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Business Benefits and ROI from Oracle 11i iProcurement

Cap Gemini Ernst & Young

© 2002 Cap Gemini Ernst & Young - All right reserved

One of the world’s largest consulting firms providing world class

management consultancy, IT design and integration and

systems outsourcing services on a global basis.

CGE&Y has over 6,500 employees based inUK & Ireland.

Cap Gemini Ernst & Young UK ~ No 1 Forge End, Woking Surrey GU21 6DBTel: 44 20 74 34 21 71 ~ www. cgey. com


Services» Management and technology consulting» Systems transformation» Systems management (outsourcing)» Local professional services

Competitive Advantages» Customised Services and Solutions» Industry Experience & Documentation» Seamless approach to strategy, operations, and

information technology Revenues: €1.1bn


“Our culture is one which encourages people

to aim high, to exceed expectations,

andto have fun while doing it!”


Executive Conclusions

“CGE&Y’s initial project with Oracle 11i Financials was extremely successful. We

have continued this progress with the Procurement and HR modules. This has

made CGE&Y a more effective organisation, better able to deliver superior solutions to our

clients.” Brian Bodsworth, CIO

CGE&Y, UK & Ireland



“CGE&Y had four strategic requirements to improve our sourcing operations

Reduce the cost of our external purchases through strategic sourcing

Use highly integrated systems to support the simplification of our purchase to pay processes

Produce management information to monitor and enforce compliance for sustained cost savings

Web enabled technology for low maintenance cost, whilst allowing access for all staff to allow de-

centralised purchasing processes.”

Brian Bodsworth ,CIO CGE&Y, UK & Ireland


Cap Gemini Ernst & Young UK & Ireland Procurement Challenges Develop Strategic Sourcing Expertise

Improve Relationships with Suppliers

Eliminate Localised Procurement Process

Correct Inefficient Procurement Systems- Not integrated- Manual workarounds

Achieve a Competitive Advantaged Cost Structure


Cap Gemini Ernst & Young UK & Ireland Procurement Challenges

Develop Strategic Sourcing Expertise

Improve Relationships with Suppliers

Eliminate Localised Procurement Process

Correct Inefficient Procurement SystemsNot integratedManual workarounds

Achieve a Competitive Advantaged Cost Structure

Solution: Strategic Sourcing &

Business Process Change

iProcurement Enabled

System to Sustained Process Improvements

Oracle 11i


Responses to Procurement Challenges

One Stop Shop for all Procurement Web enabled ApplicationOffers spend Analysis and Supplier performance trackingIncreases strategic focus by automating and simplifying routine transactionsEnables discipline around the purchasing process eliminating non preferred vendor spendingControl & Visibility of Spend before Commitment is made

Solution : iProcurementOracle 11i


• Disparate Systems & Processes

• Localized Buying

• Manual Purchasing & Approval Processes

• Poor Service

• Lack of Standardisation

Resulted In

Various Prices Realized

Discounts Based on “Local Volume”Economies of scale lost

Manual Administration Effort

Low account focus and priority

Poor Supplier Management: Loss of leverage through proliferation of products & service standards driven by supplier variances.

NO Visibility of Spend before Commitment was made!!

Procurement Pre-Oracle 11i


Results!

1 Instance

Complete

Procurement

Information

•Information Available to Negotiate Lowest Price with Key Vendor

•P.O. Mandatory

•Automated Purchasing & Approval Process

Lower Prices for Products & Services

Administrative savings with automated business process enabled by iProcurement

Spending diverted (Controlled) to Preferred Vendors

Post-Oracle 11i - Procurement & Business Process Re Engineering


Executive Conclusions “Strategic sourcing in CGE&Y has been enabled by Oracle iProcurement. We now have better visibility into our detailed spend, commitments & supplier

contracts. CGE&Y is now enabled to strategically source,

leveraging our expenditures through fewer suppliers improving terms. Supplier consolidation promotes our

technology governance strategy, whereby we determine the best technological solution to a

particular type of problem. We use these products and services wherever

possible rather than starting with a ‘clean sheet of paper’ on each project.” Wendy Irvin, Chief Purchasing Officer

CGE&Y, UK & Ireland


Using eProcurement as part of an Sourcing Transformation project

• Increase benefit• Increase speed to benefit

Benefit

Time

Sourcing Transformation

Speed

Additional value

eProcurement alone

Commodity/Supplier Management alone

Strategic sourcing delivers benefit buteProcurement sustains benefit over time

eProcurement must be implemented as part of a Sourcing Transformation programme in order to deliver sustainable benefit

Plus 40-50% of the cost of buying the goods/servicesThe total opportunity for large companies could be

around $1bn +

Supply Base Management, e.g.Volume leverage/redistributionBid-based re-negotiationPrice/performance benchmarkingEnhanced competitionSupply base consolidation/preferred

suppliers

Demand Management, e.g.Standardised itemsReduced contract “leakage”Visibility of contractsPolicy compliance and measurementItem substitutionRequirements and specification

management

Total Cost Management, e.g.Lifecycle costing/total cost of ownershipTransaction costs (requisition, order,

approve, pay)Payment terms managementTax / customs optimisation

3-5%

5-10%

5-10%

Typical benefits achieved (as %

of prices)

Source: CGE&Y


Procurement Delivered Cost Reduction

2002 2003 2004Actual Forecast Forecast

-1.1%

-8.7%

0%

-2%

-4%

-6%

-8%

-10%

-4.8%

ExternalSpend

These are REAL Benefits, not contracts. These savings are DELIVERED, IN PLACE and are CONSISTENTLY MONITORED

Savings are extracted to the P&L or used to selectively to Drive Revenue Growth



“Before iProcurement we did not have a formal procurement team and much of the purchasing was done locally, in an uncontrolled manner.

With Oracle 11i, procurement is now centralised. The system has excellent management

information, enabling a more disciplined processwhich allows us to consolidate purchases with key

vendors to acquire lower prices. Our purchase order mandatory process achieves compliance

with approved vendors.” David Strickland

Purchasing Consultant CGE&Y, UK & Ireland


2002€4.8M

2003€ 20.1 M

2004€ 36.9M

Enabled by Oracle11i iProcurement

Procurement Contract Yearly Savings

Delivered to P&L Savings are Cumulative


IT 71%

Other 29%

2002 €4.8M

Procurement - Where have wereceived the Benefit?

0%

20%

40%

60%

80%

100%

Communications

Print

Cleaning

ElectricityCouriersStationery

2002


2003 Cumulative Gains €20.1M!

IT 62%

Flex Resourcing 21%

Other 17%

Procurement - What Benefits areForecast and Targeted?

0%

20%

40%

60%

80%

100%

2003

Data Comms

Print

Cleaning

Pensions

Electricity

Office ConsumablesCouriers


2004 Cumulative Gains € 36.9M

IT 60%

Other 29%

Flex Resourcing

11%

Procurement Areas ofContract Savings

-6% Cost

Reduction

-7% Cost

Reduction

-11% Cost

Reduction



“When CGE&Y-UK &I made the decision to implement a strategic

sourcing process using purchasing best practices, Oracle's iProcurement

module was an enabler and allowed us to pin down the change.

The system prevents employees from reverting back to the old way of doing things over time. The sourcing gains will continue, and not be a one time

occurrence.” Jeff Clarke, Project Manager

CGE&Y, UK & Ireland


Example of Process Improvement World Class end-to-end automated flexible

resource process for our external contractors!

“Before Oracle iProcurement, each business would cut its own deals, clearly not an optimal situation. An additional benefit enabled by

Oracle Technology is the Self Billing function for our Flexible Resource Process. We eliminated a weekly invoice for each contract worker

saving €670k annually.” Nicholas Mabin

Director Recruitment & ResourcingCGE&Y, UK & Ireland


Flexible Resource Self BillingImprovement

Pre Oracle0

Post Oracle 11iSelf Billing via Timecard

Administrative Savings of € 670k per year!!

YearlyInvoices 16,200

360 contractors45 invoices/Yr


Using the Benefits Achieved to Direct Business Growth

In today’s extremely competitive marketplace, pricing flexibility with the lower cost structure enabled by the Oracle Implementation and

outstanding execution gives CGE&Y the ability to be more aggressive in obtaining profitable new business.


Revenue

Earnings

€0

€5

€10M

2003 2004 2005 2006

3.0

12..0

9.0

6.0

1.0 2.1 3.14.2

Shareholder Value Impact+ € 7.7M

€15M

“We developed an innovative contracting approach which is allowing us to drive incremental growth and increased earnings of €10.4m across 4 years.

This is a complex contract process and Oracle eProcurement allows us to manage and monitor progress. Top-notch execution and Oracle have allowed us

to achieve a competitive edge..... enabling us to win extra business”

Strategic Procurement strategies with our key IT Suppliers have fuelled growth

iProcurement InitiativeFinancial SummaryFinancial Summary


Financial Performance MeasuresiProcurement Initiative

Project Net Present Value (Increase in Shareholder Value) = € 118.1M

IRR >500% infinite ROI >100% (6515%) (Oracle Definition) Pay Back Period <1 Year


Productivity & Growth Benefits NPV (€M)iProcurement Initiative

NPV€ 118.1

CostProductivity

€ (M)

Project Costs

IncrementalGrowth


Economic Value Measures Total Business Value Effect!

Economic ProfitChange vs. Base Case

€ 0M

€ 30M32.4

2002 2003 2004 2005 2006

€ 15M

33.131.7

17.9

2.9

Economic Profit is a complete measure that takes into account earnings, as well as the assets employed to generate those earnings.

Successful Strategic Sourcing Upfront Effort enabled Project to be Self Funding

€ 45M

iProcurement

Executive ConclusionsExecutive Conclusions



“The strategy of implementing Oracle 11i iProcurement

really paid off. The low system implementation cost meant that we

were more than able to fund the whole project, including strategic

sourcing and process simplification, from year one savings alone!”

Brian Bodsworth , CIO CGE&Y, UK & Ireland



“The Rainbow initiative was led by the Uk & Ireland Purchasing Team, But the real key to success was facilitated to all of the areas of the business in a joined up way.

Rainbow touched every facet of CGE&Y. We used cross functional teams from many

disciplines (PRM, consulting, accounting, legal, facilities...). Without this teamwork we would

not have achieved these sizable gains so quickly.”

Wendy Irvin Chief Purchasing Officer

CGE&Y, UK & Ireland

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