Implementing an IT Financial Management Solution
SSON: Why do you feel IT Financial Management is so important for large enterprises right now?
Dennis Flax: Providing IT services at the most profitable cost has always been important at Koch Business Solutions, LP (KBS) and the level of focus on profitable cost controls is even greater in the current economic environment. Many of the customers who KBS support are in commodity based businesses where leveraging fixed costs and operating as a low cost provider is a critical and competitive advantage.
SSON: What pain points were you trying to resolve which prompted you to seek an IT Financial Management Solution (ITFM) solution?
DF: The KBS billing and catalog systems could not be expanded to address the substantial growth in our company’s shared service offerings. Our market-based philosophy includes providing pricing information at a very detailed level so as to provide our customer base with the information needed to make informed buying decisions. Therefore, we have a very detailed service catalog which translates into large volumes of billing lines each month that required us to identify and implement a more robust FM solution. In addition to solving the billing volume issue, a major goal was to improve our financial analysis and forecasting capabilities.
SSON: Describe your existing Shared Services environment. What are the main ITFM challenges you have in managing such a complicated environment?
DF: KBS is a shared services company supporting the Koch Industries family of companies and our customers choose to outsource to KBS as their service provider – utilizing KBS is not mandated and customers have the option to provide services for themselves or outsource to others.
Our customer base also consists of many separate operating units within the Koch Industries family of companies, many of which are from very different industries. Each customer has its own, often unique, set of needs and goals. Therefore, the KBS service owners to which the KBS finance function supports also have many differing billing and financial support needs. Maintaining simplicity and standardization while still meeting our customer’s expectations is therefore a challenge.
SSON: Can you share three goals that you have in your organization over the next five years?
DF: Our goals are to:
- Improve our forecasting capability to better anticipate our customer demand
- Automate and simplify FM transactional processing
- Increase our financial analysis capability and business support with the redeployed headcount, which looks likely to result from our reduced transactional processing needs
SSON: What sort of ROI have you experienced since installing Digital Fuel
DF: Rather than ROI, we evaluate the success of projects based on the marginal Net Present Value vs. the Optimized Base Case. Our projected NPV results are positive and Digital Fuels has been successful in meeting our daily operational needs. We are still working with Digital Fuel to implement one of our major objectives which is to forecast and perform more robust "what if" projections.
SSON: How did you go about building a business case to implement this solution? Was it difficult to get buy in from the major stakeholders?
DF: As with any financial system, identifying hard dollar savings is difficult. To build a business case, we followed the same decision making framework we utilize on any investment and evaluated the Net Present Value opportunity on a marginal basis. To do this we developed our optimized base case. In our optimized based case, we did not assume status quo because we expect continuous improvement, therefore we modeled a continuation of our historical efficiency gains as well as the projected volume changes. This established our case to which all of our alternatives would be measured against.
SSON: How do you measure your results - do you have set metrics and how often are they likely to change?
DF: As mentioned earlier, we bill our services at market and our results are measured through our P&L. In other words, if our cost to provide a service is lower than the market price for that service, we will show a profit. We also measure profitability by service area and therefore understand where our costs are not competitive with the market. This provides us with an incentive to understand why we are not competitive and then react by either lowering our costs or evaluating other alternatives.
SSON: All organizations are in pursuit of 'value' to do things more effectively and efficiently - how do you think KBS is adding value?
DF: This of course is an ongoing process. We have made substantial positive strides through a combination of the following:
- Ensuring the right employee talent
- Ensuring an understanding and focus on our company’s 10 MBM Guiding Principles which include Value Creation, Principled Entrepreneurship and Customer Focus
- Addressing issues through a sound process improvement
For more information:
Koch Business Solutions, LP (KBS)
Koch Business Solutions, LP (KBS) is a shared services company that provides critical consulting and transactional services to the Koch Industries family of companies in the areas of HR, IT and Finance. The organization's vision challenges us to understand what creates value for customers and to maximize value by:
• Aggregating purchasing power to reduce costs
• Maximizing economies of scale to drive efficiencies
• Developing and applying specialized knowledge
Based in Wichita, Kan., Koch Industries, Inc. is one of the largest private companies in America according to Forbes magazine, with a presence in nearly 60 countries and about 70,000 employees. The company is involved in refining and chemicals; process and pollution control equipment and technologies; minerals; fertilizers; polymers and fibers; commodity trading and services; and forest and consumer products. Familiar Koch companies’ brands include STAINMASTER® carpet, LYCRA® fiber, Quilted Northern® tissue and the Dixie® brand of tabletop products.