Lecture at SP Jain Institute of Management on EPM and BI

1. Day 2: - Optimizing Data for EPM
Lecture at SP Jain Institute of Management
Executive MBA, Singapore – Oct 2009
Ravi Tirumalai
Oracle Corporation,, Asia Pacific

2. Agenda
• Understanding the EPM Data challenges
• Master key data management process
• Products and solutions:
– EPM
– Scorecards
– Dashboards & KPI’s

3. Enterprise Performance Management System
EPM Workspace
Performance Management
BI Applications
Applications
Business Intelligence Foundation
Middleware
OLTP & ODS Oracle Data OLAP SAP, Oracle, Siebel, Excel Business
Systems Warehouse PeopleSoft, Custom XML Process
Data Mart

4. Performance Management Applications
Strategic Planning Planning and Budgeting
Set Strategic
Cascade Targets
Objectives
Treasury Long-Term
Forecasting Detailed Budgeting
Strategies Planning
Corporate
Allocate Resources
Development
Master Data
Business Rules
Metrics/KPIs
Targets, Plans & Actuals
Financial Close Process Cost and Profitability Management
Define Costing
Methods
Internal External
Data Report & Analyze
Consolidate Reporting & Reporting & Define Cost Drivers
Cleansing
Analysis Compliance
Perform
Allocations
4

5. Transparency Challenges

6. Financial Consolidation At-a-Glance
Collect Data Calculate & Adjust Report
• Gather from multiple & • Apply FASB and IFRS • Generate financial
disparate applications consolidation rules statements,
• Store data in a centralized • Perform currency translation managerial reports,
repository & aggregation and perform ad hoc
analysis
“Consolidations applications are seeing a resurgence after
what was considered a maturing of this market, driven
primarily by compliance issues in the United States (driven
by Sarbanes-Oxley) and worldwide (driven by the pending International Financial
Reporting Standards).” -- Kathleen Wilhide and Henry D. Morris

7. The Financial Consolidation Challenge
Deliver High Value and Reduced Cycle Times
Average 6 Days 12 Days
Collect data Close Adjustments Report Analyze
Currency Management
I/C Legal
Subsidiaries External
World Class
<2 Days 6 Days
More time!
Collect Close Adjustment Report Analyze and Forecast
Source: Hackett Group Benchmarking-Solutions Book of Numbers
7

8. Operational Challenges
Subsidiary 1
Accounting Differences
¥ • Charts of accounts• Currencies
•
• Accounting methodsCalendars
Parent Company
Subsidiary 2 Manual, Error-Prone Processes
• Data extraction, transformation, and load
£ • Adjustments and eliminations
Consolidation
$
Joint Venture Complex Ownership Structures
• Minority interest • Intercompany
Rs • Cross holding transactions
Multiple, Fragmented Systems
Affiliate
 Lengthy close process with weak internal controls
€  Rigid systems that cannot exploit new opportunities
 Disconnect between strategy and execution

9. Financial Close and Reporting Today
…a controlled process is not easy to achieve!
• Lengthy and cumbersome closes
• Inefficient and disconnected
processes
• Difficulty with reporting and analysis
• Data quality issues
• Inability to keep pace with change
Kenneth Lay
• No control over the process
• Too many spreadsheets Accounting scandals have
brought financial reporting
…AUDIT ISSUES into focus as never before

10. Performance Management Applications
Strategic Planning Planning and Budgeting
Set Strategic
Cascade Targets
Objectives
Treasury Long-Term
Forecasting Detailed Budgeting
Strategies Planning
Corporate
Allocate Resources
Development
Master Data
Business Rules
Metrics/KPIs
Targets, Plans & Actuals
Financial Close Process Cost and Profitability Management
Define Costing
Methods
Internal External
Data Report & Analyze
Consolidate Reporting & Reporting & Define Cost Drivers
Cleansing
Analysis Compliance
Perform
Allocations
10

11. Fundamental Capabilities
Capability Detail
Planning and Fully embedded into BI and Microsoft Office
Analysis for real-time reporting and analysis
The ability to model at the operational level,
Modeling
assessing impact to the overall strategic plan
See the business impact of changing business drivers
What-if
to make intelligent decisions
Technology that allows the entire user community
Collaboration
to communicate and plan in real time as well as offline
Bi-directional planning capabilities
Top-down / Bottom-up
to promote accuracy and accountability

12. Challenges - Excel/Manual Based Processes
– Lack of process
– Lack of integration
– Lack of confidence
– Rigid, costly to
maintain
– Inability to act
12

14. Today’s Integrated Planning Process
Sweat and Excel
Financial Planning
Long-Term Financial Working
Treasury Profitability Performance
Financial Planning & Capital
Management Management Scorecards
Planning Budgeting Planning
Human Product
Demand Customer Supply Logistics
Resources Performance
Management Management Planning Planning
Planning Management
Functional Operational Planning
ERP System
15

15. Integrated Business Planning
Bridging the Finance-Operations Disconnect
Financial Planning
Long-Term Financial Working
Treasury Profitability Performance
Financial Planning & Capital
Management Management Scorecards
Planning Budgeting Planning
Strategic Integrated Financial
Operational Impact Performance
Modeling Analysis Modeling
Human Product
Demand Customer Supply Logistics
Resources Performance
Management Management Planning Planning
Planning Management
Functional Operational Planning
ERP System
17

16. Integrated Business Planning
Profit targets, prices, costs,
investment limits, working capital
Financial Modeling and Strategic Operational Modeling
Planning and Planning
Constrained Op Plans
Baseline Op Plans Operating Policies
Functional Operational
GL Accounts
Accounting Periods
Budget Data Planning
Entities
Actual Master Data
Execution Plan
Transactional Data
ERP

17. Differences between Strategic Operational
Planning and Financial Planning
1. “Network” models
2. Planning Frequency
3. Concept of “Lead Time”
4. Data Driven Model Relationships
5. Constraint Based

18. Integrated Planning Drives Key Requirements
Need for Core Technology Innovation
1. Modeling of operational constructs
– Rich expressiveness in modeling & calculation logic
– Complex dependencies, relationships, transformations
– Declarative calculations, not scripted
2. Rapid analysis of cross-functional impact
• “Change anywhere, analyze everywhere”
• Evaluate financial desirability & operational feasibility
• Interactive response times
3. Robust analytic transaction framework
1 1
• Scenario management & change isolation
2 2
• Reconciliation of concurrent plan changes
3 3
• System of record for plan changes: audit trails
20

19. Budgeting Process is Highly Inefficient
• Time – takes too long, results
obsolete
• Quality – political/negotiation, not
Senior Management reflective of business
• Cost – many wasted resources,
dubious benefits
• Flexibility – lack of
responsiveness to changes
FP&A Group
Dept A Dept B Dept C

20. Streamline Planning, Budgeting and Forecasting
• Centralized, not distributed
• Short budget cycles
• Collaboration across organization
• Consistent assumptions and
calculations
• Accurate data and plans
• Accountability
• Align top-down with bottom-up
• Driver-based planning
• Rolling forecasting

21. Reduce Fragmentation in Financial Modeling
• Complex spreadsheet models
Acquisitions
• No consolidated view
Banks Investors
Divestitures
• Spreadsheets are error prone
• Limited accounting integrity
• Lack of integrated models
Board of Directors
make scenario analysis
Senior Management cumbersome
• Long simulation times
Treasury Corporate
Long-Term Planning
Development

22. Enabling an Iterative Planning Process
Finance
Review Plan Exceptions Evaluate Alternatives
• Analyze critical gaps • Create what-if scenario’s
between financial and on plan revisions
operational plans • Rough-cut modeling
• Resolve constraints
Update Plan of Record Assess Business Impact
• Approve plan revisions • Compare impact of
• Submit plan changes back to alternatives on key
planning and execution systems financial and operational
metrics
Marketing Sales Supply Chain
 Manage collaboration  Enable fast decision-making
 Assess cross-functional impact  Perform interactive scenario analysis
24

23. Performance Management Applications
Strategic Planning Planning and Budgeting
Set Strategic
Cascade Targets
Objectives
Treasury Long-Term
Forecasting Detailed Budgeting
Strategies Planning
Corporate
Allocate Resources
Development
Master Data
Business Rules
Metrics/KPIs
Targets, Plans & Actuals
Financial Close Process Cost and Profitability Management
Define Costing
Methods
Internal External
Data Report & Analyze
Consolidate Reporting & Reporting & Define Cost Drivers
Cleansing
Analysis Compliance
Perform
Allocations
25

24. Integrated Corporate Finance Modeling Allows You
to Create a Complete Plan
Strategic Planning
Value
Management
Treasury Long-Term
Strategies Planning
Corporate
Development
Top-Down Target Setting Covenant/Ratio Analysis Mergers & Acquisitions
Contingency Planning Funding Alternatives Valuation Analysis
Strategy Screening Rating Agencies Divestitures
26

25. Financial Modeling
Challenge
Missed market opportunities
Limited cost-benefit analysis
All scenarios not considered
Not enough focus on cash flow
27

26. Scenario Modeling
Explore Options for Organizational Restructuring
Scenario 3
Scenario 2 • Copy and modify
Original State Scenario 1
existing hierarchies to
easily model options
– Move
– Add
– Remove
• Run consolidation on
modified hierarchy to
see potential outcome
– Balance Sheet
– Income Statement
– Statement of Cash
Flows
– Managerial Reports

27. Risk Analysis
Possibilities Probabilities
Thinking in Single Point Scenarios Thinking in Ranges
• Only 3 possible outcomes • Monte Carlo simulation shows full range of
• Limited view of risk outcomes
• What are most important risk factors? • Illustrates probability of outcomes
• What are the odds I’ll miss the target? • Immediate visibility into inherent risk
• Which outcome is most likely? • True risk analysis for financial models
3 possibilities… No probabilities… All possibilities… Clear probability…
29

28. Predictive Modeling – Drivers Impact
30

29. Integrate Strategic Planning Budgeting & Forecasting
Strategic Plan
Long-term planning Optimize capital structure
Corporate development Shareholder value
Seed targets and assumptions
Budget
Cascade BU Targets Consolidate budgets
Prepare detailed financial plan Budget Reviews Update strategic plan
with latest forecast
Seed budget
Forecast
YTD Capture forecast assumptions
Actuals Performance reviews
Rolling Forecast
Driver-based planning
Key performance indicators
Months / Quarters 1 Year 3 – 5 Years

30. Profitability Management Questions
• What defines a profitable
customer?
• What is the profit contribution
margin of a product or a service?
• What does it cost to sell or
service customers?
• What proportion of resources
does a customer consume? Why hasn’t reducing costs
increased profitability?
32

31. Enterprise Performance Management System
EPM Workspace
Performance Management
BI Applications
Applications
Business Intelligence Foundation
Middleware
OLTP & ODS Oracle Data OLAP SAP, Oracle, Siebel, Excel Business
Systems Warehouse PeopleSoft, Custom XML Process
Data Mart

32. Across the Enterprise and Beyond
Corp
Supplier Customer
Division Division
Partner

33. Business Intelligence
Scorecard
Dashboards
EUQR
Data Foundation

34. Operational Challenges
Analyses, Reports
Executives
Sales Marketing Operations Finance
Sales Marketing Operations Operations Finance Finance
Data Data Data 1 Data N Data 1 Data N
Data
IT Warehouse
• Delayed, inaccurate reporting Cross-functional analysis only by IT
• Conflicting, departmentally-biased results Sub-optimal enterprise performance
36

35. Valuable Insights Often Require Data from Multiple
Departments and Sources
Customers Suppliers
HR/Workforce
Procurement
Distribution
Operations
Marketing
Finance
Service
Sales
Customers Suppliers
Customers Suppliers
How does call center agent tenure, training, & compensation affect
efficiency and cross-selling performance?
How does supplier performance impact customer satisfaction and revenue?
How do I proactively manage risks of my receivables portfolio?
37

36. The Analytic Application Problem is Below the Surface
DASHBOARDS
Information Delivery
“Visible”
“PLUMBING”
Everything Else “Under the Surface”
Mappings to multiple applications
and data transformation all take
expertise and time
Upgrades

37. What’s “Above the Surface”?
Metrics and Attributes Reports & Dashboards

38. So what’s Below the Surface?
Extracts Staging Work Flows Transform Unified Metadata
& Area & Execution & Dimensions
Change Plans Loads Fact Tables &
Data Aggregates
Capture
Presentation
Account ID
Physical
Logical
∑

39. What Percentage of Each Layer is Configured?
20% + 10% + 10% + 10% + 20% + 20% 40% 50%
Extracts Staging Work Flows Transform Unified Metadata
& Area & Execution & Dimensions
Change Plans Loads Fact Tables &
Data Aggregates
Capture
Presentation
Account ID
Physical
Logical
∑

43. Data Quality Control Points

44. BI Approach :From Warehouse to Workspace
Data Sources Data Warehouse BI Foundation Workspace
(BI Server)
PRESENTATION LAYER
•Single Database
•Interactive Dashboards
• User Roles, Preferences
•Multiple schemas, • Simplified View
•Ad Hoc Analysis
logical separation • Logical SQL Interface
•Reporting & Publishing
•Staging Data Layer SEMANTIC OBJECT LAYER
(SDL) •Disconnected & Mobile
• Dimensions
Analytics
•Foundation Data • Hierarchies
Layer (FDL) • Measures •Proactive Detection &
• Calculations Alerts
• Aggregation Rules
•Access and • Time Series
•MS Office Integration
Performance Layer PHYSICAL LAYER
Consume
(APL)
Manage
Acquire
• Map Physical Data
• Connections
• Schema
Security

45. BI Applications Architecture
 Role Based Dashboards
BI
 Analytic Workflow
Dashboards by Role Presentation  Guided Navigation
Services
Reports, Analysis / Analytic
 Security / Visibility
Workflows  Alerts & Proactive Delivery
Administration
Metrics / KPIs  Logical to Physical Abstraction Layer
Metadata
 Calculations and Metrics Definition
Logical Model / Subject Areas BI Server
 Visibility & Personalization
Physical Map  Dynamic SQL Generation
Data Warehouse /
Data Model  Abstracted Data Model
Direct  Conformed Dimensions
Load Process
Access to  Heterogeneous Database support
DAC
Source
Data Staging Area ETL  Database specific indexing
Extraction Process
 Highly Parallel
 Multistage and Customizable
 Deployment Modularity
Oracle SAP R/3 Siebel PSFT EDW
Copyright © 2008, Oracle and /
Federated Data Sources Other
or its affiliates. All rights
reserved. - Internal Use Only

46. Dashboards and Scorecards Differing Perspectives
Past Future
• Business results Alerting • Strategy deployment
• Operational and strategic Benchmarking • People & team scoring
• Root cause analysis Metrics • Accountability maps
• Guided navigation Graphics • Management processes
Reporting • Initiative tracking
Metadata • Cause & effect
• Collaboration
Dashboards Scorecards
Dashboards: Why did I miss Scorecards: How does my goal
my goal? support the corporate strategy?
48

47. Snapshot of Dashboard

48. Snapshot of Dashboard
50

49. Snapshot of Scorecard

50. Snapshot of Scorecard

51. Process & Steps to build a BI Application
1. Research business requirements for processes & users
2. Design the underlying logical model – KPIs, Dimensions etc These steps
3. Architect physical data model – Fact tables, Aggregates etc require different
types of BI, ETL
4. Buy and configure a database management system to store and DB
information technology
5. Buy an ETL tool to extract, transform and load data from the
transactional tables These steps
require
6. Develop ETL programs based on an intimate understanding significant
of transactional data structures resources with
specialized skills
7. Buy a BI tool for interactive end user access – Ad-Hoc, / expertise
Dashboards, Alerts, Offline, MS Office etc.
8. Develop Dashboards & KPI, Hierarchies and prompts These steps
typically take a
9. Integrate Security: authorization, authentication and auditing long time to
10. Integrate user experience with transactional applications perfect as
knowledge of
11. Perform rigorous performance testing and QA best practices is
12. Manage changes to BI Apps – because of upgrades and learned
updates to the transactional systems

52. Built-in Best Practices - Metrics
Example Financial Analytics Metrics
Receivables Payables General Ledger Profitability
AR Balance AP Balance Balance Sheet Profitability Returns
• DSO • DPO • Cash • Return on Equity
• Closing Group Amt • Closing Group Amt • Accounts Receivable • Return on Assets
• Credit Limit Used % • Total AP Overdue Amt • Debt to Equity Ratio • Return on Capital
• Total AR Overdue Amt • Overdue Amt to Total % • Current Ratio Margins
AR Aging AP Aging Asset Turnover • Gross Margin %
• AR Aging 1-30 Amt • AP Aging 1-30 Amt • AR Turnover • Operating Margin %
• AR Due 1-30 Amt • AP Due 1-30 Amt • AP Turnover • EBT Margin %
• AR Overdue 1-30 Amt • AP Overdue 1-30 Amt • Inventory Turnover • Net Income Margin %
Payment Performance Payment Performance • Cash Cycle Product Profitability
• AR Payment Days • AP Payment Days • Fixed Assets Turnover • Revenue
• AR Weighted Days • AP Weighted Days Cash Flow • Product Gross Profit
• Times Paid Before Due • Times Paid Before Due • Operating Cash Flow • Product Operating Profit
AR Transactions AP Transactions • Investing Cash Flow Customer Profitability
• AR Avg Invoice Amt • AP Avg Invoice Amt • Financing Cash Flow • Revenue
• AR Credit Memo Amt • AP Avg Payment Amt • Net Cash Flow • Customer Gross Margin
Sample Pre-Built Dashboards
Financial Controller Receivables Manager Payables Manager Department Manager
• Balance Sheet • AR Balance • AP Balance • Budget Vs Actual
• Cash Flow • Payments Due • Payments Due • P&L
• Budget Vs Actual • Effectiveness • Effectiveness • Product Profitability
• P&L • Invoice Details • Invoice Details • Customer Profitability

53. Ensuring Alignment to Corporate Objectives
Headquarter
Objectives
Subsidiary 1 Subsidiary 2 Subsidiary 3
Critical Critical Critical
Success Success Success
Factors Factors Factors
Actions Actions Actions

54. Aligning to Corporate Strategy
• Accountability Maps
• Strategy Maps
• Cause and Effect
Maps
56

55. Building a Scorecard
Consolidated Budget Strategic
Actuals Goals Long Term Goals
Financial Actuals Target YEAR 1 Target YEAR 5
Customer
Internal
Learning & Growth
ERP, CRM, HR, Other (Oracle, SAP…)

56. How the Scorecard System Works
Send e-mail alert Fix
when a problem is
detected
SCORECARD
Analyze
E-MAIL ALERT STRATEGY ANALYSIS
58

57. The Business Intelligence Continuum
Strategic Dynamic Will our cash balances take us
through this crisis?
What if we rolled out this product
nationwide?
What if demand falls short of forecast?
Past Oriented Future Oriented
Which customers spend the most?
What is the Q4 revenue forecast?
What did this customer buy?
Which customers are most profitable?
Operational Static

58. Solve a Continuum of BI Needs
Strategic Dynamic
Modeling
Past Oriented Future Oriented
Advanced
Analytics
Ad-Hoc Query
& Reporting
Standardized
Reporting Operational Static

59. A Fusion of BI & Business Processes
• Visibility & Business Insight
– Understand Business Impact
Business Process
BI & BAM
• Action From Insight
– Empower Business Users
Business Process
BI
• Insight Driven Business Processes
– Business Intelligence Services for
integrated insight and reporting
BI
Business Process

60. Driving action from insight – Empowering Decisions
Drive sales & marketing
promotions
Enhance Customer
Satisfaction
Escalate and rectify
approvals issues
Business Process
Initiate employee
Business Intelligence
Dashboards, Alerts, Reports education initiatives
Remove production
bottlenecks

61. Technology Value Chain
Where Value is Created
Syn
Struct
Collect Store the Use
ure
sis
Filter Digets
External By Decision Optimized
Aggregate Assess
Internal By Responsibility for Speed
Relate Decide
Extract Act

62. In Summary : Alignment and Accountability are
Key to Driving Enterprise Performance…
• Develop strategies
and goals
• Define key initiatives
and KPIs
• Revisit Goals Set • Model scenarios
• Update Models Goals
• Update Plans
• Reallocate Resources Align Plan
Insight • Allocate strategic
Performance targets
• Financial & Statutory Action • Financial budgeting
• Management Reporting • Operational planning
• Compliance Report Monitor • Rolling forecasts
• SDR – GRI Metrics
Analyze • Financial and operational
• Revenue, profits, KPIs
• Efficiency and Utilization
• Variances to budget • Benchmarking and metrics
• Key trends
across LOBs
• Profitability
• Effectiveness

63. Applying Technology to Performance
Management- Fourth time lucky
CONVERGENCE
NETWORK
INFORMATION
DATA
1960 1970 1980 1990 2000 2010

64. CONVERGENCE
People
Communication PAYOFF Computing
Information

65. Back Up Slides

66. Performance Management - Best Practices
• Strategic Planning
– Definition of goal
• Tactical Planning
– Tactics, initiatives, resource allocation
• Financial Planning
– Preparation/consolidation of plan
• Management Reporting
• Forecasting
• Business Risk Management

67. Why Planning Fails
• Planning and reporting the wrong stuff
• Poor ownership and accountability
• Tying plan achievement to compensation
• Incomplete strategy definition
• Inadequate risk recognition
• Poor communication
• Weak Integration (connecting the dots)
• Information overload
• Mistaking detail for accuracy

68. Best Practice for leveraging Technology
• Integrate business and technology planning
• Break down the functional walls
• Set the right priorities
• Avoid automating inefficiencies
• Implementation is a team effort
• Focus on use, not deployment
• Manage complexity
• Link ROI to business value

70. Common Enterprise Information Model
Single Consistent View and User Self-Sufficiency
PRESENTATION LAYER
User Roles, Preferences
Simplified View Role-Based Views of the Information
Logical SQL Interface Relevant to the User
SEMANTIC OBJECT LAYER
Dimensions
Hierarchies
Measures Consistent Definition of Business Measures,
Calculations Metrics, Calculations
Aggregation Rules
Time Series
PHYSICAL LAYER
Map Physical Data
Connections Model Once, Deploy Everywhere
Schema
Across Any Data Sources
75

71. Simple Source On Mapping Rule
Identify the Identify the
Identify the Identify The
varying Dimensions
Initial Data Dimensions
Operation to be To be
Source To be Debited
performed Credited
Create or Select a Create or Select
Condition Components

72. Ensuring Financial Data Quality
Financial Data
Audit Trail
Trial Balance to Report
Data Reconciliation
Business
Data Accuracy
Processes
Data Completeness
Internal Audit Controls
COSO Repository
Stewardship Business Analysts
Driver Regulatory Compliance
We mean
77

73. An Integrated approach to BI & DW
Elements of a BI Initiative Success Factors
Consume Insight as a Service
Multi-channel
Open API’s
User self-service
Federated query
Aligning People,
Manage Processes & Technology
Embedded OLAP, Data Mining RAC,
Clustering
Data Integration, Business Security, Scalability,
Acquire Processes (BPEL, BAM), MDM, & Performance
Content Management

76. Pre-Built, Pre-Mapped, Pre-Packaged Insights
1 Pre-built warehouse with more than 16 3 Pre-mapped metadata, including embedded best
star-schemas designed for analysis and reporting practice calculations and metrics for Financial,
on Financial Analytics Executives & other Business Users.
Presentation Layer
Logical Business
Model
Physical Sources
2 Pre-built ETL to extract data from hundreds of 4 A “best practice” library of over 360
operational tables and load it into the DW, sourced pre-built metrics, Intelligent Dashboards, 200+
from Oracle EBS, PeopleSoft Enterprise, SAP R/3, Reports and alerts for CFO, Finance Controller,
and other sources. Financial Analyst, AR/AP Managers and Executives

77. The New BI approach
visualization Dashboards
Consume
Analytics Scorecards
Workspace
Performance
BI Apps
Management
Apps.
BI Foundation
Infrastructure
Acquire Manage