Profitability insight with Prodacapo
One of the major reasons behind introducing Prodacapo ABM was to provide more insightful information as a basis for business decisions and to give a better understanding of profitability.
About
Reuters is a global information company. It provides trusted information to professionals working in financial services, corporate and media industries around the world. Reuters also provides services to around 35,000 financial market professionals working across a variety of market such as equities, commodites and foreign exchange. The company has approx. 15,300 employees and operations in 91 countries.
Challenge
Reuters provides trusted information to individuals and organizations and has a reputation for speed, accuracy and independence. When Reuters employed a new CEO he determined a vision for moving the organization forward based upon a fundemental shift in the way business was being managed.
A large part of this change was associated with the information management received and used as a basis for senior decision-making.
Reuters had traditionally considered costs from a functional point of view but management wanted to be able to associate costs with revenues of products and customers across the organization. This would allow them to create greater visibility and encourage increased accountability within divisions. Reuters answer was to create the Profitability Insight Project.
Profitability Insight
The Profitability Insight Project was designed by the CEO and his team with the objective of running the company on a more sophisticated basis.
"Profitability Insight was designed to give us greater transparency into the business", says David Grigson, CEO, Reuters. "It is based on having the appropriate measures and systems in place to enable us to understand which of our activities and capabilities contribute most to maximising value. It allows us to hold managers accountable for the execution of strategy and the delivery of shareholder value."
A high proportion of the operating costs were shared and collected in the traditional way by function. Trying to linking these costs directly to the revenues were difficult. The way forward was to analyze the business using an activity based costing (ABC) model in order to understand which customers and products wer maximising value.
However, it soon became apperant that a specific activity based costing software solution would be needed.
Selecting a robust ABM solution
Reuters had built activity based costing models in the past but the complexity of the business had made the resultant models difficult to rely on in practice. This led to the creation of static ABC models, built upon different methodologies and which business managers found hard to understand. The lack of integration between local models meant that the informaiton could not be used proactively on a global basis.
Reuters needed a flexible and robust ABM solution that would be capable of interacting with, and sourcing data from, a wide range of the applications that support their business.
Reuters was recommended the activity based costing solution from Prodacapo.
"Prodacapo ABM gave us the technical ability to aggregate data from a variety of internal sources on a global scale. This was something that we had not been able to do in the past," says Ann Firth, project manager, Reuters.
Result
Initially, Prodacapo was implemented as a pilot ABC project. This was very successful and the results generated considerable interest within Reuters. The project was extended to give global coverage.
Today, Reuters updates the ABC information every month. Data is extracted from multiple sources, such as Reuters' Siebel CRM system, the sales and installation database, the global client database, as well as from the general ledger database.
The results of the ABC calculation in Prodacapo ABM are presented globally in their ProClarity system, which is Reuters' reporting and analysis tool for users.
The ABM information from Prodacapo is also incorporated into the monthly internal financial reporting at board level, as well as across divisions and regions. It is also used to support the external segmental reporting under IFRS.
Using Prodacapo ABM, Reuters has established a stronger basis for driving business decisions and a greater and deeper accountability for generating profit.
More information
|
