Enterprise Performance Management for Midsize Companies and Workgroups An Oracle White Paper Updated July 2008
Enterprise Performance Management for Midsize Companies and Workgroups This white paper will review the stages of business growth and provide examples of how forward-thinking emerging companies have leveraged BI and EPM solutions to manage expansion and address complex reporting and compliance issues. EXECUTIVE OVERVIEW Finance and information technology (IT) executives and staff in large enterprises around the world are adopting business intelligence (BI) and enterprise performance management (EPM) solutions to provide insight into the factors driving performance and to better comply with reporting regulations. But these tools should not be limited to large, publicly held companies. Midsize companies and workgroups face many of the same challenges as large enterprises, although on a smaller scale, and they also need the tools that provide insight into performance and management of key company data. INTRODUCTION As businesses move from simple beginnings to the early stages of expansion and growth, resource and performance management challenges are acute because scarce capital must be allocated and invested carefully. Each additional location and human resource brings higher fixed costs and the need to understand how these costs will be absorbed and funded: Are we adding head count to support existing demand? Are we investing in new facilities to drive expansion of the business? BI and EPM solutions can help answer these questions and give the management team insight into the factors driving revenue, cost, and profits. This white paper reviews the stages of growth that most companies experience. Examples of forward-thinking midsize companies will show how BI and EPM solutions have been leveraged to manage expansion and address reporting and compliance issues. All companies begin with small operations, so the CEO has complete visibility into customer orders, payments, purchases, and hiring activities. A SIMPLE BEGINNING WITH SIMPLE BUSINESS SYSTEMS Every large enterprise starts with modest beginnings, be it a single retail operation, a small law firm, a one-person financial planning service, or a basement manufacturing operation. Easy-to-use business systems such as QuickBooks are designed for small businesses and handle accounting, payroll, and purchasing. Business plans and budgets are developed in Microsoft Excel, Word, and PowerPoint. With centralized management, an accessible accounting system, and a Enterprise Performance Management for Midsize Companies and Workgroups Page 2
business plan that is easy to update, the principal or CEO has complete visibility into customer orders, payments, purchasing decisions, and hiring activities. Information is readily accessible and decision-making is a simple process. But the situation can change quickly. As businesses grow, spreadsheets are augmented with packaged budgeting and planning applications. Companies might also need to implement BI query and reporting tools and customized dashboards to track key metrics. MULTIPLE LOCATIONS, PRODUCTS, AND TECHNOLOGY TOOLS As the small business expands into multiple locations with more staff, products, and services, the principal or CEO will have less visibility into each aspect of the business. Customer activities, marketing, and billings and collections are delegated, and other managers make purchasing and hiring decisions so the business can expand. New locations and divisions could drive the need for additional operational systems and databases. There is a new need to access, report on, and analyze data from different sources. Resource management becomes critical decisions regarding where and when to add additional resources must be matched with expected revenue and cash flow. At this point, spreadsheet-based reporting and planning solutions start to break down. An annual business plan will no longer suffice, because management needs more-frequent reports on sales and expenses to allocate the right resources. Rolling forecasts might also be required and the accuracy of these forecasts can have a big impact on strategic decisions. Companies might now begin adopting BI query and reporting tools to integrate data from multiple operational systems and deliver timely, accurate sales and other management reports monthly, weekly, or even daily. Customized dashboards might also be leveraged to track key performance metrics and to personalize insights for managers. Packaged budgeting and planning applications may be implemented to replace spreadsheets and provide more control over the forecasting process. DFCC Bank of Sri Lanka experienced this growth sequence. With 375 employees, DFCC relied largely on numerous spreadsheets and databases to create its budgets. As this process grew in complexity, the number of spreadsheets grew to more than 1,000, and the occurrence of errors increased. In addition, the time it took to complete the budgeting process became a growth inhibitor. By implementing Oracle Hyperion Planning a centralized, Excel and Web-based planning, budgeting and forecasting solution DFCC was able to reduce the budget consolidation cycle from three weeks to 24 hours. It also improved its performance reporting at the bank and branch levels. Oberto Sausage Company is privately held, with about 1,200 employees at four processing plants. Before the year 2000, few people in the company had access to information needed to make sound business decisions. Oberto s monthly management reporting consisted of a printed 750-page report, generated by its enterprise resource planning system, that managers had to sift through manually. By implementing Oracle s Hyperion Interactive Reporting, within a few months Enterprise Performance Management for Midsize Companies and Workgroups Page 3
Oberto began delivering customized reports and dashboards to managers in finance, operations, distribution, and customer service. These reports provide daily views into orders, shipments, and inventories. As a result, managers are able to provide enhanced customer service, better inventory and sales management, and improved sales performance. Expanding internationally has its own set of requirements. Companies need to plan and report in multiple currencies, correctly account for intercompany transactions, and report to new tax authorities. At this stage, packaged applications that can handle multinational financial consolidation and reporting are required. Going public drives the need for financial consolidation and reporting processes that provide a high level of integrity and control. Detailed audit trails that can trace data from its original source to financial statements are a compliance requirement. MORE COMPLEXITY AND RISK WITH INTERNATIONAL EXPANSION As companies expand into new locations, they might also encounter the need to branch out beyond their home country s borders. Whether it s a Canadian company expanding into the lucrative U.S. market, a Dutch company expanding into the U.K. or France, or a Korean company expanding into other Asian markets, international expansion brings greater complexity and risk to the business. This includes the need to plan and report in multiple currencies, correctly account for intercompany transactions, and report to different tax authorities. During this phase, in addition to having more-complex budgeting, planning, and management reporting needs, companies are also faced with more-complex financial reporting requirements. This further reinforces the need to upgrade from spreadsheet-based solutions for budgeting, planning, and management reporting. Companies must seriously consider implementing packaged applications that can handle the complexities of multinational financial consolidation and reporting. Here s an example of a mid-sized company in the U.K. that addressed its multinational consolidation requirements with Oracle s help. As one of the world s largest auction houses, with 50 subsidiaries globally, the company needed a better way to consolidate its monthly financial results. It selected Oracle Hyperion Financial Management, a Web-based financial consolidation application, and Oracle s reporting and analysis tools to streamline the period-end closing and reporting process, and improve the delivery of management information throughout the organization. After a few months, the company began to see the benefits of the new system and is now considering using the system to handle its planning and forecasting process. INCREASED SCRUTINY FOR PUBLIC COMPANIES Whether a company is expanding internationally or not, the prospect of moving from being privately held to being a public company brings a substantially new set of challenges. The scrutiny placed on public companies by the financial markets drives the need for a financial consolidation and reporting process that provides a high level of integrity and control, as well as detailed audit trails that enable traceability of data from its original source to consolidated financial statements. The financial projections presented to potential investors before a public offering must also be as accurate as possible, including cash flow and funding requirements. And after a company goes public, the financial guidance provided to external stakeholders, along with quarterly financial results, must also stand up to scrutiny. Enterprise Performance Management for Midsize Companies and Workgroups Page 4
In today s global marketplace, strictly producing financial statements is often no longer sufficient to meet the transparency demands of investors, employees, customers, business partners, and the community at large. These stakeholders are demanding more disclosures related to executive compensation, energy usage, environmental issues, hiring and labor practices, charitable programs, and other social issues. Companies need software that supports the collection, consolidation, and reporting of financial and nonfinancial information, key performance metrics, and supporting commentary for internal and external audiences. Moreover, the challenge of running a complex organization drives the need for comprehensive performance management systems. These systems support the continuous management cycle of goal setting, modeling, planning, monitoring, analysis, and reporting that allows managers to gain greater insight into the business and more agility in decision-making. All corporate resources must be aligned and focused on the right market opportunities to maximize performance and meet stakeholder expectations. Ashtead Group is one of the largest equipment rental groups in the world, with a network of more than 400 profit centers in the United States, U.K., Singapore, and Canada, and more than 500K in annual revenue. As a public company traded on the London Stock Exchange, Ashtead Group has been using Oracle Hyperion Financial Management, a financial consolidation application for financial reporting, and Oracle Essbase analytic platform for management reporting. In addition, it recently adopted Oracle Hyperion Strategic Finance, a financial modeling application, to support strategic financial planning and regular reforecasting. Having outgrown a linked spreadsheet-based solution, Ashtead Group has gained more control over its financial planning process, with integrated financial statements and the ability to quickly perform scenario analysis, address Financial Accounting Standards Board and International Financial Reporting Standards impairment testing requirements, and manage debt issuances. Emerging busineses might have limited IT resources and infrastructure to support sophisticated software systems. New deployment options such as MSPs, SaaS, and subscription based pricing enable smaller companies to implement BI and EPM systems at a reasonable cost. NEW DEPLOYMENT OPTIONS FOR SMALL AND MEDIUM BUSINESSES Midsize companies and workgroups might have limited IT resources or infrastructure to support sophisticated software systems. In a fast-growing organization, IT typically focuses on the transactional systems that handle the growing volume of activity so that customer service is kept at a high level and information is kept secure. Due to these other priorities, BI and EPM system requests might not receive the funding and attention they deserve and various groups are left to fulfill their requirements using spreadsheets or low-cost departmental solutions that don t integrate with corporate systems. However, there are other options for midsize companies and workgroups that need proven BI and EPM solutions but have limited IT resources and budget. Enterprise Performance Management for Midsize Companies and Workgroups Page 5
One solution is managed service providers (MSPs). MSPs can act as an outsourced IT department, providing the hardware and systems software required to support sophisticated BI and EPM software solutions, and can spread the cost of this infrastructure out over time. Some MSPs might also provide implementation and administrative services for these systems; they leverage their in-house expertise to customize the solution and relieve resource-constrained companies of the cost and training required to support these systems. Another emerging trend is the software as a service (SaaS) model. Unlike the MSP model, where the customer purchases a perpetual license for the software, the SaaS model allows the customer to rent the hardware and desired software solution on a pay-as-you-go basis. Companies such as Salesforce.com and NetSuite offer SaaSbased customer relationship management and accounting solutions based on a peruser/per-month model. Although these solutions cannot typically be customized to the same extent as installed or MSP-based solutions, they do provide a fast, lowcost solution for growing companies with constrained IT resources. BI AND EPM SOLUTIONS FOR MIDSIZE COMPANIES Oracle and its partners offer financial reporting, budgeting and planning, advanced analytics, query, and reporting solutions to companies of all sizes, in all industries around the globe. Oracle understands the requirements and constraints of smaller, high-growth organizations and provides BI and EPM software solutions that help finance and IT executives increase confidence in their financial reports, management reports, and plans; improve business predictability; and allocate resources more effectively. Oracle s BI and EPM solutions for midsize companies include Market-leading, packaged financial management applications that can be implemented rapidly Integrated dashboards and reporting and analysis tools that support rapid information delivery Web-based interfaces for easy deployment Easy integration with Microsoft Office Flexible deployment options including in-house installation or off-site hosting to reduce your IT requirements Enterprise Performance Management for Midsize Companies and Workgroups Page 6
CONCLUSION Small companies rarely stay that way. Businesses grow from sole proprietorships to multiple locations. They might even expand to incorporate international operations or public ownership. Regardless of the stage of growth, there is always a need to access, report on, and analyze data from different sources. Spreadsheets must be augmented with budgeting and planning applications so that resource management decisions can be matched with revenue. Companies also need to implement BI query and reporting tools and customized dashboards to track key metrics so that performance can be consistently monitored. Oracle offers financial reporting, budgeting and planning, advanced analytics, query, and reporting solutions to companies regardless of their size. These BI and EPM tools meet the current and future needs of growing businesses and make the most of valuable resources. Enterprise Performance Management for Midsize Companies and Workgroups Page 7
Enterprise Performance Management for Midsize Companies and Workgroups Updated July 2008 Author: John O Rourke Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 oracle.com Copyright 2007, 2008 Oracle. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.