CSC Proprietary and Confidential 1 OLM NBF Model Outline Steve Coxon July 2013

CSC Proprietary and Confidential 1

OLM NBF Model Outline

Steve Coxon

July 2013

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Content• Introduction - Purpose• OLM NBF Model Construct• Model Context• Model Principles• Model Versions• Model Overview - Operating Instructions• Model Overview - Price (& Revenue Determination)

• Market Price Input• Manual Input• Model Fee Uplift

• Model Overview - Cost• Manual Input• CST Files

• Risk Management• Standard Output• Model Support

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Introduction: Purpose

• Purpose is to:• Introduce the OLM New Business Finance Model• Provide the context in which the model has been developed• Provide an outline of the proposed model methodology• Outline the process for using the model• Solicit feedback on the construction and use of the Model for OLM Business

Case purposes

OLM NBF Model ConstructOLM New Business Finance (NBF) Models are the recommended Financial Models to be used when compiling financial information for Business Case justification purposes at OLM Gate Reviews

The Model utilises standard cost categories and financial information presentation templates that reflect the manner in which CSC reports its ongoing operating performance

Model Construct

• Using a predefined ‘Rates’ file to establish the ‘Forecast Period’, ‘Currency’, ‘Overhead’, and Mark Up ‘Fee’ levels to derive indicative price and revenue if appropriate

• Using a predefined ‘Financial Management’ template to automatically align Offering financial information into Profit & Loss, Balance Sheet & Cash Flow templates, providing Financial Summaries and Metrics for evaluation purposes

• Providing three versions, ‘Manual’, ‘Basic’ and ‘Standard’, to eliminate unnecessary multiple File use where information is limited at the outset

• Providing additional options (to the standard NBF ‘Fee’ based methodology), to allow manual input or market based pricing details to be supplied, in additional to an additional option to manually input cost summaries,(rather than CST files for cost collection)

• Provide a Standard OLM Financial Summary ‘Output’ that details the information requirements for the OLM Gate Executive Presentation

• Provide additional Information to support Offering systems set up and Performance Reporting inc: ‘Resource Unit’ (RU) description. ‘Revenue Recognition’ details, and the SAP ‘WBS Structure’


OLM NBF Model

Context

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Context• Each Offering environment for cost and pricing is unique………but a common framework

is required• Standardization is not possible at the ‘owner’ level……….but is at the OLM ‘process’ level?• Without guidance, a cost and pricing ‘smorgasbord’ will result…….so there is a need to

provide structure• The structure must facilitate each unique Offering……..provide direction not prescription

Concept• Standardize the offering OLM reporting requirement………..including Resource Unit (RU)

cost and price • Standardize the Financial Management (FM) methodology that delivers OLM reporting

and decision making information• Enable the ‘owner’ level to have cost & price build capability……..with the details

‘interfacing’ into the standard FM file structure

Solution• Use the existing CSC New Business Finance (NBF) files and methodology to provide

information structure, standardization and direction to enable a consistent financial output and OLM performance level

Model Context: Inform on ‘Standard’ Cost & Pricing ‘Capture’

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Portfolio Management

Deliver BC / Updates

Prepare BC / Updates

Plan

Conceive

Model Context: Conceptual Overview

Financial Management

PRC File (Pricing / Revenue)

CST Cost File

FM File

(Financial P & L)

Financial Overview

Offering Cost Management

Infra structure /

BOM

Third Party

CSC Allocation

CST Cost File

Offering Specific ‘Back End’

Preparation’

NBF Files:Interface to the OLM Standard

Process

Offering Price Management

Resource Units

Target Market

Target Price

PRC Price File

OLM Standard ‘Front End’

Delivery

Offering Lifecycle Management

Portfolio Management

Portfolio Strategy

Portfolio Optimization

Portfolio Realization

G2G1 G4G3 G6 G7G5G0

Early Adopters

Launch Offering

Scope Offering

Generate Business

Case

Develop Offering

OptimizeOffering

Retire OfferingConcept

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Cost Model

Pricing Model

Finance Pricing

OLM Project Cost

Project Manager

Market Launch Operate

Early Adopter Operate

Billing (RU’s) WBS Structure

Project Costs

Early Adopter Revenue

Market Launch

Revenue GeographyIndustry

OrganisationPortfolio

Offering LineOffering

SAP Reporting & Performance Management

Record & Report

PerformanceMetrics

Create Legal & Commercial Framework

Legal Commercial

Supply Chain Alliance Partners

Investment Request

Investment Request

Financial Justification


Model Context: OLM Finance Overview

G2G1 G4G3 G6 G7G5

Scope Offering

Generate Business

Case

Retire Offering

Develop Offering

Early Adopters

Launch Offering

Optimize Offering

Gate 1Exec

Presentation

Gate 2Exec

Presentation

Gate 3Exec

Presentation

Gate 4Exec

Presentation

Gate 5Exec

Presentation

Gate 6Exec

Presentation

Gate 7Exec

Presentation

Offering Manager

Finance, Sales &

Marketing

Preliminary Business

Assessment

InvestmentRequest

PortfolioStrategy

Offering Metrics

Create Cost & Pricing Framework

Sales & DeliveryPerformance Management

Pipeline Management

NBF BC Models

CST

FM PRC

Sales & Marketing

Delivery

Performance Management


Early Adopters& New

Customers

NBF Deal Models

CST

FM PRC

Business Case Business Case Business Case Business Plan Business Plan Retirement Plan


OLM NBF Model

Principles

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• Standardisation – of the financial details on which investment decisions are made

• Defined Financial ‘Hurdles’ – RAG Dashboard for Portfolio & CSC Financial Criteria

• Standardisation – of the methodology to construct Business Case (BC) Financial Analysis

• Standardisation – of the cost categories to align with Operating Performance Reporting

• Market Based Pricing (P x Q) – catered for to derive forecast Revenue

• Manual Input Options – for price and cost to simplify file handling

• OLM Gate Profile – to support cost construct / views across the OLM ‘Gates’

• Prior Gate Comparison – To support ‘Gate’ stage forecast variance identification

• Revenue File Identification – to differentiate ‘Project’ & ‘Revenue’ generating cost files

• Supports ‘Bundled’ Offerings – by constructing cost ‘Towers’ to align with RU Pricing

• Alternate Cost Breakdown – using additional files to support differing views

• Resource Unit (RU) Description – to ‘expose’ the Offering billing / sales system set up

• Revenue Recognition Rules ***– defined to support financial reporting

• SAP WBS Details*** – defined to support system and contract set up

*** Under construction – to be developed as part of the SAP Transformation Project

Model Principles


OLM NBF Model

Versions

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• Manual – using limited files to support direct input of cost / revenue• Direct input of Market price & volume to derive Revenue• Direct Input of cost details to derive Total Cost, (inc. Overhead)

• Basic – using CST (cost) file(s) to supplement the ‘Manual’ version• Option to Use NBF CST (cost) file(s) to provide cost• Option to use Model ‘Fee’ based ‘mark up’ to derive Revenue

• Standard ***– using the full suite of NBF models• Option to use alternative cost summary file• Option to use additional files to derive bundled component item prices

*** It is recommended that the additional functionality of the ‘Standard’ NBF model suite is only used with the support of an NBF team member

OLM NBF Model Versions

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OLM NBF File Overview: Manual Version

Rates File

Input Required:

• Offering Name• Duration

• Country Location• $ Rate

Conversion

‘Manual’ Entry File Set:

• Rates File• FM File

• PRC File

FM File PRC File

Input Required:

• None

Input Required:

• Manual File Selection

• Price / Volume OR

• Revenue• Cost Summary

Financial Summary

Cost & Revenue Details

Standard Financial Output:

Executive Presentation Summary

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OLM NBF File Overview: Basic Version

Rates File

Input Required:



Conversion

‘Basic’ File Set:


• PRC File• CST File (For Replication)

FM File PRC File

Input Required:

• None

Input Required:

• Revenue / Cost File Use Selection


• Fee Based Revenue

• Cst Cost File(s) Link

Financial Summary




CST File(s)CST File(s)


Input Required:

• Cost details ‘Mapped’ to

Standard CSC Cost Categories

Capital Summary Cost Summary

Cst File Replication

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OLM NBF File Overview: Standard Version

Rates File

Input Required:



Conversion

‘Standard’ File Set:


• PRC File• CST File (100)

• Advanced Analysis Files

FM File PRC File

Input Required:

• None

Input Required:

• Revenue / Cost File Use Selection


• Fee Based Revenue

• Cst Cost File(s) Link

Financial Summary






Input Required:

• Cost details ‘Mapped’ to

Standard CSC Cost Categories

Capital Summary Cost Summary

Cst Files (100 Available)

CCS_CURR File

PRC Unit Price

Volumes Master

Alternate Cost View

Advanced Pricing / Offering Breakdown – Contact NBF Team

in the USReview Detail

PRC Extract / Analysis

Files


OLM NBF Model

Operating Instructions

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Model Overview: Operating Instructions To enhance the model users understanding and to ensure a robust and consistent output from this

model, additional information has been provided to educate and inform on its use

• File Overview• Financial Analysis (FA) Process

• Read Me Overview• User Guide

• Model Assumptions• Standard Colour Scheme

• User Guide Links• Standard Output


OLM NBF Model

Overview – Price(& Revenue Determination)

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Model Overview: Market Price Input 1. Select ‘Market Price’ in the ‘Start’ Sheet 2. Define the ‘Resource Units’ (RU) (Billing Components) that are contained in the Offering

3. Input ‘Market Price’ for defined ‘RU’s’

4. Input ‘Volumes’ for defined ‘RU’s’

Derived Offering Revenue for defined ‘RU’s’ (P X Q)

Optional Entry for Target Cost level to derive ‘Productivity’

Targets for Evaluation purposes

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Model Overview: Manual (Revenue) Input 1. Select ‘Manual Input’ in the ‘Start’ Sheet 2. Define the ‘Resource Units’ (RU) (Billing Components) that are contained in the Offering

3. Construct the ‘Revenue’ Forecast by adjusting the CST derived Revenue totals or inserting the required values into the tables provided

No Volume input required – Revenue Totals for Early Adopters & R & M used for Revenue forecast in the Financial Summaries

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Model Overview: Standard ‘Model Fee Uplift’ 1. Select ‘Model Fee Uplift’ in the ‘Start’ Sheet 2. Define the ‘Resource Units’ (RU) (Billing Components) that are contained in the Offering

3. Establish the ‘Fee’ rate in the rates file via the Rate Table sheet as part of Model set up

No Volume input required – Revenue Totals for Early Adopters & R & M used for Revenue forecast in the Financial Summaries

4. Load / Link Cst files and define ‘Revenue’ files and any Early Adopter Discount 5. Revenue generated totals derived from applying

‘Fee’ rate to the Revenue ‘defined’ cost file


OLM NBF Model

Overview - Cost

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Model Overview: Manual Input (1) 1. Select ‘Manual Input’ in the ‘Start’ Sheet

2. Input Summary Capex / Opex details for all OLM Gates and ongoing Run & Maintain

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Model Overview: Manual Input (2)

3. Validate Capital & Offering Development & Operating Cost ‘PROFILE

5. Validate Consolidated Capital Costs

4. Validate Consolidated Development & Operating Costs

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Model Overview: CST Files 1. Select ‘CST Files’ in the ‘Start’ Sheet

3. Define the Cst File structure in the ‘Cst Input’ sheet, select OLM stage ‘Tower’ and update Data

Links to the named files

For more information on Costing & CST Files see ‘OLM NBF Model Guidance – Costing’ Slideware

2. Define the Term, Currency and Location details in the ‘Rates’ File

4. Review / validate Cost & Derived Revenue Profile and Consolidated Cost totals


OLM NBF Model

Risk Management

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• The classification and categorisation of risk is assumed to be a Portfolio specific activity

• The OLM NBF Model assumes the quantification of weighted risks is applied as a contingent value – added to the cost base as follows:

Risk Management

1. For ‘Manual Input’ - Defining a risk ‘premium’ % to be applied to the Offering Cost Profile

2. For ‘CST Files ‘ – Including an additional CST ‘Risk’ file which contains underlying assumptions and quantification as a % of the specific cost category where the risk occurs


OLM NBF Model

Standard Outputs

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Model Overview: Standard Outputs

OLM Financial Justification Summary provides the template

required for the OLM Gate Executive Presentation


OLM NBF Model

Model Support

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• For further Information or support for the use of this model please contact in the first instance:

• Steve Coxon• [email protected]• +44 (0)7760 494977

• For further information or support for the use of the New Business Finance (NBF) standard templates please contact:

• Victor Smiroldo• [email protected]• +1 703 641 3176 (Office)• +1 571 213 1057 (Mobile)

OLM NBF Model Support

mailto:[email protected]

mailto:[email protected]


OLM NBF Model

Thank You

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Demonstration

OLM NBF Model Demonstration

Documents

CSC Proprietary and Confidential 1 OLM NBF Model Outline Steve Coxon July 2013