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Service costing for IT Shared Services Centers
Citation preview
Costing, Cross Charging andPerformance Management inShared ServicesBusinessObjects Profitability and CostManagement in IT and other shared services
Department, Board Area or TeamDate
© SAP 2008 / Page 2
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 3
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 4
Many would say IT Management has not kept pace withthe demand for IT or the spending on IT
1960s 1970s 1980s 1990s 2000s
1,000
800
600
400
200
0
IT Spend
IT Demand
IT Management Capability
IT businessm
anagement
gap
© SAP 2008 / Page 4
Source : 2006, IT Management SW
© SAP 2008 / Page 5
IT is a complex business
Controls a myriad ofassets, applications,technologies and skills
Provides complex products,services and projects to amultitude of business users
Has a large amount ofindirect costs that cannotbe easily understood usingtraditional cost accounting:
Supervision andmanagementInfrastructureSystems architectsSecurity
Typical breakdown of IT expenses
People45%Application Software
13%
Other13%
Network11%
Hardware18%
CRM system
E mail
Marketing
© SAP 2008 / Page 5
© SAP 2008 / Page 6
Dynamic Resource Allocation
Business ServiceRequests Priority 3
Priority 1Priority 2 Priority 3Priority 2
Priority 1 Priority 2
Virtualization
New challenges forIT costing and charge out
ServicesOrientatedInfrastructure
ServerPhysical / Virtual StorageNetwork
Metered Charge Out
Priority 3
Priority 2Priority 1Priority 1
Dynamic Resource AllocationService awareness | Business Priorities | Optimization | Automation
Virtual Server Images (VMs)App A App B App C
Metered Charge Out
OS OS OS
Client 1
DedicatedCharge Out
Client 3
DedicatedCharge Out
Client 2
DedicatedCharge Out
Application A Application CApplication B
© SAP 2008 / Page 7
Questions that IToften struggle to answer
Where can IT find cost savings withoutcompromising service levels?
What exactly is the total cost of projects,applications and services once IT supportcosts have been factored in?
How do we resolve all the internal dissentaround cross charging?
What information can IT provide to businessunits to help them make informed decisionsabout their consumption of IT services?
Are there any pockets of excess capacitywithin IT?
What information should IT provide to showthe business that we are in control?
How much iscompliancecosting me?
How do wedemonstrate thatwe are in control
of IT costs?
How can weconvince the
business to getrid of redundant
systems?
What are thecost benefits ofconsolidating
suppliers?
What is the totalcost of providinge-mail service?
© SAP 2008 / Page 7
© SAP 2008 / Page 8
Impa
ct o
n Bu
sine
ssP
erfo
rman
ce
Maturity of IT Costing &Performance management
High
Low
Low High
EXCELLENCE
IT as a businesspartner
INNOCENCE
No real IT costsand Performance
Management
CONSISTENCY
Production ofreliable information
RELEVANCE Efficient IT Costs &PerformanceManagement
What we believe – and where IT needs to getto!
CIO is in charge of a large, complexbusiness and a huge amount ofexpenditure
Both boards and business unitsexpect IT to make improvements interms of transparency, focusing onthe right investments - andoptimizing the use of previous ITinvestments
IT needs business solutions thathelp it better manage its resources,make better decisions and facilitateinformed discussion with thebusiness
© SAP 2008 / Page 8
© SAP 2008 / Page 9
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 10
Proven experience inimproving financial performance
© SAP 2008 / Page 10
In a review paper Accenture concluded that ABC can help to reduce acompany’s overall cost structure by between 3% and 5% CFO Project Vol. 2 October 2003
After improving the transparency of its cross charging, users stopped treatingIT as a “free buffet” and a retailer curtailed the rapid growth in its IT spend
… then there’s the intangible benefit of managers making more informed, andquicker, decisions!
A European bank eliminated unnecessary numerous new projects – 1 in 3was no longer wanted by the business users once they saw the costsinvolved
After doing an IT services and cross changing implementation a Europeanbank saw a 20% decrease in the number of PC’s and a 30% decrease in thecost of providing a fully loaded PC – amongst other benefits
© SAP 2008 / Page 11
Compelling ROI
Removal / Optimization ofExcess Capacity
Within IT
Identification and Removal ofNon Value Activities in IT
Actionable insight for better costmanagement
Faster and more accuratebudgeting
Better information for supportinginvestment plans
Accurate reflection of IT costs inbusiness decisions
Within the business
Less bickering about crosscharges
Rational (and reduced)consumption of IT services
For the business
Quick improvement inbottom line
Reduce IT spend vs.competitors
Realized Benefits
© SAP 2008 / Page 11
© SAP 2008 / Page 12
Analyst rating for Profitability andCost Management
© SAP 2008 / Page 12
5/5for SAP BusinessObjects
Profitability and CostManagement
Maximum
© SAP 2008 / Page 13
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 14
Stove pipe or integrated?
Separateimplementations –frequently supported by amyriad of offlinespreadsheets
Data management anddata integrity issues
Tend to be historicallyfocused
Line item budgeting aspart of corporatebudgeting process
Key performanceindicatorsPerformance metricsBenchmarking
IT services costing andcross charging
Plan andBudget
Resources
Costing andCross
Charging
Measureand
Monitor
© SAP 2008 / Page 14
© SAP 2008 / Page 15
Unique, integrated approach
All functionalityprovided in a singleuser interface
All data accessible toany type of model
Change any data itemonce only
On demand “What-if?”analysis andcalculation
Plan andBudget
Resources
OptimizeCosts andProfitability
Measureand
Monitor
IT services costing andcross charging
“What-if?” Scenario planningCapacity planningDriver-based budgetingActivity-based budgeting
Key performance indicatorsPerformance metricsBenchmarking“What-if?” scenarios
© SAP 2008 / Page 15
© SAP 2008 / Page 16
Different typesof IT expense
Different typesof charge-back
“Identifiable” costs ofspecific business unit
applications and projects
Directassignment ofidentified costs
Residual cost
High levelapportionment
e.g. # staff, Revenue
Type of services costing and cross-chargingpracticed today is inadequate
Circa 50% of ITexpenses is for
support functions,administration andmanagement andthis is POORLY
understood – GartnerG00138617
Apportionment maynot reflect actual
usageLack of
transparency of howcross-charge is
made up
Indirect costs ofprojects,
applications andservices arefrequently
overlooked
Internal Customers
“Identifiable” costs ofspecific shared services
e.g. Helpdesk, Desktops
Low levelapportionment
e.g. # calls,# desktops
IT Expenses andAssets
© SAP 2008 / Page 16
© SAP 2008 / Page 17
CO
STASSIG
NM
ENT
CO
STASSIG
NM
ENT
DR
IVES
DR
IVES
Resources
Properties People Capital TechnologyAssets
IndirectActivities
Designing systems ManagingDRIVES
CO
STASSIG
NM
ENT
Activity-based Costing(ABC) is the key
Services,Applications,InternalCustomers CRM system
DR
IVES
DirectActivities
Providing supportProcessing Storing
E mail Marketing
COSTREASSIGNMENT
© SAP 2008 / Page 17
What’s neededto do the work?
What workis
performed?
What do weneed to do?
© SAP 2008 / Page 18
Activity-based Budgeting
ResourceDrivers
ActivityDrivers
Reforecast Resourcesand Line Item Expenses
ReforecastDemand fromBusiness Units
CostAssignment
CostAssignment
Activity-based C
osting
Robust andTransparent Costing
Bringing it all together around ABC
ACTIVITIESCost Drivers PerformanceManagement
Activity-based Management
RESOURCES& COSTS
COST OBJECTSServices, Applications, Projects, Internal Customers etc
© SAP 2008 / Page 18
© SAP 2008 / Page 19
Activity-based budgeting
RESOURCES& COSTS
Activity-based Budgeting
ResourceDrivers
ActivityDrivers
Reforecast Resourcesand Line Item Expenses
ReforecastDemand fromBusiness Units
COST OBJECTSProduct, Services, Projects, Internal Customers etc
ACTIVITIES
CustomerForecasts 10% increase in staff
Activity20 GB more storage 50 User set ups20 Password resets 15 Helpdesk calls
Activity20 GB more storage 50 User set ups20 Password resets 15 Helpdesk calls
Resources1 additional support staff 1 new HW lease50 new SW licenses 10% more disk space
Service10% more email accounts
Marketing
© SAP 2008 / Page 19
© SAP 2008 / Page 20
Pricing and Cost Recovery for “mature” services and products
Costing and pricing scenarios
GLChange behaviour tocontrol consumptionand reduce IT costs
Reconcile Expenseswith Charge Outs
Pricing and Cost Recovery for “new” services and products (e.g. Virtualization)
GL
ABC model
Enjoys savingscompared with adedicated server
Calculated cost ofexcess capacityRemains with IT untilsold to other users
Detailed Invoice toInternal CustomerABC model
Calculated cost basedon demand or usagefrom Business Users
Unit Rate forCharging Out
Actual as calculatedWith a Mark UpBundled (i.e. Laptop + Office + Support)Overridden with a Fixed Rate
Calculated cost basedon optimal capacity
Unit Rate forCharging Out
Detailed Invoice toInternal Customerbased on metered
usage
© SAP 2008 / Page 20
© SAP 2008 / Page 21
Costs acrossvarious dimensions
Service | Project | BusinessUnit etc
Inputs and outputs
Asset ManagementSystems
Finance systems (GL)
Time ManagementSystems
Metering and MeasurementE.g. CPU, RAM, HDD, Time etc
Web-based data entry
IT Business ManagementTools E.g. Project Portfolio Management
Standard IT ServicesLibraries E.g. ITIL, CoBIT etc
Inputs
Transparent and Accurate CrossChargingInformed consumption – Reduce buffet mentality
Cost AnalysisCost of Service Levels, Non Value Added Costs, FixedCosts vs. Variable Costs
Performance Measures /BenchmarkingUnit rates, Cost drivers, Internal, External
Investment DecisionsMake or Buy, TCO, Replacement
Cost ReductionRemoval of Non Value Adding Activities, ChangingBehaviours
Planning and BudgetingCapacity planning, Resource Planning, MarginalCosting
Process ImprovementProcess costs, Process Re-engineering
Uses
© SAP 2008 / Page 21
© SAP 2008 / Page 22
Integration with SAP Solution Manager
SAP Solution Monitoring
Key source of drivervolumes for true cause-and effect assignmentsand accurate costing
Measured usage usingdata from SAP SolutionManager provides fairand equitable crosscharging
© SAP 2008 / Page 22
SAP Solution ManagerEnabling end-to-end solution operations
Solution Monitoring
Service Desk
Root CauseAnalysis
SAP Service DeliverChange Request
Management
ImplementationSupport
UpgradeManagement
SystemMonitoring
ServiceLevel
Monitoring
BusinessProcess
Monitoring
Real time monitoringSystem usagePerformance monitoring
Change requestmonitoringService requestmonitoring
Process orientedmonitoring of the mostcritical businessprocesses
SAP BusinessObjectsProfitability and Cost
Management
© SAP 2008 / Page 23
ITIL V3 financialmanagement and service economics
Service Consumption Modelingand Valuation
Quantifies funding sought for a defined set ofServices
Service Investment AnalysisInvestment appraisals, ROI, TCO
Planning ConfidenceBudgeting based on demand and supply
Service Portfolio ModelingCompares external vs. internal costs for optimalprovisioning
Variable Cost DynamicsEstablish what fixed and variable costs are linkedto a Service
Service Provisioning OptimizationCapacity management and continual improvement
Financial ComplianceProper and consistent accounting methods
Visible and Consistent CostStructure
Robust accounting methodology
Customer
Service Provider
Commonality of Interests and Benefits
Service InvestmentAnalysisFinancial
Compliance
Variable CostDynamics
ServiceProvisioningOptimization
Service PortfolioManagement
PlanningConfidence
ServiceConsumptionModeling and
Valuation
Visible andConsistent Cost
Structure
© SAP 2008 / Page 23
© SAP 2008 / Page 24
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 25
Pre-defined dimensionality for ABC
User friendly, rapid and efficient modelbuilding
Versions, periods,RC’s, currencies
Up to 5 cost objectdimensions
Revenue types
Services dimension
Attributes for alternatehierarchies
Data aliases forlanguages etc.
Flexible rules engine
Point and clickassignments acrossmultiple dimensions
Easy model control
Sophisticated security
© SAP 2008 / Page 25
© SAP 2008 / Page 26
Rapid point and click assignments
User friendly, rapid and efficient modelbuilding
Select activity, serviceor line item by
Responsibility Center
Optional override byVersion and Period
Either “cascade”costs to CostObjects in a userdefined order
OR
Assign activity costmulti-dimensionally tothe exactintersection of costobjects in a singlestep
Select the activitydriver from theavailable list – andoverride byResponsibilityCenter if required
Select the Cost Objectseither individually orsimply assign to all
© SAP 2008 / Page 26
© SAP 2008 / Page 27
Use the best costing methodologyfor the situation
Use the wizard for writing equations for time-driven costing for responsibility centers with highnumber of repetitious activities
Use time splits in the other responsibility centers
Complete flexibility with costing methodologies
User friendly, rapid and efficient modeling
Time-Splits Time-Driven
Embedded rules engine with a front-endwizard for easy and rapid modeling of morecomplex business rules
Totally flexible rules engine for bespoke model building
© SAP 2008 / Page 27
© SAP 2008 / Page 28
Any new member detected in a hierarchyautomatically inherits the assignments of itssiblings - minimizing time and effort on modelmaintenance
Logical data structure for minimal model maintenance
Scalable, enterprise class solution
Service 1 Service 2 Service 3
Service Family
New Service
Expedite the collection off ofnon-system driver data using the workmanagement functionality of automatedalerts and reminders
Removes the drudgery and enablesmore frequent reporting even withremote contributors
Web books for automated data collection direct to the database
© SAP 2008 / Page 28
© SAP 2008 / Page 29
Rather than “cascading” activity cost to eachcost object in turn, if the driver data isavailable, it can be assigned to the exactintersection - i.e. the cost when thiscustomer buys this product through thischannel – avoids erroneous assumptions!
Single step multi-dimensional assignment
Extending the value of profitability and costmanagement
Channel3Product
1
Cus
tom
er
22 1
Ability to trace back all assigned costs to lineitems and responsibility center
Comprehensive user defined trace-back
Resources& Costs
Cost Objects
Activities
Resource Driver
Activity Driver
© SAP 2008 / Page 29
© SAP 2008 / Page 30
Scalable, enterprise class solution
Comprehensive security and access rights,by group, by role, by individual right down tocell level
Context aware views means users only seetheir data – and a single report caters formany, minimizing deployment time
Optional audit trail with date and time stamps
Comprehensive context-aware views, security and audit trail
End users can view screens that use theirlocal language and terminology - andentering financial amounts in their localcurrency, enabling cross border deployments
Multilingual aliases and multi-currency functionality
© SAP 2008 / Page 30
© SAP 2008 / Page 31
Flexible methodologies for costing,pricing and cross-charging IT and othersupport services
Detailed invoices that provide transparencyinto cross-charging and information for aninformed discussion between business usersand service providers
Services dimension for cross charging IT and other shared services
Extending the value of profitability and costmanagement
Reiterative reallocations betweendepartments consuming each other’sservices with full trace-back ofreallocated costs
Delivers more accurate costs thatreflect reality Business
Unit 3
BusinessUnit 2
BusinessUnit 1
Reiterative reallocation for accurate services costing
HRRecruitment
ITNetwork
Maintenance
© SAP 2008 / Page 31
© SAP 2008 / Page 32
Users can slice and dice the datathemselves with consolidated resultsbeing calculated on-demand and theirWeb book automatically refreshed
Using this functionality they can test outthe impact of changes before committingto them, resulting in better - and moreincisive - decisions
Unique on-demand query and what-if? analysis
Reliable on-demand “what-if?” analysis andscenario modeling
© SAP 2008 / Page 32
© SAP 2008 / Page 33
Users can leverage the insight into thedrivers of cost and profitability inplanning and budgeting models. Thisprovides integrated budgeting andcosting solution giving deep insight intothe cost and profitability of products andcustomers in future periods
Changing the driver volumes and then“back-calculating” an existing ABC modeldelivers an activity-based budget
Driver-based budgeting is based on a moreiterative understanding of what drives costinside the organization
Both can be rapidly re-forecast byupdating driver data enablingoperational capacity to be tightlyaligned with demand
Costing and driver-based / activity-based budgeting in a single solution
Extending the value of profitability and costmanagement
Resources& Line ItemExpenses
Cost Objects
Activities
RevenuesProduct, Customer,
Channel etc
ProfitabilityProduct, Customer,
Channel etc
CostAssignment
CostAssignment
ResourceDrivers
ActivityDrivers
Adjust capacity infuture periods
Adjust prices andsales mix
Adjust resourceAdjust resourcecosts in future
periods
Adjustconsumption infuture periods
Adjustconsumption infuture periods
Adjust demand infuture periods
© SAP 2008 / Page 33
© SAP 2008 / Page 34
Because all the assignments have been madein a multidimensional data structure, drill throughis automatic with no links to maintain
Consolidated measures are calculated byweighting “% achievement”
Seamless IT metrics
ProblemManagement
KEY
OBJECTIVE METRIC
# Problems
Problem ResolutionRate
Problem WorkaroundRate
Problem ReopenRate
# Major Problems
Customer ImpactRate
Average ResolutionTime
Minimize Impact ofIncidents
Resolve IncidentsEfficiently
Single step multi-dimensional assignment
© SAP 2008 / Page 34
© SAP 2008 / Page 35
Single instance update filters through all models
Seamless functionality
© SAP 2008 / Page 35
Cost analysisWhat are the resources involved?How much does it cost…?
Performance MeasurementWhich indicator shall we use?What did we improve?How do we perform compared to others?
Pricing and billingHow do I price my services?How do I justify invoices to customers?Are amounts paid in line with true costsand budget?
Planning and budgetingBased on forecast volumes and servicelevels, what resources do I need?If the demand changes, how quickly canI reforecast?
© SAP 2008 / Page 36
Solution architecture
Presentation layer
Model buildersModel structure / rules
Work management
End user dataentry, query &
analysisWeb or LAN
End user drillthrough dials and
gaugesWeb or LAN
Data layer
GL, Data Warehouse, CRM, Other transaction systems
Extract, Transform, LoadData Integration Tools
Export resultsto an external
Data Warehouse
Single opendatabase
Oracle or MS SQL
Applicationlayer
Profitability and CostManagement
MDX connector
Microsoft Excel
Business-Objects
Enterprise andSAP NetWeaver
BusinessObjectsCrystal Xcelsius
Other 3rd partyOLE-DB
compliantOLAP
© SAP 2008 / Page 37
Client layer
Application layer
Database layer
Application layer
Database layer
Scalable multi-tier architecture
ERP Database'sGL, Data Warehouse, CRM,Other transaction systemsProfitability and Cost Management
DatabaseSQL or Oracle
PCM ModelServer(s)
PCM MainServer(s)
Webclients
Win 32 clients
PCM WebServer(s)
Several clientscommunicate with adatabase server via themiddle-tier servers
This architecture enablesthe connection of largenumbers of client machineswith minimal performancedegradation
Extract, Transform, LoadData Integration Tools
© SAP 2008 / Page 37
© SAP 2008 / Page 38© SAP 2008 / Page 38
Summary
Benefits
User-friendly rapid and efficient modeling
Scalable enterprise-class solution
Extend the value of profitability and cost management
Reliable on-demand what-if analysis andscenario modeling
Visibility
Alignment
Incisive decisionmaking
Optimize costs andprofitability
© SAP 2008 / Page 39© SAP 2008 / Page 39
Summary
User-friendly rapid and efficient modelingPredefined logical data structure and point and click assignments meansrapid model build and minimal maintenance reducing your total cost ofownership (TCO) and accelerating your ROIModel complex situations across multiple periods and versionsSupports multiple ABC methodologies
Scalable enterprise-class solutionSpeedy deployment, training and user adoption; centralized model admin;Web books for collecting non system driver data from remote usersAbility to process high data volumes without compromising accuracyMulti-currency and multi-language aliases supportEnterprise class security and traceback – with full audit trail
Extend the value of profitability and cost managementUnique services costing and cross-chargingDeliver activity-based and driver-based planning and budgeting models;change driver volumes and “back-calc” existing ABC modelsRapidly reforecast; update driver data and align capacity with demand
Reliable on-demand what-if analysis and scenario modelingUnique on-demand query and what-if analysis, with web-accessible dataallowing users to assess the impact of changes before committing to themSlice and dice data and analyze results, create charts, drill down to detailedcost data and link to related budgeting and metrics modelsMaintain data in central repository for greater efficiency and control
BenefitsVisibility
Broad insight into the true driversimpacting costs and profitabilityincluding IT shared services viauser friendly interface
AlignmentKeep operational capacity andsupport functions tightly alignedwith both demand and strategy forflawless execution
Incisive decision makingRapid identification of underlyingcauses of changes in organizationalcost and profitability with thecapability to test out the impact ofchanges before committing to them
Optimize costs and profitabilityDetailed understanding of costsand profitability enables you to takeaction orientated decisions thatreduce the cost to serve andimprove the profitability of products,customers and channels
Print version for take away/handouts
© SAP 2008 / Page 40
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 41
Benefits of sound financial management in IT
CostingMakes justified investment decisions
Measurement drives cost effectiveness
Have informed discussion withbusiness users in financial terms
GeneralAccurate costing information tosupport investment decisions and TCO
More efficient use of IT resources
Increase professionalism with peers
BudgetingEnsure funding is aligned with servicecommitments
Ensures services can be maintained
Provides early warnings of under- or over-consumption of resources
Increased confidence in setting andmanaging budgets
Cross ChargingCharge out is equitable
Drives accountability by business users
Provides basis for balancing provision ofservices with needs of the business
Encourages informed discussion aboutservice levels and price
© SAP 2008 / Page 41
© SAP 2008 / Page 42
Everyone with alaptop and a
desktop? – it’s nolonger acceptable
Let’s set a date todecommission
Just virtualize allour stuff as soon as
you can
What’s the saving ifI accept a lowerlevel of service?
Rather than incurmore cost, we’ll
limit e-mail storage
If that’s the savingfrom pushing outreplacement, we’ll
live with it
I’ve told my folk –the free buffet’s
over!
The discriminating business user
© SAP 2008 / Page 42
© SAP 2008 / Page 43© SAP 2008 / Page 43
For you as a Partner
Improved time-to-value for your customersSpeed of implementation – packaged product with greatdeal of flexibility vs. custom buildMore projects in less time – means further billable opportunitiesBuild expertise – assist in speeding up subsequentimplementations
Elevate customer relationshipProcess re-engineering opportunities – executive level visibilityEase of use – reduces training, encourages project adoptionCustomer able to participate more – potential for more strategicprojects
Increase revenue and expertiseDrive revenue for competitive vendor migration servicesDevelop expertise in SAP FPM to capitalize on servicesopportunitiesPossibly to integrate services across ERP, GRC and EPM
Strategic focus on SAPRevisit competitive implementations which are complex, sufferfrom lack of user adoption or are poorly integrated with SAPEngage with the larger SAP ecosystem
© SAP 2008 / Page 44
“Profitability and CostManagement allowed us toproduce reliable reportsand the reduce the timeand complexity inproducing them.”
Dorothée MassatCFO of SILCA
Description
Benefits
© SAP 2008 / Page 44
European bank
“Founded as a merger between the ITdepartments of Crédit Lyonnais, Calyon andCrédit Agricole, SILCA implemented servicescosting and cross charging
20% decrease in the number of PC’s
30% decrease in the cost of providing a fullyloaded PC
20% decrease in server costs
Reduced to produce costing reports
Gained financial credibility through transparency
Internal Use Only
© SAP 2008 / Page 45
“What really shows thequality of an IT budget orforecast is whether the unitprice of the service isdecreasing and otherproductivity indicators.Profitability and CostManagement provides therequired visibility on both.”
Jean-Louis BarsottiniCFO of I-CDC
Description
Benefits
© SAP 2008 / Page 45
European bank
“Informatique CDC is the IT shared servicesfunction that supports CDC, CNP Assurances,CNCE and Natexis
30% decrease in the number of PC’s
15% decrease in printing costs
Eliminated unnecessary new projects – 1 in 3 nolonger wanted by the business user
Improved the quality and accuracy of the ITbudget
Reduced the running cost of most applications
Internal Use Only
© SAP 2008 / Page 46
“What convinced us toselect the applicationahead of the competitionwas its open architecture.Plus, the modelingcapabilities using anactivity-based costingmethod and the ease withwhich data collectionoccurs and accountingreports can be generatedand circulated via ourIntranet.”
Joel RouressolHead of Analysis
Description
Benefits
© SAP 2008 / Page 46
European retailer
“Groupe Casino operates 9,123 retail outletsunder 40 different fascias in 15 countries withbrands such as Casino, Monoprix, Franprix,Leader Price and Geant
Every department, branch or subsidiary is billedwith highest degree of accuracy for IT servicesused
Visibility ensures better control over the volumesof services and hardware purchases
Provided tools for controlling costs of projects
© SAP 2008 / Page 47
The PresidentsManagement Agendachallenges all Agencies tobe responsible andaccountable for all taxpayerdollars
This helped USDAmodernize the FY09budget formulationprocess… a critical firststep to Budget andPerformance Integration
Description
Benefits
© SAP 2008 / Page 47
U.S. government agency
“With 15,000 employees, based at 2,359 localUSDA Service Centers, USDA has an annualbudget of $30B. It provides 2.2 million farmerswith support and assistance for disasterrecovery, income support, conservation anddevelopment loans
Ability to better justify spending
Replaced a system where USDA was trying todeliver PBB through thousands of spreadsheetsinvolving a lot of non-value adding work foranalysts and limited ability to trace commitments–running the risk of failing to comply withregulatory guidance and public law
Internal Use Only
© SAP 2008 / Page 48
“The actual cost of aproject is under continualmonitoring. ITManagement wants us toexplain any differences.SAFIR helps us to makeboth our sector customersas well as our IT teamsaware of the consequencesof these differences”
Muriel FallyDirector of the SAFI project
Description
Benefits
© SAP 2008 / Page 48
French postal service
“Group La Poste is one of the top 3 majorcompanies in France. The French Post Office isorganized in four trades and a transverse entity :Mail (La Poste Courrier), Postal bank (La BanquePostale), Parcel (La Poste Colis) and LPGP (LaPoste Grand Public)
Value creation – ability to trace costs andexpenses of IT costs and projects leading toability to record these as assets for the company
Automation – manager data preparation andprocessing takes around ten minutes…wherehad previously taken two days per month
Accuracy – cost model is based on actual, nottheoretical consumption
© SAP 2008 / Page 49
“BusinessObjects Profitability and CostManagement for IT” sample references
© SAP 2008 / Page 49
Internal Use Only
© SAP 2008 / Page 50
1. The challenge for IT and shared service function today2. Customer benefits from using shared service costing3. Activity-based costing and the foundation for IT
performance management4. SAP BusinessObjects Profitability and Cost Management overview5. Benefits of using SAP BusinessObjects Profitability and Cost
Management6. Screen walk through of the solution
Agenda
© SAP 2008 / Page 51
Overview
Performance MeasurementWhich indicator shall we use?What did we improve?How do we perform compared to others?
Pricing and BillingHow do I price my services?How do I justify invoices to customers?Are amounts paid in line with true costsand budget?
Planning and BudgetingBased on forecast volumes and servicelevels, what resources do I need?If the demand changes, how quickly canI reforecast?
© SAP 2008 / Page 51
Cost AnalysisWhat are the resources involved?How much does it cost…?
© SAP 2008 / Page 52
Out of the box dimensionality
Versions,periods, RC’scurrencies
Up to 5 costobjectdimensions
Revenuedimension
Servicesdimension
User-definedrules
Attributes
Data aliases forlanguages etc.
© SAP 2008 / Page 52
© SAP 2008 / Page 53
Activities and processes
Process andactivitydictionary
Attributes are used to group activities on asmany alternate hierarchies as necessary
Useful for comparison against standard ITservices libraries such as ITIL
© SAP 2008 / Page 53
© SAP 2008 / Page 54
Activity re-assignments
Support activities are reallocated onto operational activities
For example, « 7.1 Management » is reassigned on all departmentsusing the total number of FTEs
© SAP 2008 / Page 54
© SAP 2008 / Page 55
Cost Object costs
Select the activity,service or line itemby RC – overrideby Version and
Period if required
Select the activitydriver – override by
RC if required
Select the targetCost Objects either
individually or by“All”
© SAP 2008 / Page 55
© SAP 2008 / Page 56
Cost Object costs analysis
Costs of services and projects per customer, period andversion are automatically calculatedand refreshed after any change in the model
The full traceability on services and customers costsauthorize access to underlying activity/process costs,source department and line items
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Pricing and billing
Cost AnalysisWhat are the resources involved?How much does it cost…?
Performance MeasurementWhich indicator shall we use?What did we improve?How do we perform compared to others?
Pricing and BillingHow do I price my services?How do I justify invoices to customers?Are amounts paid in line with true costsand budget?
Planning and BudgetingBased on forecast volumes and servicelevels, what resources do I need?If the demand changes, how quickly canI reforecast?
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Pricing
Units costs are automaticallycalculated
Users can manually input a pricein place of the proposed one – oradd a fixed or variable markup
Split between budget and actualallows the IT department thechoice of invoicing using theforecasted demand or the actualdemand
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Cross charging
Each row details unit price,budgeted price, real volumes,budgeted volumes and thetotal amount + tax if relevant
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Reconciliation
Users can compare the budgeted amount with thecalculated invoice per customers
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Planning and budgeting
Cost AnalysisWhat are the resources involved?How much does it cost…?
Performance MeasurementWhich indicator shall we use?What did we improve?How do we perform compared to others?
Pricing and BillingHow do I price my services?How do I justify invoices to customers?Are amounts paid in line with true costsand budget?
Planning and BudgetingBased on forecast volumes and servicelevels, what resources do I need?If the demand changes, how quickly canI reforecast?
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Simulation using forecast volumes
Collect forecast volumes from users
.. Calculate new activity levels…
.. resource requirements and budgets ...
...as well as new unit rates for coming year
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Budget follow-up
The budget can be tracked atany level of detail in the model.
Line itemsActivity costsCost objects costsPerformance indicators etc.
Actual, budget and allre-forecasts are in the samedatabase and model, makingcomparisons and follow upvery easy
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Planning and budgeting
Cost AnalysisWhat are the resources involved?How much does it cost…?
Performance MeasurementWhich indicator shall we use?What did we improve?How do we perform compared to others?
Pricing and BillingHow do I price my services?How do I justify invoices to customers?Are amounts paid in line with true costsand budget?
Planning and BudgetingBased on forecast volumes and servicelevels, what resources do I need?If the demand changes, how quickly canI reforecast?
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Performance measurement
Performance objectives andmetrics can be calculated using:
Line item valuesActivity costsCost objects costsActivity drivers and resource volumesAny other external metic bought into the model
Indicators can be displayed in thegraphs and charts in PCM webbooks – or in drill through PCMgauges - or linked to other toolsusing the MDX connector
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On-demand – ‘What-if?’ analysis
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Users can drill through to theunderlying data – and test outhow changes they makeimpact the achievement ofhigher level objectives in futureperiods
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For more information
See SAP.com for:White papers
Costing and cross-charging IT services (WIP)Implementing customer, product and channel profitabilityanalytics (WIP)
Solution briefsManage organizational costs andoptimize profitability
Solution in detailManage organizational costs and optimize profitability
Customer case studiesGroupe CasinoWH SmithAllied Irish BankMorleyBDL Hotel Group
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Thank you!
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