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Fall 2014 Deloitte Consulting Project
December 5th, 2014
2
Team Leaders
Neil Jones
Class of 2017
IT Management
Entrepreneurship
Raina Kim
Class of 2016
Finance
Chinese
SIBC
3
Founded by Father
Hesburgh & Frank
Potenziani with the
vision “Peace Through
Commerce”
Officially known as the
Student International
Business Council at the
University of Notre
Dame
The largest student run
organization
500+ members
30+ client companies
10+ international
internships
1989 2000 2014
4
Agenda
1. Defining the Situation
2. Team A Solutions
3. Team B Solutions
Situation: Two merging oil and gas firms
are operating on different ERP systems
5
Location
Canada, US, Eastern Europe, North Africa
Annual Revenue
$13 Billion
Total Employees
12,000
Location
Canada
Annual Revenue
$9 Billion
Total Employees
7,000
Industry overall
Oil and gas industry is capital intensive
• Imperative to control operational costs, given high costs of exploration
Unscheduled downtime will hinder growth
• High exploration costs must be offset by continuous production
Must stay focused on gaining competitive advantage
• Minimizing change impacts from ERP integration will keep Atlas’ competitive edge
7
Deloitte Project Goals
Develop and implement a consolidated ERP system
across the new company, post merger
Minimize change impacts on
employees and day-to-day operations
Enhance business
continuity across the
merger
Team A
8
Lucrecia Siman
Class of 2017
Management Consulting
Political Science
Kyle McHugh
Class of 2017
Finance
Economics
Monica Barboza
Class of 2017
Management Consulting
Portuguese
Team A
9
Tiphaine Delepine
Class of 2017
Finance
Elizabeth Principe
Class of 2017
Finance
Applied Math
Lake Heckaman
Class of 2017
Finance
Mathematics
Presentation Outline
Solution
Implementation
Benefits
Conclusion
Solving Atlas’s ERP issues will position
Atlas for future success
Atlas Energy
(Oracle)
Alberta Oil
(SAP)
Oursolution
Deloitte’sTask
Standardize business processes
Enhance business continuity
Minimize change impacts
Increase operational efficiencies
Retain top talent
Cut costs
Employees : 7,000
Annual revenue : $9 billion
Region: Canada
Alberta Oil
Employees : 12,000
Annual revenue : $13 billion
Region: Canada, US Eastern
Europe and North Africa
Atlas Energy Inc
What is an ERP system?
ERP
Business process management
software
Enterprise
Resource
Planning
Automation and integration of
data
Improves effectiveness
and productivity
ERP modules include: HR, financials, supply chain,
manufacturing, among others
13
Potential Solutions
Translate Alberta to Oracle
Translate Atlas to SAP
Alternative Option
ERP Deployment Options
Multiple sites or geographic locations
Single Tier becomes too large and costly to customize, maintain and upgrade
Increasing number of M&A’s entering or leaving the organization
Two-Tier
Drivers
What is a two-tier ERP system?
Two-tier ERP
Corporate level ERP system acting as global standard
Other subsidiary level ERP systems for divisions
1
2
27%32%
48%
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011
Companies considering a two-tier strategy
Trend towards two-tier ERP
According to Constellation Research, the amount of buyers considering two-tier ERP strategies is increasing consistently
Two-tier ERP strategies have been gaining popularity since the 2008 recession
Ventana Research found that 2/3 of companies with over 1000 employees use ERP systems from more than one vendor
Our solution: a two-tier ERP
Maintain Tier 1 ERP system at corporate level and continue operating multiple Tier 2
ERPs at the secondary level. This simplifies future acquisitions and sales of divisions.
Oracle Hyperion Financial Management
Atlas Energy (Updated Oracle)
Alberta (SAP)
Future Acquisitions
Future Acquisitions
External
reporting
Senior Management
reporting
18
Many companies have already
successfully adopted two-tier strategies
Support for big and small business units
•Solved a $2B problem –domestic and foreign subdivisions were in need of ERP
•Lower TCO, under $100,000/year to operate
Rapid global expansion efforts
•140 locations worldwide running on different software systems
•Streamlined management
•Support for future expansion
Fast growing company
•$670 million between 2009 & 2010
•Two-tier ERP went live in 6 months
•Plans for 26 international markets in 3 months
Establish Oracle Hyperion Financial Management System
Update Oracle base system in Atlas
Map data from SAP to Oracle
How we will implement our solution
20
Use comprehensive suite to merge
Oracle and SAP repositories
Oracle Hyperion Financial
Management Close Suite
Data Relationship Management
Administration tool
Patches
Hyperion Disclosure
Management
xBRL
“Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers.”
Charles PhillipsOracle President
0%
5%
10%
15%
20%
25%
30%
35%
40%
% E
RP
USE
RS E
XP
ER
IEN
CIN
G S
AV
ING
S
SAVINGS AMOUNT
SAVINGS FROM CLOUD USAGE
0-20% 21-40% 41-60% 61-80% Over 80%
21
Use cloud storage and computing to
handle big data
Lower ownership
cost
Higher return
Total cost savings
22
Benefits of a two-tiered solution
Minimal Disruption
Human Resources
Lower overall costs
Mergers & Acquisitions
Trends in Global
Economy
23
Two-tier helps maintain culture and
retain top talent
Maintain unique culture of companies
Retain Atlas’ top talent
Take care of local issues
Two-tier increases efficiency and savings
Minimal Disruption
Training only for high-level
management
Business operations continue and
improve
Cost Savings
Massive reduction in training costs
Lower purchase price
No lost revenue
Our solution will streamline future M&A
activities
Lower cost
Shorter time
Ease of acquisition
33% reduction in implementation costs
50% decrease in full implementation time
Large-scale ERP systems cannot keep pace with
a changing environment
26
Global economic trends will yield
increasing revenue streams for Atlas
Canadian Dollar
Weakens
Canadian exports seem
cheaper
Foreign Countries
Import Canadian Oil
0
5
10
15
Barrels per day (millions)
Oil imports by countryUnited States
China
Japan
Germany
Netherlands
Canada
Atlas will capitalize on this market growth by not halting
business operations
27
Potential drawbacks of a two tier system
Complexity
Operating systems from
different manufacturers
Upkeep
Both systems will need periodic updates
Industry Precedent
First to deal with potential
issues
Two-tiered solution addresses concerns
• Implementing a two-tier ERP system is less costly than converting all divisions to a single system
•The unique culture of each division is not compromised and local issues are easily resolved
•Standardizing top management while divisions remain separate facilitates future M&As
•Low-level operations are not interrupted while high-level management is in training
Disruptions are
avoided
M&A is prevalent in the oil industry
Costs are minimized
HR remains division-specific
A two-tier ERP system creates standardization that promotes growth while
facilitating interaction between divisions.
Recap
Enhance
business
continuity
Increase
operational
efficiencies
Minimize
cost
Minimize
change
impacts
Retain top
talent
QUESTIONS?
TEAM A APPENDIX
32Source: Stikeman Elliott 2014 Energy M&A Trends in Canada
Canadian M&A Energy Trends
Resistance to proposed pipeline projects will continue
Increase in consolidation and M&A of smaller companies expected to continue in 2014
Low natural gas prices and oversupply have led many industry leaders to sell assets
33Source: IBIS
Energy Trends – Industry Overlook
To 2019, industry revenue of global oil and gas is forecast to grow at an annualized rate of 4.3% to $5.6 trillion
A steady increase in price of energy production is expected, as the world economy recovers from recession
Industry employment is projected to increase over next 5 years, a sign of positive growth
34Bp.com
Africa is the next big thing in natural
gas
0%
20%
40%
60%
80%
100%
120%
140%
160%
2012 2015 2020 2025 2030 2035
Natural Gas Production Projection
North America Europe & Eurasia Africa
Drawbacks
• Lack of infrastructure and stability
Highlights
• Africa shows over 140% growth by 2035
Conclusion
• If infrastructure can be secured, investment recommended
Share of Total Oil Consumption and
production (2013)
Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-
report.pdf
25%
7%
21%9%4%
34%
ConsumptionNorthAmerica
South &CentralAmericaEurope &Eurasia
Middle East
Africa
19%
9%
20%32%
10%
10%
Production
36Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-
report.pdf
Oil Change 2013 over 2012
NorthAmerica
South &CentralAmerica
Europe&
Eurasia
MiddleEast
AfricaAsia
PacificWORLD
Production 8.70% 0.20% 0.20% -0.70% -5.70% -1.70% 0.60%
Consumption 1.30% 4.40% -0.40% 2.20% 3.20% 1.50% 1.40%
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
Perc
enta
ge
37http://www.srr.com/article/trends-and-challenges-oil-and-gas-industry
Oil and Gas Industry New Technologies
Focus on
developing
technological
solutions,
increasing
the world’s
producible
reserves.
Development of the Subsea Oilfields
Moving processing to the ocean floor reduces infrastructure costs and production costs, greatly improving return on investment.
The Shale Play
Exploitation of shale basins using hydraulic fracturing and horizontal drilling techniques has increased U.S. crude output.
Enhanced Oil Recovery
Boosting oil recovery could unlock around 300 billion barrels of oil, reducing the risk and the infrastructure cost.
38
Comparing Oracle and SAP ERP systems
Oracle
•Low market share
•Need more through vetting
SAP
•Customization cumbersome
•High personnel requirement
90% of users realize ROI in 5 years
Software is trending towards cloud and big data
Projects have a larger scope and scale
Moving toward increased IT capabilities
39Source: http://www.eia.gov/todayinenergy/detail.cfm?id=15251
Need for Minimal Disruption
With low volatility, North American oil is primed for high sales, meaning minimal disruption is a must
Atlas Net daily production of 261.3 million equivalents per day (6% increase over 2014 Q1)
33% Increase in Q2 to 2,100 barrels per day
20% increase in production capacity
Alberta Strong economic growth with an expected trend of 3% growth
Massive spending on oil sands projects is now translating into sharply higher production and exports
With more takeaway capacity (given by Atlas) Alberta can raise prices and turn a higher profit margin
40
Two-Tier Systems Lower Costs and
Implementation Time
Average Tier 1 Oracle
Implementation
Time frame: 22.5 mos
Cost: $2.25 M
50% of users reported
operational disruption
Disruption lasted 3 months
Average 2 Tier Implementation
50% decrease in time frame
33% reduction in cost
Team B
41
Lauren Janek
Class of 2017
Finance
Cynthia Qu
Class of 2017
Economics
Liberal Studies
Kevin Schmitt
Class of 2017
Accounting
Theology
Team B
42
Taryn Stamper
Class of 2017
Finance
Applied Math
Paulina Eberts
Class of 2017
Chemical Engineering
Niki Dirksen
Class of 2017
Marketing
43
Atlas and Alberta Oil will become
united through an ERP implementation
Atlas Energy Inc.-ERP System: Oracle
-Employees: 12,000
-Annual Revenue: $13 Billion
-Regions: Canada, US, Eastern Europe, and North Africa
Alberta Oil-ERP System: SAP
-Employees: 7,000
-Annual Revenue: $9 Billion
-Regions: Canada
44
Oracle ERP will unify Alberta and Atlas
and lead to future success
ERP consolidation for Atlas Energy Inc. and Alberta Oil
Analysis of top ERP competitors
Oracle
Comparison of implementation
strategies
Rapid bottom-up approach
Effects of ERP in the merger
Minimize disruptions, maximize efficiency
Future market expansion
Africa, natural gas
45
ERP System
ERP Implementation
Strategy
Factors of an Effective
Implementation
Future Success
46
Enterprise Resource Planning promotes
business synergy
Mobile Cloud Big Data
ERP
Improved Data Flow
- Creates improved supply and demand management
- Produces real time insight for financials
Increased Efficiency
- Helps in planning and optimizing business operations
- Captures customer information efficiently
Internal Company Relations
- Allows for complete employee database
- Structures levels of management and employee expectations
Integration
- Connects all aspects of business in a centralized source
- Creates streamlined business model and processes
47
Oracle and SAP offer the greatest resources
for expanding Atlas Energy over competitors
Microsoft Dynamics • Lowest market share of all three
• Mostly used in small and mid-sized
companies
• Less complex ERP system
11%
32%
26%
17%
14%
Vendor Market Share in 2013
Microsoft Dynamics
Tier III and others
SAP
Oracle
Tier II
Oracle and SAP’s proven track records lead to more potential
opportunities for the newly merged company
Tier II and Tier III• Provide solutions for small to medium
companies
• Few locations, simple location structures
• Less customization options
48
Oracle and SAP are the most logical ERP
solutions
ERP System Strengths Weaknesses
• 17% of market share
• Research and development
capabilities
• Highest success rate at 71%
• Oracle implementations
take approximately 4
months longer
• Slow in adapting cloud
services
• 26% market share
• Strong customer support
• Highest short list-rate at
51%
• High licensing costs
• SAP has a 13% difference
between planned and
actual costs
• Implementations have 69%
material operation
disruptions
49
Oracle allows for the most efficient
merger between Atlas and Alberta
Company Size
Smaller implementation needed due to Atlas’s larger presence
Location
Alberta’s location allows for reduced training and implementation costs
International Market
Atlas’s international activity will not be affected during
implementation
Costs
Oracle has a smaller differential between planned and actual costs
by 9%
50
Oracle’s implementation led to many
benefits for Southwestern Energy
“ With Deloitte Consulting’s
implementations and Oracle’s
consolidated financial platforms,
SWN can now scale to new ventures
domestically and internationally.”
-CRAIG OWEN, Chief Financial Officer
20% reduction in totalcosts
50% increase inbottom-line benefitover the next five
years
One of the lowestoperational cost
companies in Oil andGas industry within US
51
An effective ERP implementation can
minimize Oracle’s drawbacks
Length of Implementation
Overall CostsFuture Cloud Implications
52
ERP System
ERP Implementation
Strategy
Factors of an Effective
Implementation
Future Success
53
Phased Roll-out and Big Bang are two
common ERP implementation strategies
Phased Roll-out
Pros:
•Less risk
•Skills and experiences aregained with each phasewhich can help smooth theprocess
Cons:
•Taker longer to be fullyconverted•Not as focused as Big Bang
Big Bang
Pros:
•Shorter implementationtime
•Lower costs
Cons:
•High risk
•Failure in one part of thesystem may cause problemsin other
A rapid bottom-up approach leads to
success in the oil and gas industry
“Integrate then transform” vs.
“transform then integrate”
Necessity of rapid
implementation
Top down vs Bottom up
“The ‘integrate, then transform’
strategy…facilitates the process
of creating a single, high
functioning, and
communicative
organization.”
“The business
of actually
creating a single
corporate culture…
depends largely on
Implementing measures
Which prompt participants at all
levels and throughout every business
unit to begin working off the same page”
55
Rapid bottom-up implementation of
Oracle leads to efficient standardization
3. Allow for integrating business processes to increase operational
efficiency
2. Reduce culture clash and create company unity in order to retain top talent
1. Remove overlapping divisions and increase communication in order to cut costs
56
ERP System
ERP Implementation
Strategy
Factors of an Effective
Implementation
Future Success
57
Different sub-divisions have varying
definitions of implementation success
•ERP system is successful when the company achieves business improvements and other predetermined goals
Executive Leadership
•ERP system is successful when the project is implemented within budget and on time
Project Managers
•ERP system is successful if there are smooth operations within the system
Users
An ERP implementation is successful for all parties when there is top
management level support, ERP training and education, Enterprise-
wide communication.
58
Efficient communication is necessary in
carrying out the implementation
Communicate:
Technical team and
subject matter experts
Top management
Project Managers
Training Staff
• Scope
• Objectives
• Timeline
• Budget
59
Proper ERP implementation correlates
with merger success
Hardware and Software Installation
Programming
User Training
Documentation
Communication
60
ERP System
ERP Implementation
Strategy
Factors of an Effective
Implementation
Future Success
61
Canada’s increasing oil production will
positively affect newly united Atlas
2012 2015 2020 2025 2030 2035
North America 0% 16% 30% 33% 35% 37%
Europe & Eurasia 0% 0% -2% -4% -6% -5%
Africa 0% -3% 5% 4% 3% 4%
-10%
0%
10%
20%
30%
40%
Oil Production Projection
North America Europe & Eurasia Africa
By 2019, industry revenue of global oil and gas is forecast to grow at an annualized rate of 4.3% to $5.6 trillion
Canadian Oil Production expected to increase by 37% by 2035
62
Successful ERP integration will lead to
future market success
Natural Gas Production in Africa predicted to increase by 140%
Integration of ERPs will increase company’s revenue in increasing markets
0%
20%
40%
60%
80%
100%
120%
140%
160%
2012 2015 2020 2025 2030 2035
Natural Gas Production Projection
North America Europe & Eurasia Africa
63
Unified Atlas Energy Inc. under Oracle
leads to merger and market success
ERP consolidation for Atlas Energy Inc. and Alberta Oil
Analysis of top ERP competitors
Oracle
Comparison of implementation
strategies
Rapid bottom-up approach
Effects of ERP in the merger
Minimize disruptions, maximize efficiency
Future market expansion
Africa, natural gas
QUESTIONS?
TEAM B APPENDIX
66
2014 SAP vs Oracle Data
CLASH OF THE TITANS 2014
An Independent Comparison of SAP,
Oracle and Microsoft Dynamics
67
Implementation Focus
• Increase operational efficiencyManufacturing
• Implement cost-cutting solutionsFinances
• Retain top talent and unify the company
Internal Organization
68
Oracle’s effect on Manufacturing
Oracle Production Scheduling
Maximize Shop Floor Throughout
Maximize Utilization of
Critical Resources
Maximize Inventory Turnover
Minimize Inventory
Minimize Unnecessary Time Usage
Oracle Production Scheduling
Increase in Productivity
Optimization
69
Oracle’s effect on Finances
Simplify
Extensivespreadsheetintegration
across financefunctions
Control
Imagingintegration for
supplierinvoices
Accelerate
Innovativeembedded
multi-dimensional
reportingplatform
Collaborate
Simultaneousaccounting of
multiplereporting
requirements
70
Oracle’s financial applications cut
down costs
•Oracle allows companyto grow withoutworrying about findingskilled IT staff
•Oracle’s advancedfinancial applicationsstreamline operationsand optimize supplyand distribution
•Oracle’ s financial cloudturns data received into information morequickly
•Oracle’s centralizedaccounting engine canprovide real-timeaccounting results forvery large data volumes.
Lower operational
costs infinancial
consolidations
Reducewasted
resources onunpromising
projects
Diminish ITcosts
Decreasecosts in supply
anddistribution