Enhancing ERP

System Value
by Dan Everett
Contents
Introduction 1

Managing Business Performance 2

Demand Management 4

Supply Management 4

Financial Management 4

Technical Requirements 5

Data Source Independence 5

Analytic Functionality 7

User Self-Deployment 8

Business Process and Workflow 10

Summary 12

About the Author 13

About Hyperion 13
Introduction
During the 1990s, Global 2000 companies spent billions of dollars on enterprise resource
planning (ERP) systems. The systems focused on automation, year 2000 compliance,
process re-engineering and economies of scale to reduce the cost of business transactions.
Unfortunately, ERP systems were not designed to provide broad, timely and easy access to
information for decision makers.

In addition, not all the information needed by executives, line of business managers and front-
line workers resides in the ERP system. And to make matters worse, many companies have
multiple ERP systems in use throughout their enterprises due to mergers and acquisitions.
Consequently, companies have had to struggle with issues such as:

• How do I successfully extract data from the ERP system for decision makers?

• What is the optimal delivery mechanism for executives, line of business managers and
front-line workers?

• How do I integrate data from my ERP system with data from other sources in the enterprise?

• How do I integrate data from multiple ERP systems?

1
 Managing Business Performance
Changing markets and economies create opportunities as well as challenges for businesses
around the globe. The underlying theme for all businesses today is that corporate value is
driven by the bottom line, and, in the end, it is profitability that really matters. To achieve high
profitability, organizations need to implement closed-loop business performance management
solutions that help them make quick, informed decisions and understand the impact of those
decisions across the enterprise.

Just how important is a closed-loop performance management strategy? An American

Management Association survey of 203 companies ranging in size from $27 million to $50
billion indicated that “measurement-managed” companies consistently outperform their peers.

100
97%
80
83%

60 74%
Percentage
of 55%
Organizations 40 52%
44%

20

0
Perceived as an Reported to be Last major cultural
industry leader financially ranked or operational
over the in the top third change judged to
past three years of their industry be very or
moderately successful

Nonmeasurement-Managed Organizations
Measurement-Managed Organizations
Source: American Management Association

Performance management drives corporate value.

Hyperion® Essbase® XTD is a scalable, reliable and high-performing business intelligence (BI)
platform that is the technology foundation of Hyperion’s comprehensive Business Performance
Management Suite. The remainder of this paper will highlight how Hyperion Essbase XTD helps
companies maximize the value of ERP systems from vendors such as SAP, PeopleSoft, Oracle,
Baan, JD Edwards and Lawson. Find out how you can leverage your ERP data to more effectively
manage business performance by:

Charting your course

Communicate goals and strategies, business drivers and key performance measures
for success.

2
Reducing your risks
Dynamically model and test business scenarios, validate strategies and plans, and allocate
resources for maximum business impact.

Aligning execution with strategies

Tie strategies to operational plans and align individual goals to corporate objectives.

Planning your competitive advantage

Constantly adapt plans and budgets in real-time.

Anticipating and predicting results

Identify and proactively track performance against leading indicators as proxies for success.

Continuously assessing and driving business performance

Monitor, measure and report on performance against goals across the extended enterprise.
Create an environment for continuous performance improvements.

Improving financial integrity and corporate accountability at all levels

Deliver a single version of the truth via the Web and promote transparency in financial results.

Goal Setting
Scorecarding

Set Goals

Constraints
Consolidations Profitability
Management Report Model
Resources
Financial Revenues
Legal
Shared
Information

Resource Allocation
Effectiveness Financial Planning
Profitability Analyze Plan Budgeting
Deviations Demand
Variance

Monitor

Performance Measurement
Benchmarking and Metrics
Efficiency and Utilization

The business performance management process.

3
 Demand Management

Hyperion Essbase XTD helps companies segment markets, identify new sales opportunities,
improve the effectiveness of lead generation campaigns and more accurately forecast
customer demand.

For example, a brand manager may receive an alert about a period-over-period declining sales
volume trend. After some further analysis, the manager may find out that there is a statistically
significant correlation between the declining sales and declining marketing activities. The mar-
keting department can then come up with some new campaigns to increase sales volumes by
answering questions like:

• How effective were past marketing campaigns at increasing sales by product, by customer
segment and by marketing channel?

• What are the demographics of the customers that responded to the marketing campaigns?

• What marketing channel (direct mail, e-mail, print ads) is most effective for each segment?

Then, historical information about sales volume over the last 24 months, including seasonal
trends, can be used in conjunction with the projected effect of the marketing campaigns to
forecast sales volume for the next six months.

Supply Management

Furthermore, Hyperion Essbase XTD helps companies align procurement, manufacturing

and logistics with market demands to reduce costs and capitalize on changing revenue
opportunities.

Continuing with the demand management example, a manufacturing plant manager can use
the forecasted demand as input to plan staffing, tooling, and inventory levels required to fulfill
product volume and mix forecasts. Inventory managers can then negotiate with suppliers based
on price, quality, lead time and delivery performance to create a profitable and predictable pro-
curement process. After launching a campaign, the brand manager may then receive alerts about
higher than expected response rates in regional markets and modify product distribution to
ensure order fulfillment and increase customer satisfaction.

Financial Management

Moreover, Hyperion Essbase XTD helps companies model profitability, develop plans and allo-
cate resources to more effectively align operational execution with corporate financial goals.

Before executing on the initial demand and supply plans, financial analysts can look at the big-
ger picture profitability across brands. Using the demand forecasts, projected procurement and
marketing costs, and historical customer and product profitability, information analysts can
model the impact of changes in product mix and volumes in order to maximize corporate profit
margins. Required changes to previous plans can be routed back to brand managers, marketing,
plant managers and inventory managers. This iterative planning process may go through a few
cycles based on resource constraints until a final plan is approved and resources are allocated.

4
Technical Requirements
When integrating a business intelligence platform with an ERP application, it is important to
evaluate the following key requirements.

Data Source Independence

A BI platform should offer connections to multiple data sources to ensure long-term flexibility
and adaptability of business performance management solutions. Source data often resides in
multiple transactional enterprise resource planning (ERP), customer relationship management
(CRM), supply chain management (SCM), manufacturing resource planning (MRP) and legacy
applications, as well as data warehouses and marts, spreadsheets and other file formats,
because the information needed and the level of detail varies between executives, line of busi-
ness managers and front-line workers. Executives typically need access to a broad range of
sources in order to monitor performance across the enterprise, while line of business managers
need more depth of detail in specific areas of the business.

For example, using Hyperion Essbase XTD, a consumer packaged goods company successfully
integrated customer data in its ERP system with external AC Nielson Syndicated data and Wal-
Mart retail link data into a point-of-sale analysis application. The increase in efficiency and
analytic effectiveness has helped the company save hundreds of thousands of dollars.

Direct Access

Some solutions require direct access to the ERP transactional data in both real-time and batch
modes. Direct access can be through application programming interfaces (APIs), such as SAP
BAPI and PeopleSoft OpenQuery, or through structured query language (SQL) directly against
the relational database management system (RDBMS).

Essbase® XTD Integration Services provides direct access to a broad range of source data
residing in ERP, CRM or legacy systems, as well as data organized in HTML, XML, flat files,
relational databases (Oracle, IBM DB2 UDB, Microsoft SQL Server, Sybase and Informix) and
spreadsheets. Data is streamed directly from source to target applications either on demand
or at scheduled intervals.

Bidirectional data, metadata and business process integration between popular ERP and CRM
applications, such as SAP, Oracle, PeopleSoft, JD Edwards and Siebel, insulate users from the
programming languages, APIs and complexities of the underlying data models of ERP systems.
Consequently, users can easily download data for decision-making as well as upload budgets
and plans back into the transactional system.

5
 SAP R/3 Example

Essbase XTD Integration Services provides total access to SAP database tables and business
processes. Whether users need to grab data for an ad hoc analysis, download monthly actuals
or upload the annual budget, they can achieve seamless application-to-application integration
between SAP R/3 and business performance management solutions built on Hyperion
Essbase XTD. Key features include:

Access to the methods and attributes of SAP business objects without the need of knowing the
Business Application Programming Interface (BAPI). An SAP business object exists for each trans-
action document, such as a journal entry or sales order, and includes all the built-in logic and
rules associated with that transaction.

The sending and receipt of SAP intermediate documents (IDocs) using Application Link Enabling
(ALE). As another vehicle to communicate with SAP R/3, this adapter imports or extracts data via
IDoc forms.

Access to Remote Function Calls (RFCs) that have been either predefined by SAP or custom-
coded. When using this adapter, users specify which remote function or functions they wish to
access and the specific parameters of each function. Predefined remote function calls exist for
both importing and extracting data with SAP R/3.

Data input via SAP R/3 transaction screens. Adapter input ports are available for each screen
method, which correspond to the values of the corresponding fields on the screen in SAP. The
approach is helpful when no other method exists for data entry.

Read-only access to the SAP logical database and tables within that database. Features are
available to join information between SAP R/3’s predefined tables.

Data Warehouse Access

Many ERP vendors have developed packaged data warehouses or marts to cleanse, consolidate
and store data for decision-making. In addition, companies have built custom data warehouses
to incorporate data that resides in other systems into the decision-making process.

Essbase XTD Integration Services provides data and metadata integration with the warehouse
to build more advanced business performance management solutions. A graphical interface
and metadata catalogue makes it easy to create logical application models from tables, views
and columns in a relational database, and physical applications can quickly be created from
the logical models. Services are provided to extract and load data from the warehouse or mart
into the application, and drill through from the application into the lower level detail in the
data warehouse.

PeopleSoft EPM Example

Hyperion has leveraged its BI platform to build a certified software partner solution for
PeopleSoft Enterprise Performance Management (EPM) reporting. The certification validates
the effectiveness of Hyperion Essbase XTD to provide broad, timely, and easy access to the
PeopleSoft EPM Warehouse. Hyperion Essbase XTD helps PeopleSoft customers achieve quick
return on investment by easing integration, speeding solution delivery and increasing
decision-making collaboration.

6
Hyperion Essbase XTD certification testing demonstrated data and metadata mapping to the
PeopleSoft EPM Warehouse schemas for financial, human resource, customer relationship and
supply chain management, out-of-the-box reports and views, and a security bridge to replicate
users from PeopleSoft EPM into Hyperion Essbase XTD. This seamless integration quickly deliv-
ers measurement and monitoring of key metrics, ad hoc interactive analysis and advanced
analytics into the hands of users so they can extract maximum business value from their
PeopleSoft data.

Data Enterprise Warehouse Integration Delivery

Sources via
Hyperion

XML
Customer Finance Analysis
Legacy/ Accelerators
ERP
Employee Supplier
Staging Data Mart 1
Flat Essbase XTD
File Industry Data Integration
Services

Existing Enriched Data

DW Reporting Data Mart 2

External
Data ODS Data Warehouse Data Marts

Metadata

PeopleTools

PeopleSoft EPM integration.

Analytic Functionality

The analytic functionality of a BI platform has a direct impact on the breadth and depth of
performance management solutions that can be deployed for different business functions and
levels across the enterprise. In a survey of users, 81 percent said they purchased Hyperion
Essbase XTD because of its analytic functionality. Some examples of the more than 250 func-
tions available out-of-the box in Essbase XTD Analytic Services include:

Attributes and statistics help companies segment markets, identify new sales opportunities and
improve the effectiveness of lead generation campaigns. For example, a large telecom customer
uses Hyperion Essbase XTD to rank customers according to user-defined metrics, such as call
volume, bill amount or high-margin service options. Then, the company correlates the strength
that attributes, such as corporate or personal account, gender and geography, have on customer
ranking to offer new pricing structures to target subscriber and market segments, as well as
upsell and cross-sell value-added services.

Forecasting functions and time-series algorithms help companies align procurement, manufactur-
ing and logistics with market demands by tracking moving minimum, maximum and average
demand and calculate future values-based historical trends on a weighted list of factors that

7
 influence demand. For example, one of the world’s largest automotive manufacturing companies
uses Hyperion Essbase XTD to better manage daily vehicle production volume and mix down to
the individual options level by more accurately forecasting sales demand and aligning manufac-
turing resources to support that demand. Better management of the supply chain has helped
the company increase profitability by reducing inventory carrying costs and increasing sales
and customer satisfaction.

Multiuser write-back and financial functions help companies model profitability, develop plans and
allocate resources to more effectively align operational execution with corporate financial goals.
For example, a large multinational office products retailer is using Hyperion Essbase XTD to
allocate costs, such as distribution and store operating expenses, marketing expenses and
inventory carrying costs, based on physical size and weight of units shipped, inventory value,
retail space occupied and other cost drivers to get a truer picture of product profitability. The
company uses the profitability information to develop return on net asset (RONA) models that
help it determine if it is achieving the desired efficiencies in marketing decisions and the
desired leverage of store shelf space. Then, it uses that knowledge as a strategic planning tool
with vendors for every product category.

User Self-Deployment

A BI platform should provide an IT environment that offers the control and administration effi-
ciency of centralization, while providing considerable latitude in how information is accessed,
personalized and distributed by various end-user communities. Making it easy for departments
and business units to fulfill their own performance management needs can significantly reduce
training and support costs.

Personalized interfaces.

8
Essbase® XTD Analysis Studio provides a comprehensive range of user interfaces, such as highly
visual dashboards and scorecards for executives, spreadsheets for line of business analysts per-
forming sophisticated modeling and planning, and PDFs for front-line workers needing opera-
tional and production reports. All user interfaces have been designed to leverage Web-based
deployments and can be fully customized to your company’s requirements.

Wizards help end users to quickly build, schedule, distribute and personalize metrics and
reports in a self-service manner with little or no IT involvement. Reports can be organized and
managed in centralized folders for personal, departmental or enterprise distribution in numer-
ous formats, including Adobe Acrobat (PDF), HTML, DHTML, Java, Word, Excel, e-mail or via
wireless devices. In addition, Essbase XTD Analysis Studio can be seamlessly integrated into any
corporate portal strategy, including Plumtree, Lotus K-Station, mySAP.Com, PeopleSoft 8 Portal,
iBaan, IBM Websphere Portal Server, Microsoft Digital Dashboard or a homegrown portal.

Oracle Financials 11/11i Example

Hyperion has also built Performance Management Accelerators on top of the BI platform to
speed delivery of solutions for ERP systems like Oracle Financials 11/11i. These out-of-the-box
templates provide predefined data mappings, dimensions, hierarchies, business metrics, reports
and views that shield users from the vast array of database tables, cryptic naming conventions
and complex relationships in the ERP data model.

Source Transaction Systems

Systems Data Warehouses

Step-by-Step Select Data Elements

Guide for Analysis

Essbase XTD
Integration Data Model
Services Calculations

Essbase XTD Outlines/Hierarchies

Analytic Services Cube Optimization

Essbase XTD KPIs and

Analysis Studio Reports/Views

Hyperion Performance Management Accelerator solutions.

A broad spectrum of metrics is provided to help companies more effectively manage revenue,
cash flow, assets and costs. In addition, a step-by-step guide enables a wide range of users
to quickly select information they need, such as a set of books, accounts, journal entries and
scenarios. As users move through the setup guide, the accelerator logically and dynamically
narrows the selections to be made based upon the choices made in previous steps.

9
 Business Process and Workflow

It is not enough for a BI platform to merely display business metrics in graphical form or deliver
reports to a wide range of users. Closed-loop performance management solutions require sup-
port for multiple business processes, such as goal setting, activity-based costing, profitability
modeling, budgeting and planning, financial consolidation and performance scorecarding, as
well as workflow between those processes.

Hyperion Essbase XTD not only supports multiple business processes, it also supports best
practices and management methodologies, such as benchmarking, balanced scorecards,
Economic Value Added (EVA), and Six Sigma. For example, Hyperion has a partnership with Stern
Stewart & Co. to utilize their its EVA management framework. EVA is widely regarded by security
analysts as the best single measure of corporate performance because it is calculated by taking
operating profits after tax and deducting a charge for the cost of capital.

In addition, Hyperion® Performance Scorecard is certified by the Balanced Scorecard

Collaborative and incorporates a direct link to the world-class benchmarking capabilities of
Hackett Benchmarking & Research. Adding externally relevant benchmarks into your balanced
scorecard enables you to compare your company performance to the best and the rest in your
industry. Consequently, you can better identify areas that need improvement and understand
how to build, maintain or extend your competitive advantage. Hyperion Performance Scorecard
is the only software product available that is integrated with Hackett data and, therefore, has a
truly unique ability to unearth best practices.

The workflow capabilities of Hyperion Essbase XTD have the potential to dramatically improve
collaboration between customers, suppliers, partners and employees by providing a dynamic
and flexible way for individuals from different companies to be active participants in the
decision-making process. By providing data, metadata and process integration, Hyperion
Essbase XTD enables the collaboration to go far beyond simply sharing information through
a Web browser.

Data Level Integration

Hyperion Essbase XTD provides a common user experience across business performance man-
agement applications and underlying data sources. This includes functionality such as a com-
mon user interface, single sign-on, point-of-view synchronization and the ability to seamlessly
navigate from one application to another based on a common set of products or customers.

Furthermore, Hyperion Essbase XTD supports authentication tools such as Lightweight Directory
Access Protocol (LDAP), Active Directory Services (ADS) and NT Lan Manager (NTLM) to ensure
authorization rights of users to data across applications, as well as standards such as Secured
Socket Layers (SSL) and Hypertext Transfer Protocol Secure (HTTPS) to protect the integrity of a
message during transit.

Moreover, Hyperion is helping to define industry standards such as eXtensible Markup Language
for Analysis (XMLA), eXtensible Business Reporting Language (XBRL) and Java OLAP API (JOLAP)
that provide common formats and exchange mechanisms for data. JOLAP is a J2EE objected-
oriented interface to BI platforms designed specifically to address the programming needs of
Java developers.

XMLA is a linguistic interface with no preference for programming language or object model.
XMLA uses mdXML statements for multidimensional data access in much the same way as SQL
is used for relational data access. The most common sentence structure in both SQL and mdXML
is the SELECT statement. However, in the relational model, the returned result of a SELECT
statement is a table (also called a row set), whereas the returned result of an mdXML SELECT
statement is a cube (also called a cell set). See www.xmla.org for more information.

10
XBRL is a reporting format for financial information and is generally considered to be a standard
that will play a part in accounting reform called for by the Sarbanes-Oxley Act. Companies such
as Microsoft and Reuters already report financial results to Wall Street using XBRL, and the
Federal Deposit Insurance Corporation (FDIC) is requiring banks to submit their call reports
using the standard by the end of 2003. XBRL was ranked the number one need-to-know new
technology for CFOs in 2003. See http://www.cfo.com/article/1,5309,7812||S||345,00.html
for more information.

Metadata Level Integration

Furthermore, Hyperion Essbase XTD provides strong metadata integration so users leverage
a common set of dimensions, hierarchies, calculations, business rules and reporting formats
regardless of what business process they are involved in. Functionality is provided for
defining, sharing, updating, versioning and synchronizing metadata across user interfaces
and applications.

Hyperion® Hyperion® Performance Hyperion®

Planning Scorecard Financial Management

Models Targets Goals Targets Results Reports

(simple)

Metadata
Hyperion Business Repository
Modeling Tailored Applications

Hyperion® Hyperion
Models Business Planning
and KPIs Modeling Model
Model Models Targets Reports

Standard KPIs
Models

ng
ppi
Ma

Data Sources

Hyperion metadata management.

Process Level Integration

Moreover, Hyperion Essbase XTD is a technology enabler for business activity monitoring and
collaborative BI, which automates performance management to improve the speed and effective-
ness of adapting business operations to changing conditions.

Performance management processes can be encapsulated within business rules, which can then
be used as a means of monitoring business activities in real-time. Events that occur as the
result of those activities act as input values that trigger the business rules to dynamically
deliver filtered information to other processes and targeted end users in the BI workflow.

11
 For example, the delivery of targeted alerts, reports and guided analysis to executives, line of
business managers and departmental users also provides input drivers for other performance
management processes, such as goal setting, business modeling and planning.

In addition, Hyperion Essbase XTD seamlessly integrates with the workflow infrastructures that
companies already use throughout their enterprises, such as job schedulers and J2EE Enterprise
Application Integration (EAI) servers.

For example, one customer has automated maintenance of its business performance manage-
ment applications by integrating Hyperion Essbase XTD with its Tivoli management console
and Autosys job scheduler. The job scheduler waits for an extract file to arrive in a specified
directory, makes sure the file is the right size and then starts a job to update the application.
If any problem occurs with any of the jobs in the update process, a message is sent to the Tivoli
management console so the problem can quickly be corrected. Consequently, reliability and
accessibility of the applications are increased.

Summary
As companies move from simply monitoring to proactively managing business performance,
they need real-time visibility into market, customer and competitive conditions. This requires a
closed-loop business performance management solution that helps them make quick, informed
decisions and helps them understand the impact of those decisions across the enterprise.

Hyperion Essbase XTD is a scalable, reliable and high-performing business intelligence platform
that provides the technology foundation for business performance management by integrating
across ERP and other IT systems, as well as business processes in a cost-effective and flexible
manner. The BI platform has helped thousands of customers around the world leverage more
business value from their ERP systems.

“As a result of numerous acquisitions and a highly fragmented market, we had

a great need to improve visibility and best practices across the enterprise. With
Hyperion, we can now measure the critical details and view the big picture to
make timely and informed decisions that impact profitability. We have seen a
$5 million savings so far simply by having the information necessary to staff
our printing presses appropriately.”

Michel Salbaing
CFO
Mail-Well

This enhanced value is a direct result of the data source independence, analytic functionality,
user self-deployment functionality, business process and workflow capabilities of Hyperion
Essbase XTD. Contact Hyperion today to find out how Hyperion Essbase XTD can help fulfill
your business needs in the areas of:

Demand Management. Segment markets, identify new sales opportunities, improve the effective-
ness of lead generation campaigns and more accurately forecast customer demand.

Supply Management. Align procurement, manufacturing and logistics with market demands to
reduce costs and capitalize on changing revenue opportunities.

Financial Management. Model profitability, develop plans and allocate resources to more effec-
tively align operational execution with corporate financial goals.

12
About the Author
Dan Everett is senior product marketing manager responsible for Hyperion’s business intelli-
gence platform. He has an extensive background in business intelligence, systems and database
management, and test, measurement and process engineering. Dan holds a degree in informa-
tion management systems from the University of San Francisco.

About Hyperion
Hyperion, the global leader in business performance management software, creates solutions
that help companies measure performance and drive profitability. Hyperion’s Business
Performance Management Suite of packaged and tailored applications and its open, integrating
business performance management platform, Hyperion Essbase XTD, enable companies to set
goals, model and plan performance, monitor and report key results, analyze underlying busi-
ness drivers and anticipate future performance of core business activities. Hyperion products
are used by more than 6,000 customers around the world to enable financial, organizational,
customer relationship, supply chain and channel performance management. Hyperion has a net-
work of more than 330 partners to provide innovative and specialized business performance
management solutions and services.

Headquartered in Sunnyvale, California, Hyperion generated annual revenues of $492 million in

fiscal 2002. The company employs more than 2,200 people in 20 countries and is represented
in 16 additional countries through distributor relationships. Hyperion is traded under the
Nasdaq symbol HYSL. For more information, please visit www.hyperion.com,
www.hyperion.com/contactus or call 800 286 8000 (U.S. only).

13
Hyperion Worldwide Headquarters
Hyperion Solutions Corporation
1344 Crossman Avenue
Sunnyvale, CA 94089
Tel: +1 408 744 9500
Fax:+1 408 744 0400

Product Information
Tel: 800 286 8000 (U.S. only)

Consulting Services
Tel: +1 203 703 3000
E-mail: northamerican_consulting
@hyperion.com

Education Services
Tel: +1 203 703 3535
E-mail: education@hyperion.com

Web Site
www.hyperion.com

Contact Us
www.hyperion.com/contactus/

© 2003 Hyperion Solutions Corporation. All rights

reserved. Hyperion, the Hyperion “H” logo and
Essbase are registered trademarks of Hyperion
Solutions Corporation. Hyperion Solutions, Hyperion
Business Modeling, Hyperion Financial Management,
Hyperion Performance Scorecard, Hyperion Planning
and Essbase XTD are trademarks of Hyperion
Solutions Corporation. All other trademarks and
company names mentioned are the property of their
respective owners.

3741_0103KS_WP_.5KTG