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Business Transformation and IT
Finance Transformation & IT
FEI Summit
Carlos PassiAsst Controller, Business Transformation
Business Transformation and IT
© Copyright IBM Corporation 20092
Agenda
IBM Finance Transformation
Leveraging Technologies & Tools Global Integration Risk Management Business Analytics IT Infrastructure (Virtualization & Cloud)
Evolution of IBM Finance
Business Transformation and IT
© Copyright IBM Corporation 20093
• Country focused• High labor count• Disparate systems• Administrative focus
PEOPLE (ORG)Global CoE’s / Outsource
Agile & Value FocusedProductive & Collaborative
Eff
ectiv
ene
ss
Efficiency
(1)Finance E/R >3%1 Cost of Finance as a % of Revenue
(1)Finance E/R <2%
(1)Finance E/R Goal <1%
(1)Finance E/R 1.4%
‘94 ‘08‘00‘96 ‘98 ‘02 ‘04 ‘06
PEOPLE (ORG)Unit, Application & Geo Specific
Slow & Task FocusedCountry Centric & Isolated
Continuous progress marked with significant milestones
(1)Finance E/R 1.5%
• Conducted Hackett benchmarking study – Finance E/R 2x competition
• Created Global Finance Process Owners• Focus on core accounting transaction systems
(Transaction foundation)• Implemented common processes (WWCOA) &
global systems
• Undertook several enterprise initiatives: Y2K / Euro conversion / VM migration / Web exploitation
• Focus on reduction of WW application portfolio (theoretical minimum)
• Conducted second Hackett study to reset benchmarks
• Horizontal integration of processes (SAP Assets, Payables, Procurement)
• Improve collaboration/access for internal customers (ODW)
• Focus on core competencies / Outsource transaction processes (BTO AP/FA)
• Ubiquitous self service access to financial information (Portal, FIUI)
• Global Centers of Excellence: Planning / Financial systems / Acct / Treasury
• WW Finance transformation in Planning, Services, Cash Management, Tax, Business Controls, A/R, Capital Tracking, Access Management
• Cognos BI & Planning Systems
Acc
ess
| In
teg
ratio
n |
Inn
ova
tion
PROCESSComplex & Disparate
Local InitiativesTransactional / Reporting
Characteristics (Starting Points)High Cost & Disjointed
TECHNOLOGYLegacy / Interfaced
Proprietary / Monolithic Disintegrated Portfolio
Characteristics (Best of Breed)
PROCESSSimplified & StandardizedEnterprise/Horiz Initiatives
Decision Support / Analysis
TECHNOLOGYOpen & Standard / SOAOnDemand / Self-ServeSmall Strategic Portfolio
Low Cost & Integrated
Over the past decade, Finance has leveraged new IT technologies to transform the organization, driving simplification, productivity & effectiveness.
The Journey…
Business Transformation and IT
© Copyright IBM Corporation 20094
Data
Stan
dards (WW
CO
A), C
urrency, Produ
ct Ma
ps
Enterprise Layer
Enterprise business transaction applications and corporate data facilities
Finance Transaction Layer
Ledger, Fixed Assets, A/R, A/P, Intercompany, Pricing, Costing, Treasury
Financial Enrichment Layer
Financial Warehousing,
Planning
Decision Support
Consolidation, Reporting &
AnalysisSingle World Wide Consolidation System, Cognos BI Tools, CFO Portal
P R O
C E
S S
L
A Y
E R
S
APPLI
CA
TIO
NS /
SO
LUTIO
NS
Common World Wide Planning System, Consolidated & Geographic Finance Information Warehouses
Common Ledger, F/A, A/P, A/R, Interco (WW Run-Once Solutions)
Finance as a Service (SOA) e.g. SABRIX, WWPRT
The Stack…
Business Transformation and IT
© Copyright IBM Corporation 20095
STRATEGIC OPERATIONAL
SYSTEMS
FIW-CCORPORATE
AccountingConsolidation Lotus Notes
Databases
Lotus Notes Databases
JAPAN
FIW-MCAP FIW-MC
NA/LA
FIW-MCE/ME/A
LEDGERLEDGER
EDGE
WebServer
EMEAAP
FIUIExecutiveDashboard
APEX
Actuals
Americas
LEDGER
CFO Portal
Our processes and information technology are centered around trusted sources of data
Business Transformation and IT
© Copyright IBM Corporation 20096
INCREASE VALUE
MANAGE RISK
REDUCE COST
Finance leverages and exploits new technologies to drive value, manage risk and reduce cost
& Consolidation
NewTechnologies
& Tools
Business Analytics
ITInfrastructure
Global Integration
Risk Management
Blue HarmonyBlue Harmony
COGNOS Integration
Research (STAR)
COGNOS Integration
Research (STAR)
Continuous Control Monitoring (CCM)
Continuous Control Monitoring (CCM)
Virtualization
Cloud Computing
Virtualization
Cloud Computing
Business Transformation and IT
© Copyright IBM Corporation 20097
Blue Harmony (Enterprise Transformation Initiative) Implementing common SAP platform across 3 major processes
• Leverage global resources through common processes
• Adopt standards for seamless intra and inter-organization operation
• Provide adequate control through compliance and governance
• Improve productivity and efficiency to expand margin and grow EPS
• Better information• Better decisions• Better executions
Blue Harmony enables IBM’s GIE strategy as it simplifies operations in 3 major processes and helps to reach earning-per-share targets
Global SimplificationGlobal SimplificationGIE StrategyGIE Strategy2006 EPS
Historical revenue growth
Margin Expansion
Share repurchase
Acquisition and growth initiatives
Retirement-related
$6.06
$0.75
$1.00
2006 EPS
Historical revenue growth
Margin Expansion
Share repurchase
Acquisition and growth initiatives
Retirement-related
$6.06
$0.75
$1.00
$11.002010 EPS
Margin Expansion
Potential Benefits for IBM Productivity efficiencies from FIN, OTC
and OTO Enhance solution selling capabilities,
improved customer satisfaction and retention
Improve DSO and other capital measures Simplify IBM’s Applications landscape by
retiring ~1000-systems
Finance
Opportunity to Order
Order to Cash
Finance
Opportunity to Order
Order to Cash
Business Transformation and IT
© Copyright IBM Corporation 20098
CCM (Continuous Control Monitoring)Managing risks in key business processes
■ Uses IBM Complex Event Processing (CEP) technology to extract information from internal business applications and analyze the data against predefined criteria
■ Monitors high risk transactions in key business processes that are administered in an automated environment to deter and detect circumvention of controls
ALERT ACTIVITY RULE RULE DESCRIPTION
SOX RELATED
CONTROL Y/N
UNIVERSE OF
TRANSACTIONSALERTS
GENERATED
ALERTS GENERATED
YTDTOTAL VALID
TOTAL OPEN
1Multiple concessions (2 or more) to the same customer number where the aggregate total value of the concessions is equal to or is greater than defined clip level. Individual concessions equal to or greater than clip level in USD are excluded.
Y - KCFR 106 0 0 0 0 0
2Multiple concessions (2 or more) to the same enterprise number where the aggregate total value of the concessions is equal to or is greater than the defined clip level. Individual concessions equal to or greater than clip level in USD are excluded.
Y - KCFR 106 0 0 0 0 0
3
Multiple concession write-offs (2 or more) for a customer number where the aggregate total value of the concessions is equal to or is greater than defined clip level. Individual concessions equal to or greater than clip level in USD are excluded. Additionally, the credit codes are PA, RR and SA.
Y - KCFR 106 0 0 0 0 0
4Invoices valued at a defined USD clip level or more where the customer number has one of the following credit codes: PA, RR and SA.
Y - Headlight 294 85 190 0 85
5Collection activity in CDMS (Common Dispute /Debt Management System) that is not documented for invoices exceeding the USD clip level with invoice dates that are 15 days old (from current date).
Y - KCO # 501.0 79 29 120 0 29
6Collection activity in CDMS (Common Dispute /Debt Management System) that is not documented for invoices exceeding the USD clip level with invoice dates that are 30 days old (from current date).
Y - KCO # 501.0 249 58 194 0 58
MAIN > ARGENTINA
Current implementations & sampling of rules include:
Accounts Receivable (WW focus, 37 countries, 48 rules)
• Customer / Enterprise concessions exceeding a country limit and/or customer credit rating
• Deviated Refunds (sent to IB address or changed customer address)
• Invoices for low credit rated customers
• Aged (30+ days) collection activity that is not documented for large valued invoices
Business Partners (6 countries and 67 rules)
• Multiple/excessive discounts applied to same BP
• Processed payment doesn’t match approved disbursement amount
• Purchase returned but credit not applied timely
General Procurement (1 country and 5 rules)
• Orders open for 180 days without activity
• Adherence to required to vendor source selection and fair value (SS/FV) analysis
Screen Shot from CCM (Activity Alert):
Business Transformation and IT
© Copyright IBM Corporation 20099
COGNOS IntegrationIncreasing the value of finance through business analytics
FMS (Field Management System) CommissionsFMS (Field Management System) Commissions One of IBM’s largest suite of applications supporting the incentives
process Allow sellers to track quota attainment and perform sales reporting
at a customer level FMS enables the implementation of key business strategies:
30 days to pay; Monthly commission payments Ledger-based measurements Line-of-sight measurements for employees Increased incentive value to employee Timely management information to executive team Improved discipline and controls in the process Reduced resource stacking; Reduced manual workload
FMS (Field Management System) CommissionsFMS (Field Management System) Commissions One of IBM’s largest suite of applications supporting the incentives
process Allow sellers to track quota attainment and perform sales reporting
at a customer level FMS enables the implementation of key business strategies:
30 days to pay; Monthly commission payments Ledger-based measurements Line-of-sight measurements for employees Increased incentive value to employee Timely management information to executive team Improved discipline and controls in the process Reduced resource stacking; Reduced manual workload
Leverage Cognos products to solution new business requirements; and opportunities to transform and simplify processes.
Potential to fundamentally change how IBM Finance will support the business and add greater value.
IntegrationIntegration
Project Technology
New Capabilities
Backlog Reconciliation BI
FMS Commissions BI
BaRT (Backlog Run-Out Tool) TM1 & BI DB2
CIO Scorecard Phase I BI
Wall Street Systems BI & WSS
Marquis Application Replacement
FIUI BI
WW Spend TM1 & DB2
Phased 3rd Party Replacement
Cognos EP Planning
Investigations Measurements BI
WW Spending HarmonizationWW Spending Harmonization Drives WW standardization of spending analysis and reporting Replaces multiple local spending Apex cubes with one common
WW cube using Cognos TM1 platform Potential benefits to IBM:
Better control of spending and quicker decision making Support career growth for finance professionals Common source of information for better business controls and
simplified access control
WW Spending HarmonizationWW Spending Harmonization Drives WW standardization of spending analysis and reporting Replaces multiple local spending Apex cubes with one common
WW cube using Cognos TM1 platform Potential benefits to IBM:
Better control of spending and quicker decision making Support career growth for finance professionals Common source of information for better business controls and
simplified access control
Business Transformation and IT
© Copyright IBM Corporation 200910
STAR (Statistical Tracking & Assessment of Revenue)Consistent metric-driven model for performance estimation
wk 13End of Quarter
wk1 wk2 wk3 wk4 wk5 wk6 Today
METHODOLOGY
LEADS-ONLY
PILLAR
LEADS-AND-LOAD
PILLAR
LOAD-ONLY
PILLAR
Firm LOAD- ONLY
PILLAR
Orders
Opportunity data from EIW (i.e., Siebel)
Each opportunity detail is modeled
Revenue data to calibrate parameters
Quarterly transactional revenue
Load data
Provides value of closed deals ready to ship
Compute Probability of Winning and Expected
Yield of each opportunity using detailed EIW data
Predict, based on history, the Future
Yield due to opportunities not yet
in the pipeline
FINAL OPTIMIZED ASSESSMENTan optimal weighted average of the four
pillars for each geo/region, and brand
WEEKLY PILLAR WEIGHTING MODELComputes historically optimal weights
for each pillar, by week, geo/region, and brand
Assessment Precision Comparison
STAR Model:
Consistent metric-based method (statistical model based on historical data)
Link tracking measures to performance
Accurate in early weeks, low volatility over weeks
Re-focus human effort from estimating outcomes to decision-support activities
Dev
elo
ped
by
IBM
Res
earc
h
Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Wk 9 Wk 10 Wk 11 Wk 12 Wk 13
De
lta to
Act
ua
lI-view STAR1 STAR2
Business Transformation and IT
© Copyright IBM Corporation 200911
Today, Finance IT activities align with the Dynamic Infrastructure and makes use of virtual hosting
Key Technologies (unordered)
• Service oriented architecture• End-to-end service mgmt• Comprehensive virtualization• Ensembles & scalable servers• Converged networks• Cloud computing services
• Software as a service• Information as a service• IT appliances• Real-time data streams• Mobile client services• Virtual worlds
Top IT Requirements (all are vital)
• Agility – rapid deployment, self-service, …
• Resiliency – availability, disaster recovery, …
• Security – trusted computing, surveillance, …
• Greenness – energy efficiency, low impact, …
• Low Cost – TCO (HW, SW, labor, facilities, …)
Evolution of IT Infrastructure – IT Simplification
Business Transformation and IT
© Copyright IBM Corporation 200912
• Substantial savings: energy, software and system support costs
• zLinux target: 80% energy, 85% floor space
• Inventory hygiene, including application to server mapping
• Dramatically faster provisioning
• Improved security and resiliency
• Quality – simple, stable, available
• Decision-Making: Integrating Enterprise and business unit view
• Mindset/culture of distributed vs. mainframe
• Workload selection -- multidimensional nature
• Incomplete/dated inventory records
• Detailed date for internal business case
• Integrating project/ program priorities
Next Steps:
Evolution of business intelligence to
Cloud Computing
Expected Benefits of Virtualization Large Scale Migration Challenges
Virtualization benefits are significant
Business Transformation and IT
© Copyright IBM Corporation 200913
Delivering Business Intelligence through Cloud Computing
Cloud computing provides dynamically scalable and virtualized computing resources as a self service.
Tenants can subscribe to this service focusing on capability instead of infrastructure.
Infrastructure and capabilities are standardized and provisioned through automation.
Business model allows tenants to pay for usage, fixed cost vs variable cost
WHAT IS CLOUD COMPUTING?
WHAT WILL THIS BRING?
• Saves $23M over 5 years (on System z Linux)
Infrastructure savings – provisioning a common service
Operations expense – reducing BI infrastructure
Talent restructuring – common BI tooling landscape
• Supports a massive install base of +200K knowledge workers
• Provides delivery of a widely used, common service within the IBM enterprise
• Centralizes the delivery of BI services using economy of scale to deliver value to all adopters, regardless of size
• Enables faster time to value for adopters and allows users to consume services at a rate and pace to match their investment
• Creates a standard BI process that prevents an infrastructure build per project investment
Business Transformation and IT
© Copyright IBM Corporation 200914
Overview for a private Business Intelligence (BI) Cloud offering
■ In 1Q09, the 3rd most popular search term on Gartner.com was business intelligence
■ Despite the difficult economic conditions, in 2008 the growth in BI platform sales was at 20%
Strategy is a tops down approach that starts with business services to capture tactical ROI and market interest:
■ Leverage existing GA products & services to jumpstart sales for private clouds
■ Use the CIO account to drive product requirements and a marketing showcase
■ Consolidate and virtualize BI silos across an enterprise for large cost savings/avoidance
■ Grow cloud at the rate and pace of the market
…while offering a stake in the ground for expansion into clod delivered data centric consolidation and cloud services.
Business intelligence
Master data management /
integration
Content / data management
14
The vision
Business Transformation and IT
© Copyright IBM Corporation 200915
Transformation Roadmap for BI Cloud
Phase 1: 3 - 6 mo Phase 2: 6mo - 12mo Phase 3: > 12mo
Bring Cloud to the User■Consolidate & centralize BI■Leverage data as-is■Standardize boarding
processes & services■ Identify the processes for
automation■ Identify services for catalog
Expand the Cloud ■Create a standard services
catalog■Automate the boarding process■Provide auditing■Automate billing and rating
capability■ Integration w/CHQ cloud
transformation team ■Notes integration pilot*
Expansion into data■ETL services■Offering data warehouse
services■Semi-structured /
unstructured data access■Evolution into IMCC
platform offerings
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10Finance ITIntegrated Supply ChainFMSHRSales TransformationSWGGTS
Blue Harmony (Pilot/Development) In Discussion
BICC EnvironmentNon BICC Environment
The BICC is the underlying foundation for the entire transformation in IBM
‚
Boarding schedule for IBM tenants
Target is 120,000 IBM tenants by 1H2010
Business Transformation and IT
© Copyright IBM Corporation 200916
Eff
ecti
ven
ess
Basics
Enterprise Integration
Standard / Common Process Automation Functional Best Practices Financial Reporting
Shared Services Web Enablement Core Competency Decision Support
Process Outsourcing / Global COEs
Technology Exploitation Rationalized ERP Information On Demand
Globalization
>3%
<2%
<1%
E/R
1994 20021998
The evolution of Finance at IBM
Business Analytics
COGNOS STAR model
Infrastructure
Virtualization Cloud
Computing
Risk Managemen
t
Continous Control Monitoring
Global Integration
Blue Harmony
Business Transformation and IT
© Copyright IBM Corporation 200917
Finance Transformation in IBM – The Journey
■ Transformation has been an Evolutionary process…
Moving from a Country Based Model to a Global model Standardizing Data and Systems Reengineering Common Global Processes Implementing and Promoting Self-Service Consolidating Core Functions into Shared Services Globalizing Centers of Excellence
It is Hard…
Business Transformation and IT
© Copyright IBM Corporation 200918
passi@us.ibm.com
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