Edgewater Ranzal Oracle Ace and Director of Technology Mike Killeen was invited to present on the need for profitability and cost management, at Oracle EPM Day in New York.

1. Edgewater Ranzal
EPM Day, New York City
October 25, 2012
Mike Killeen
Vice President of Technology
mkilleen@ranzal.com
Aligning Profit to Execution

2. ► The Need for Profitability and Cost Management
► Overview of the Oracle Hyperion EPM Solution
► Case Study
Closing Q&A
Agenda
► Closing Q&A
2

3. About Edgewater-Ranzal
One of the largest Full-Service
Edgewater
Acquired
► Publicly Traded as: EDGW
► One of The Boston Globe’s Top 100 businesses
► Ranked as one of the 500 fastest-growing stocks on Wall Street
Planning Building
Ranzal
3
► One of the largest Full-Service
Oracle/Hyperion EPM and BI
practices.
► Oracle Platinum Partner presented
with numerous awards and
recognitions by Oracle including
multiple Partner of the Year awards.
► Premier Consulting Services in North
America, and a regional European
office located in the United Kingdom.
Founded in
1996
Essbase
Acquired by
Edgewater
2004
Data
Integration &
Warehousing/
CRM/
Web 2.0
Development
Acquired
Vertical Pitch
2007
HFM/
FDM
Acquired
Meridian
2010
HSF
Planning
2001
Planning
Building
OBI Team
2011
OBIEE
Build DRM &
HPCM Teams
2009
DRM &
HPCM

4. Our Services Dashboards & Scorecards, Profitability &
Cost Mgmt, 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
Planning, Budgeting, Forecasting,
Workforce Planning, Capital Planning,
Project Planning, Public Sector
Budgeting, Strategic Finance
Installation, Upgrades,
Migration, System Monitoring,
Backup and Recovery, Disaster
Recovery, Load Testing,
Hardware Sizing
Consolidation &
Reporting
Business
Intelligence
Enterprise
Planning
Infrastructure
Project
Data Integration, Financial Data
Management, Data Warehousing, Master Data
Management, ETL Services, Performance
Tuning, Automation
Project/Program Mgmt, EPM
Road Maps, Application
Reviews, Business
Requirements, Process Change,
Documentation
Infrastructure
Training
Support
Services
Data
Services
Project
Management
Support Services – Technical and
functional Support Services.
Remote Service Desk available to
call for quick response to technical
and application issues.KeyTeach Partnership
– HFM, Planning, Essbase custom Training
Class as well as Remote and CBT.
COMPLEMENTS ORACLE TRAINING UNIVERSITY

5. The Need for Profitability & Cost
ManagementManagement

6. Call Me
Doing Fine
Why Enterprise Performance Mgmt (EPM)?
reactrecognize

7. Understanding Profitability Exposes Hidden Cost Behaviors
“…Technology vendors are spending, on average, 19% of their
selling, general, and administrative (SG&A) costs or $135,262 per
quota-carrying salesperson in support-related activities.
Few are aware of this enormous amount because the costs are
hidden .”hidden .”
“Uncovering The Hidden Costs Of Sales Support”
Scott Santucci - April 13, 2009

8. Using the Wrong Tools to Effectively Analyze Profitability
“Most companies are not using the right tools…spreadsheet
based models are hard to change, error prone and difficult and
time-consuming to use. Relying on desktop spreadsheets can
keep your company from doing the kind of analyses it needs to
Accurate Costing Is Key to Profitability
Ventana Research, 2008
keep your company from doing the kind of analyses it needs to
do when it needs to do them...”

9. Does Your Company use a tool today to perform allocations as part of a
profitability management or cost management solution? If so, what tool do
they use?
25% 25%25%25%
1. Packaged Profitability or Costing
Application (e.g. HPCM, OFSAA)
2. Custom Solution Using EPM, BI,
or OLAP Tool (e.g. Planning, EDW,
Essbase)
3. General Ledger
Polling Question #1
9
Packaged
Profi...
Custom
Solutio...
GeneralLedger
Spreadsheets/M
...
3. General Ledger
4. Spreadsheets/Microsoft Access
Solution or not sure

10. Profitability Defined
Wikipedia Defines Customer Profitability as:
“Customer profitability is the difference between the
revenues earned from and the costs associated with
the customer relationship in a specified period”
Basic Formula:
Profitability = Revenue - Direct Costs - Indirect Costs

11. Cost Definitions
► Direct Costs
► Costs Directly associated to the making of a product or delivery of a
service
► Parts for the product
► Labor for Service Delivery
► Costs Directly attributed to the selling to a customer or client
► Shipping and Handling Expense
Customer Processing Expense► Customer Processing Expense
► Indirect Costs
► Costs that are not directly attributable to the making of a product or the
selling to a customer
► Operating Costs (e.g. Call Center, Plant Overhead)
► Selling Costs (e.g. Sales & Marketing)
► Investment Costs (e.g. R&D, Initiatives)
► G&A Costs (e.g. IT, HR, Finance, Admin)
► Finance Charges for Cost of Capital Employed

12. Profitability Challenge #1 -
Indirect Expenses Assignment to Products & Customers
No Standard Process
Standard,
accepted
process
No Standard Process
Indirect
Costs are
difficult to
track and
measure

13. Profitability Challenge #2 -
Statutory Reports are not Timely or Detailed Enough
• 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
Financial
transactions
Consolidation
(GL or HFM) • What proportion of
resources does a specific
customer consume?
• Why hasn’t increased
revenue resulted in
increased profitability?
transactions
Financial
Data
(GL or HFM)
Accumulator
Bottom-line
Results
Organizational P&L

14. Profitability & Costing Solution Elements
Analysis &
Planning
Product P&L by Activity
Financial P&L
Behavioral
Data
Raw
Data
Meaningful
Attributions &
Allocations

15. Raw Data – Financial P&L
Legend
C Customer Specific Costs
P Product Specific Costs
F Financial/Overheads
Type P&L Line $ % of Rev
C/P Units Sold 100
C/P Gross Sales 1,000$ 102%
C/P Less Disc, Rtrns & Allow. (20)$ -2%
Net Sales 980$ 100%
C/P COGS @ Std 400$ 41%
Raw Materils,
Labor, Freight In,
Mfg Ovhd
► Accounts
► Legal Entity/Company
► Cost Center/Department
► Product Line/Profit Center
► Other Chart Fields:
► Sub Accounts/Functional Area
► Projects
Typical Financial Analysis
C/P COGS @ Std 400$ 41%
F COGS @ Var 23$ 2%
Less: Total COGS 423$ 43%
Gross Profit 557$ 57%
P/F/O Selling & Marketing Exp 150$ 15%
F G&A Exp 100$ 10%
Less: Total Operating Exp 250$ 26%
Operating Income 307$ 31%
F Depreciation & Amortization (75)$ -8%
F Other Inc/(Exp) (50)$ -5%
Net Income Before Taxes 182$ 19%
Less: Income Taxes @ 40% 73$ 7%
Net Income After Taxes 109$ 11%
Dept Costs:
Accounting
Mgmt
IT
Mfg Plant
Departmental Exp
Variances
► Projects
► Line of Business/Channel
► 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

16. SHIPPED TO SOLD TO TERMS: FROM INVOICE DATE
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
2% 15 days
Net 16, USD
DIRECT INQUIRIES TO:
1 (800) 999-9999
INVOICE SHIP DATE 11/01/2004
INVOICE DATE 11/01/2004
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXX
PURCHASE ORDER NO. SHIP NO. CUST. NO. SALES DIST. PLEASE SHOW THIS INVOICE NUMBER
WHEN REMITTINGTEST ORDER #1 S901999 B901999 2377
DATE INV’D
11/01/04 2002009999
ORDER DATE
MM/DD
DELIVERY DATE
MM/DD ACCT. AT CUST. CARRIER SALES ORDER
19929988811/01 11/11 1202 Customer pick-up
QUANTITY UNITS PRODUCT CODE DESCRIPTION UNIT PRICE AMOUNT
700 CA 4100000295 TBAH 24/500 75.35 52,745.00
Raw Data – Sample Operational Data
700 CA 4100000295 Efficiency Allowance 333333 0.05- 35.00-
700 CA 4100000295 SpecAllow-OI RateCs 654737 0.50- 350.00-
700 CA 4100000295 Freight-Backhaul 1.08- 155.74-
700 CA 4100000295 Fuel Allow Percent 6% 9.34-
700 CA 4100000295 Unload Allowance 0.04- 28.00-
Data Sources: Order Mgmt, A/R, Billing, Trade Spending apps
Customer
- By Customer
- Bill To/Sold To
- Shipped To
- By Market
- Mkt (Channel)
- Sales ID
- Shipped To
Product
- Category
- Sub-Category
- Brand
- Sku
Time
- Year
- Quarter
- Month(5-4-4)
- Week
- Day
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)

17. Meaningful Allocation – Top Down via Rules
› Allocation Rules can use drivers such as headcount, percentages, hours,
etc
Customer
Profitability
Profit Before Overheads
Gross Profit
Total MDC
Total Overheads
Total Mktg Overhead
Total Sales Overhead
Allocation Rules
Profitability
CRM HR GL EDW EPM
Available Driver & Allocation Source Data
Total Sales Overhead
Total General Overhead
Total Associated Costs
Broker Commissions
JV Income

18. Meaningful Allocation – Bottoms Up Via ABC
► Activity based costing:
► Rather than looking at departmental
expenses as a collection of costs by
functional areas, look at them as a
collection of activities.
► Functional view:
► Total Distribution Costs
Order Desk Dept
► Specify a department & get cost - e.g., Order Desk
- $100
► Identify activities – e.g., take phone order, take fax
order
► Identify % time spent on each activity – e.g., 70%,
30%
► Identify Driver for Each Activity – e.g. # of Orders -
50, 110
► Calculate activity cost rates
Example
► Order Desk Dept
► Warehousing Dept
► Shipping Dept
► Activity view:
► Total distribution costs:
► Take orders
► Pick items from shelves
► Drive trucks
Calculate activity cost rates
► Divide departmental cost by driver
► Phone order rate = $100*70%/50 =
$1.40/phone order
► Fax order rate = $100*30%/110 = $0.27/fax
order
► Load in drivers by customer
► Customer A – 10 phone orders = $14.00 total
cost
► Customer B – 10 fax orders = $2.70 total cost
► Assuming Customer A & B order the same product,
which is more profitable?

19. Decision Support – Sample Reporting & Analysis

20. Key Expectations of a Profitability & Cost Management Solution
► Reliability
– Visibly defensible
profitability and cost
results
► Agility
– Timely reflection of
Senior
Management
– Timely 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

21. Which of the below use cases would your organization prioritize as the top
application for a Profitability & Cost Management Solution?
25% 25%25%25%
1. Cost Allocation Process for External Purposes
2. Activity Based Costing For External Purposes
3. High Level Profitability for Management
Polling Question #2
21
CostAllocation
Processf..
Activity
Based
Costing
Fo...
High
LevelProfitability
...
Detailed
Custom
er/Prod...
Purposes
4. Detailed Customer/Product/Operational
Profitability for Management Purposes

22. Overview of Oracle Hyperion EPM
Profitability SolutionProfitability Solution

23. EPM/BI Platform
Consolidation
& Reporting
reactrecognize
today
• The more mature the EPM platform, the
more lead time to RECOGNIZE issues (i.e.
the transfer from Finance to Operational
insight)
Building an EPM/BI Platform
& Analysis
(profitability)
Financial
Planning
• The better enterprise reporting & analysis
tools, the easier it is to RECOGNIZE issues.
• The better transparency to details to
revenues and costs, the more time for
insight to REACT and resolve.
• The more integrated these components,
the faster time to REACT.Analysis
(profitability)

24. Which of the following EPM/BI programs would you rank as MOST important to
your organization?
25% 25%25%25%
1. Optimizing the Financial Close & Reporting
Process
2. Improving the Budgeting, Forecasting &
Planning Process
Polling Question #3
24
Optim
izing
the...
Im
provingthe
...
EnablingActio...
Delivering
and...
Planning Process
3. Enabling Actionable Operational and
Financial Analytics throughout the
organization
4. Delivering and Optimizing a Profitability
and/or Cost Management Solution

25. Oracle EPM and BI Architecture

26. Solution Component – Essbase OLAP Server

27. Profitability Applications are Multi-Dimensional in Nature

28. • Packaged Profitability functionality
• Computes Profitability for Business Segments, Customers and
Products
• 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
Solution Component – Hyperion Profitability & Cost Management (HPCM)
28
• 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 Metadata via EPMA
• Shared Reporting Tools like Financial Reports & Web Analysis
• Proven Technology Stack

29. Metadata
Management
Allocation
Model
Definition
Cost & Revenue
Allocation
Calculations
Profitability & Cost Analysis
HPCM Workflow for Profitability & Cost Solution

30. HPCM Stages
► 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
Name Dimension 1 Dimension 2 Dimension 3
1 – GL BudgetCentre Account Related Party
Allocation
Flow
► Separate stages enable traceability!!
2 – Sum BudgetCentre CostPool
2 - Sum_Intra BudgetCentre CostPool
3 – Process Process Activity Client
4 – Service Service

31. Direct and Indirect (Genealogy) Allocations
Drivers Deployed
•FTE (Simple)
•Various % Inputs (Custom)
•Summarization (Even)

32. In a Perfect World, All Stages are Created Equal…
R12 449
Account
R12 449
Process
R12 449
Service
HPCM/Essbase is storing the data separately in each Stage!

33. HPCM Allocation Model Definition Components
Source Stage
General Ledger
Target Stage
Cost Pool
Account
Budget
Centre
Related
Party
Budget
Centre
Cost PoolDriver
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
Driver Definitions – Create an allocation
formula/methodology that references a
loaded metric within the model.
1
2
3
4
2 3
1
4
4 dimension combination and the target
Assignment Rule
4
4

34. Sample Model Analysis – Trace Allocations
Trace Allocation
for Service

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

36. Solution Component – Common EPM/BI Reporting Tools

37. Information Delivery - Sample EPM Dashboard

38. Solution Component* - Hyperion Planning EPM Application
Shorten Planning Cycles and Improve Business Predictability
► Powerful workflow
and process management
► Intuitive interface for end
user data entry
► Robust data integration
► Leverages Essbase for► Leverages Essbase for
powerful reporting and
analysis
► Scalable Web
infrastructure
► Shared EPM
Administration Tools

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

40. What role do you see a budgeting/forecasting/planning product playing in a
profitability & cost management solution?
25% 25%25%25%
1. Critical - the definition of a set of routines that
can be shared with the profitability
management solution for actuals, plans,
forecast, and what-if scenarios
2. Important – the solution needs to support
Polling Question #4
40
Critical-the
definition
of..
Im
portant–
the
solutio...
Nice
to
Have
–can
exten...
NotIm
portant–
w
e
w
ou..
2. Important – the solution needs to support
processing of both actuals and budget/forecast
data sets
3. Nice to Have – can extend the profitability
process through driver collection & an
occasional what-if scenario
4. Not Important – we would run our processes
only for actuals

41. Case Study
An HR Consulting FirmAn HR Consulting Firm
Planning & HPCM for a Fully Loaded P&L

42. Business Process
► Process
• Creation of a “Fully Burdened” dataset.
• Attribute the “Fully Burdened” dataset.
• Allocate the Costs to the lowest level of the business (Entity & C2 Dimensions)
► As-Is
• A large tactical MS Excel solution – 50+ worksheets
• Difficult to interrogate the process.• Difficult to interrogate the process.
• Difficult to control changes.
► To-Be
• To deliver an allocation system that uses a combined Hyperion
Planning and HPCM approach.
• Solution on an Enterprise Platform - a platform for further growth.
• Ability to easily run multiple versions.

43. Application Architecture
Driver Data
Hyperion Planning
Hyperion Profitability & Cost Management
Microsoft Excel
Attribution Planning
Application
HPCM
Cost Allocation Application
Budget Planning
Application
HPCM Stage
Management Utility

44. Business Logic
STG 1
BONUS
STG 2
PROP &
STG 3
MGTI
STG 4
PRE
STG 5
POST
STG 6
PRE
HPCM
STG 7
POST
HPCM
STG 8
TOTAL
Budget Planning
App
SOURCE
HPCM App
BONUS PROP &
ADMIN
MGTI PRE
ATTR
POST
ATTR
TOTAL
ALLOC
SOURCE
DATA
Budget Planning
App

45. Attribution Process – Data Form

46. Allocation Matrix

47. HPCM Model Architecture

48. HPCM Stage Balancing

49. HPCM Trace Allocations

50. Outcome
► Excellent visibility throughout the allocation process.
► A platform for great reporting.
► Ability to run multiple versions.
► Lower IT involvement (Run the Model).
► Can answer business questions quickly.
A robust and repeatable process.► A robust and repeatable process.
► Business areas can understand their costs – challenge the data
not the process.
► Risk mitigation – Enterprise platform

51. ClosingClosing

52. ► 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 (such as IT or a
centralized HR function) accurately?
► Are people spending too much time maintaining our costing models and other
elements of our costing system?
Self-Evaluation Questions
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?

53. Closing and Q&A
53
Mike Killeen, Vice President
Edgewater Ranzal
108 Corporate Park Drive, Suite 105
White Plains, NY 10604
E-mail: mkilleen@ranzal.com

54. Appendix – HPCM Demo FlowAppendix – HPCM Demo Flow

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

56. Demo - Model Validation – Stage Balancing Report
Key Column

57. Demo - Business User Defines Drivers in HPCM1

58. Demo - Drivers are Assigned to Cost Pools2

59. Demo - Business Users Control Definition of Assignment Rules3

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

61. Appendix –
HPCM Reference InformationHPCM Reference Information

62. HPCM Key Terms & Concepts
Key Term Standardised Usage
HCPM allocation engine An allocation by definition is the split of one number into multiple based on
a set of rules and methodologies.
HPCM allocation (function) The split of data from a single source, located in one stage, to multiple
targets, located in a different stage, through a particular methodology or
calculation rule. Allocations can also exist within the same stage (called an
intra-stage allocation). In HPCM, a driver, is defined as the unique
combination of a calculation rule (e.g. pro-rate split, even distribution) withcombination of a calculation rule (e.g. pro-rate split, even distribution) with
a measure or metric (e.g. Headcount, Manual Stat).
Assignment In HPCM an assignment defines the unique pairings of source to target
relationship. For example, the fact that Actuary Management Cost Center
only allocates to the Actuary Operating Cost Centers (as opposed to all cost
centers) is an assignment rule. The fact it uses headcount for that allocation
is a driver.
Traceability Traceability in HPCM is the process of visually flowing a cost pool forwards
or backwards from any stage.