1. Orange County Convention Center
Orlando, Florida | June 3-5, 2014
Project system for Revenue Recognition in Professional
Service Organizations
by Pramod Patil

2. NTTDATA & Global SAP Practice
SAP PS Result analysis (RA) & Settlement
FMV and Billing Plan
WBS revenue planning
Enhancements
Implementation challenges
Business Benefits
LEARNING POINTS

3. © 2014 NTT DATA, Inc. 3
• 6th Ranked – Global IT Services and
Systems Integrator
• >$13B – In annual revenues
• ~75,000 Professionals – operating in
40 countries
• Balanced global delivery – 10,000
strong in India
• Founded 1967 in Japan as the
technology arm of NTT Group
• 25 years of annual growth
• Services span applications,
infrastructure, cloud, and industry
solutions
NTT DATA Corporate Headquarters, Tokyo
Executing aggressive globalization strategyExecuting aggressive globalization strategy
NTT DATA – Global IT Innovation Partner

4. Copyright © 2014 NTT DATA Corporation 4
SAP Implementation at a Glance
Full-Services Approach
• Services that cover Plan, Build,
Manage and Improve phases of
lifecycle.
• Resources with both industry and
product skills
• Solutions : On promise, hosted and
cloud
Full-Services Approach
• Services that cover Plan, Build,
Manage and Improve phases of
lifecycle.
• Resources with both industry and
product skills
• Solutions : On promise, hosted and
cloud
Value Proposition
• Glocal
• Integrated Service Delivery approach
for SMB, Mid-large and LE
• Unique signature solutions by
industry, technology and product
areas
• Lifecycle tools and accelerators
Value Proposition
• Glocal
• Integrated Service Delivery approach
for SMB, Mid-large and LE
• Unique signature solutions by
industry, technology and product
areas
• Lifecycle tools and accelerators
Delivery Model
• Adaptive Shore-wise delivery
• Globally integrated “One Method”
delivery methodology
• Dedicated PMO for ERP services
Delivery Model
• Adaptive Shore-wise delivery
• Globally integrated “One Method”
delivery methodology
• Dedicated PMO for ERP services
Go-to-Market: Portfolio and Sales
Approach
• Strong industry play in 18 out of 24
segments identified by SAP
• Dedicated local sales per industry for
net new and installed base
• Shared services & prescriptive
approach for SMB and Mid-Large
Go-to-Market: Portfolio and Sales
Approach
• Strong industry play in 18 out of 24
segments identified by SAP
• Dedicated local sales per industry for
net new and installed base
• Shared services & prescriptive
approach for SMB and Mid-Large
Global capabilities - Local presence

5. Professional Service organization
Product and Services sales as part of one Project
Revenue Recognition is based Fair Market Value
(FMV), different than Sales order billing plan
Revenue adjustment to occur every month
throughout the life of the project
Cost adjustment occur every month throughout the
life of the project and calculated based on revenue
recognized.
Revenue to be recognized should never be greater
than actual revenue.
Business Scenario

6. WBS Revenue and Cost Recognition via Results
Analysis (RA) and Settlement
Revenue planning and cost planning for WBS is
required
RA compares actual revenue versus planned revenue,
no postings happened during result analysis
RA determines if billing is exceeding planned revenue
or planned revenue is exceeding billing
SAP PS RVENUE RECOGNITION
6

7. Revenue to be recognized value is always less than or
equal to actual revenue.
If revenue to be recognized is less than actual
revenue, difference is posted as deferred revenue
Based on planned revenue and revenue to be
recognized, cost to be recognized value is determined
Cost to be recognized is always less or equal to Actual
cost.
Via settlement revenue adjustment is posted for
temporary correction of the posted revenue up or
down depending on previous point.
SAP PS RVENUE RECOGNITION
7

8. SAP PS RVENUE RECOGNITION
8
Billing to actual revenue
Actual Cost
Revenue to be recognized
Cost to be recognized
Deferred cost adjustment
Deferred revenue adjustment

9. SAP PS RVENUE RECOGNITION
9
Adjustments of revenue and cost does not create postings in
COPA.
Later when actual revenue is recorded, a portion of the billing is
recognized by adjusting corresponding deferred revenue and
transferred to COPA as the true revenue.
In the same proportion cost would be recognized
Settlement

10. Deliverable Billing Value Discount
Software
Licenses
25000 50%
Implementati
on services
100000
Hardware
components
50000 30%
Support
Maintenance
50000
BILLING PLAN and FMV
Deliverable FMV
Software
Licenses
50000
Implementati
on services
77250
Hardware
components
50000
Support
Maintenance
38250
Billing Plan
• Deliverable value based on discount
• Milestone Billing plan
• Periodic billing plan
FMV
• Discount based FMV
• Revenue to be recognized
based on FMV

11. Revenue Planning with project through WBS revenue
planning and not sales order billing plan
WBS Revenue Planning = Revenue recognition
planning
Planned revenue (FMV) at WBS side supersedes the
sales order billing plan
Billing with respect to milestone or periodic billing
plan
Revenue recognition with respect to FMV
WBS REVENUE PLANNING

12. Reason for two separate revenue plans:
• FMV based revenue recognition
• Revenue recognition plan is different that Billing plan
WBS REVENUE PLANNING

13. 1. WBS revenue planning upload from Excel
FMV is calculated outside SAP
Period based revenue recognition plan
Sometimes planning is spanned across two years.
Program creates WBS revenue plan by excel
upload
CUSTOM ENHACEMENT

14. 2. Result Analysis enhancement
Revenue to be recognized always same or less
than Actual billing
Cost to be recognized always same or less than
actual cost
CUSTOM ENHACEMENT

15. CJI3
FS10N – Line items drill down
PROJECT REPORTS

16. KE24
This is the single entry in COPA that shows both revenue and cost that have been
recognized. One observation here is that the cost element display only shows one of the
cost elements used in the transaction (in this case 7111123). For greater split you should
refer to report CJI3.
PROJECT REPORTS

17. Business process change in how project needs to be
created
Cost and revenue planning is essential for each project
IMPLEMENTATION CHALLENGES

18. Improved project control
Project managers responsibility and involvement is
month end closing financial processes
Revenue recognition based on project progress and
results
Automatic cost recognition with respect to revenue to
be recognized
Reduced finance effort due to automated period end
closing process.
Reduced finance efforts due to FMV based revenue
recognition
BUSINESS BENEFITS

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20. THANK YOU
THANK YOU FOR PARTICIPATING
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SESSION CODE: 2007
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