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Introduction to Strategic Modeling in Oracle Enterprise Planning Cloud (EPBCS)
Posted on March 26, 2019
Author: Jun Zhang, Performance Architects

Strategic Modeling has been available as one of the Oracle Enterprise Planning Cloud (EPBCS) frameworks since June 2017. This solution focuses on long-term strategic planning, and provides financial statement analysis for the balance sheet, cash flow, and income statements, along with built-in scenario analysis.

The History of the Strategic Modeling Framework in the Oracle EPM (Hyperion) Solution Suite

Strategic Modeling was initially released as an on-premises software product called “Alcars Financial Modeling” by The Alcar Group, a financial modeling company founded in 1978. The product was designed by two professors, Alfred Rappaport and Carl Noble Jr., from Northwestern University’s Kellogg School of Management. The Alcar Group was acquired by Hyperion Solutions Corporation in April 2003, and the product was rebranded as Hyperion Strategic Finance (HSF).

Hyperion Solutions Corporation was acquired by Oracle in March 2007.  Oracle rebranded the Hyperion enterprise performance management (EPM) products to Oracle EPM shortly thereafter, and started to move these capabilities to software-as-a-service (SaaS) cloud-based solutions in 2014 with the advent of Oracle Planning and Budgeting Cloud Service (PBCS). Strategic Modeling was introduced in Oracle’s EPM Cloud offerings in June 2017.

Strategic Modeling Capabilities Overview

Strategic Modeling offers a long-term and strategically-focused forecasting solution that creates comprehensive financial statements with out-of-the-box treasury, scenario analysis, debt modeling, and robust consolidation capabilities. The solution allows us to quickly understand the major impact of strategic decisions on future financial scenarios, which is valuable for several constituencies, including the C-suite, investors, and higher-level people who analyze an organization’s performance.

From a tactical perspective, this solution offers built-in accounting integrity, which means you cannot make changes to the income statement without impacting cash flow. As I mentioned earlier, when you create a model, the solution establishes three financial statements that are connected according to accounting rules: balance sheet, cash flow, and income statements. You are then are able to model out complete financials for your planning scenario for up to 100 years:

Strategic Modeling Key Features

Strategic Modeling provides the following key features:

  • A built-in hierarchical chart of accounts (COA)
  • Consolidations
  • Forecast modeling
  • Goal setting
  • “What-if” analysis
  • Integration with other EPBCS frameworks, such as Workforce, Capital, and Project Financial Planning

Strategic Modeling Framework versus Oracle EPM (Hyperion) Planning or PBCS Functionality

One of the questions that we are asked a lot is, “What are the differences between Oracle Hyperion Planning or Planning and Budgeting Cloud Service (PBCS) and Strategic Modeling? If we have Hyperion Planning or PBCS already, do we still need Strategic Modeling?”  The simple answer is that Oracle Hyperion Planning or PBCS and the Strategic Modeling framework should be used for two different types of analysis.

For example, Oracle Hyperion Planning or PBCS should be used to:

  • Project revenue and expenses for the next month, quarter, or year (in other words, to provide a shorter-term budget and forecast)
  • Track cost of goods sold (COGS), earnings before income, tax, depreciation and amortization (EBITDA), etc.
  • Track workforce and/or position planning (salaries and benefits department or group)

The Strategic Modeling framework should be used to perform these kinds of representative tasks:

  • Model treasury strategies
  • Track dividends and/or debt payoffs
  • Analyze the impact of buying a competitor or divesting of a division
  • Explain the organization’s worth

Generally speaking, Strategic Modeling and Planning address different scenarios for the needs of different audiences:

 Strategic Modeling in Excel

Strategic Modeling offers an Excel add-in which can be downloaded from EPBCS as part of the SaaS subscription here:

This download creates a new tab in the Oracle Smart View for Office panel. After adding this ribbon menu, you can use the Strategic Modeling capabilities in Excel. Currently, functions like time, funding, and creating freestyle reports, etc. are available in Smart View only:

Summary and Next Steps

In summary, Strategic Modeling is a great solution for the C-suite and Corporate Finance to make long-range planning and strategic decisions using built-in financial statements and scenario analysis which are tightly integrated with the rest of the Oracle EPM cloud solutions, offering an automated process to “seed” your strategic assumptions into your shorter-term (more operational and tactical) budgeting and forecasting processes.

Still have questions?  Email us here if you are interested in learning more.

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