer
1
2
Project
Customer
Dept
Resource
4
2
3
Driver
1
Project
4
3
4
Driver Definitions – Create an allocation
formula/methodology that references a
loaded metric within the model.
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

27. Demo -
1
End Users Define Drivers in HPCM
Select from list of user defined driver
metrics and allocation methodologies.

28. Demo -
2
End Users Assign Drivers to Source Cost Pools in HPCM
Select Default Drivers for Cost Pools, with an ability
to provide exceptions for unique projects.

29. Demo -
3
End Users Create Target Range Assignment Rules in HPCM

30. Demo -
4
End Users Map Source Stage to Targets Via Assignments
Or Allocation Assignments can be
bulk loaded via a staging table.

31. Demo – Traceability Analysis – What makes up a client charge?
2% of China Charge came
from resource wswain
from Dept X working on
Project Y
35% of China Costs come
from Asia Region Office
Project 212375

32. What’s New in 11.1.2.2 HPCM – Detailed Profitability Models

33. What’s New – Performance Improvements & Exalytics Certification
►
11.1.2.3.351 HPCM is Exalytics
Certified
►
New Parallel Calc
►
Non EPMA Mode

34. Profitability Case Study
HR Consulting Firm
Podcast Available At:
https://blogs.oracle.com/epm/entry/the_deeper_realities_of_implementing

35. Mercer HR– Attributions & Allocations
Client Overview
Implemented Solution
● Mercer HR is a human resource and related financial
services consulting firm headquartered in New York City. ●
The world's largest human resources consulting firm
providing retirement and health benefits services, human
capital surveys, outsourcing services and other financial
services to a large client base. ● Has over 18000 employees
in 180 cities in 40 countries.
● Edgewater Ranzal experts took only 4 months to build, test and put into
production an HPCM application.
● Sourced data from Planning. ●
Delivered multi-step, multi-stage Attributions & Allocations ● Provided
traceability map reports. ● Developed self-service standardised reports
for business partners to consume allocation results.
Results
Challenges and Opportunities
● A powerful, flexible, easy-to-use client profitability and cost
management system to accurately allocate costs and clearly
show profitability across the entire organisation. ● A
transparent, out-of-the-box solution to provide all the features
for improved profitability and cost management while
offering critical interoperability and self-service functionality.
● Interface with existing HFM implementation.
Technology
● HPCM. ● Planning
● HPCM offers an outstanding accurate, transparent and flexible client
profitability and cost management system that supports their daily client
activities. ● Cost allocations can be traced end-to-end across the entire
organisation, giving a clear view of profitability and understanding of costto-serve for each business area and region. ● User-friendly self-service
application negating the need to ask IT whenever allocations need to be
changed.
Client Since
January 2008
Date Services Delivered
October 2012
Vertical
HR Consulting
Products
HPCM, Planning

36. HPCM & Planning – Better Together
Hyperion Planning
Multi User Data Entry
Task Lists & Workflow
Bottoms Up Calculations
Reporting & Commentary
EPMA
Shared Dimensions &
Hierarchies (EPMA)
Data synch:
Costs by Account & Dept
Data synch: Direct Attribution to LOB
Data synch: Drivers by
Account & Dept & LOB
Data synch: Results by
Account & Dept & LOB
Reporting & Analysis
Financial Reports
Smart View for Office
BI Foundation (OBIEEE/Essbase)
HPCM
Multi-Step Allocation Modeling
Validation Reporting
Traceability Maps & Analysis

37. Attributions & Allocations - Solution Architecture
Hyperion Planning
Hyperion Profitability & Cost Management
Driver Data
Microsoft Excel
Load Driver Metrics
Load Costs
Publish
Budget Planning
Application
Attribute
Data
Load Pools
Validate
Attribution
Planning
HPCM
Cost Allocations
Set POV Variables
Update
Alloc Rules
HPCM Stage
Management Utility
Run
Allocs

38. Attributions & Allocations – Attribution Data Entry Form

39. Allocation Requirements

40. HPCM Model Architecture
Stage 1 - Global
►
►
►
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.
Business
Entity
Stage 2 - Regional
Business
Entity
Stage 3 - Local
Business
Entity
Stage 4 - Business
Business
Stage 5 - Department
Department
Entity
Account

41. Key Model Validation – HPCM Stage Balancing Report

42. Key Analysis – Trace Allocations in HPCM
Trace Allocation
Allocation
Source

43. Closing and Q&A

44. Self-Evaluation Questions
►
►
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?

45. 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 UK: +44 (0)2033 717174