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Trend  #8 – Profitability Performance

 While past decade saw Budgeting, Planning and financial consolidation as the core business process surrounding Performance Management, the biggest business problem that LoB and CFOs would like to analyze and look up to ePM framework is ‘Profitability Performance’ or ‘Profitable Analysis’ or ‘Profitability and Cost Management’.

Financial Analyst or Management Analyst spend enormous time to find out answers for these core questions, with examples from some industries:

  1. High Tech – What are my top 10 profitable customers ?
  2.  CPG – What are my top 100 profitable products and top 500 retail accounts?
  3. Professional Services – Which are the projects that are not profitable and need to be shelved?
  4. Banking – Which are the bottom 1000 non profitable accounts that needs to be followed up and removed, which branches (banking centers) are most profitable and least profitable?
  5. Healthcare – Which are the most efficient and profitable clinical services (cardiology, eye care etc.) and that are at the bottom ?
  6. Lifescience –  Which are the most profitable drugs, and which are not?
  7. Insurance – What are the bottom 10 insurance policies, and how can they be improved especially the cost to serve?
  8. Public Sector – What are cost of my agency programs and how can they self sustain? Which programs should be discontinued?
  9. Retail – Which are my most and least profitable stores? How can I improve the stores profitable and make decisions to discontinue them?
  10.  Aerospace/Airlines – Which are the most profitable routes that I need to focus, with more traffic and how can I optimize cost to serve?

As you see from the above example, its evident that profitability management is a key driver in every industry and having a solution to manage this will give instantaneous results.

To achieve the right results, there needs to be provision to build complex cost and profitability models, and also a powerful and robust allocation engine. Allocation engine is the key to get the results allocated to the right product, customer, project etc.

Based on the above, Profitability and Cost Management adoption is going to be one of the biggest areas in the ePM framework over the next decade. With the right software solutions, organizations can aim to achieve and get answers to the very pressing problems laid above.

SAP BusinessObjects through their acquisition of the ALG, have a best in class solution for handling Profitability performance. This is going to be a key component of ePM initiative of every organization in the next decade.

Top Ten ePM trends for Next Decade – #7                                                                                    Top Ten ePM trends for next decade – #9

Please keep reading this blog series, as i post the other trends in next few days.

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