With increasing competitive pressures and commoditization attacking your company’s top line, to sustain and grow profitability it’s critical to find opportunities to reduce the costs of making your products and delivering your services. As a decision-maker in a large or complex organization, you realize that having a clear picture of the profitability of each product or service is challenging, but important for determining the right strategic direction and the best tactical decisions.
Oracle’s Hyperion Profitability and Cost Management (HPCM) is a software that enables you to understand the drivers of cost and profitability. It’s a purpose-built application that includes a flexible allocation platform and provides a visual modeling environment, calculation engine, multidimensional analysis and capability to build multiple scenarios.
HPCM enables modeling of cost drivers and allocations using a variety of methods, including cascading allocations, sequence dependent calculations, activity-based costing (ABC), standard costing, time estimation, custom calculations or industry-specific adjustments. Different methodologies can also be combined. Validation functionality assures the models are complete and balanced.
HPCM offers features that support analysis and reporting of the causes and effects of allocations. Traceability Maps are graphical depictions of allocations that allow users to easily verify the business rules applied to the allocations and can also serve as documentation for review and compliance. Genealogy Reporting enables understanding of multi-level allocations, showing how values allocated through earlier stages contribute to results at later stages.
HPCM has been available as an “on premise” application for a while and has recently been gaining traction as the product’s functionality and usability have improved in recent versions. It is now available in a cloud (SaaS) version as well, named Oracle Profitability and Cost Management Cloud.
How has HPCM / PCM Cloud been used to improve cost analysis and increase profitability in different industries? Here are a few examples:
Insurance: A health insurance company uses HPCM to streamline analysis for regulatory compliance, to maximize reimbursement from government programs, and to improve analysis and predictability for product pricing and financial planning.
Banking: HPCM provides more accurate rules-based allocations by time period and scenario, increasing visibility into costs of a bank’s products as well as improving the auditability of allocations.
Education: HPCM provides a way for a university to allocate costs by program, major, campus and other vectors, enabling the university to understand the cost to educate a student and the performance of programs and faculty.
Professional Services: For a law firm of thousands of employees, HPCM drives allocation of shared services across the firm’s practices, providing insight into practice profitability at a more granular level.
Telecommunications: For a national telecommunications provider, HPCM enables clearer and more concise allocations of cost pools to improve calculation of service pricing and regulatory compliance.
How could HPCM or PCM Cloud help you improve visibility, compliance and profitability in your company? If you’d like to know more and see a product demo, don’t hesitate to reach out.