Omnicom Group masters its money with business analytics

Treasury team delivers wealth of insight

Published on 24-Apr-2012

Validated on 07 Oct 2013

"We used to aggregate leasing data quarterly, but until we got IBM Cognos Business Intelligence we couldn’t do it efficiently. The beauty of our new system is that it manages documents and data together, which lets us focus on business issues instead of time-consuming manual processes." - Eric Huttner, Assistant Treasurer

Customer:
Omnicom Group Inc.

Industry:
Media & Entertainment

Deployment country:
United States

Solution:
BA - Business Analytics, BA - Business Intelligence, BA - Risk Analytics, Optimizing IT

IBM Business Partner:
Genware Computer Systems, Inc.

Overview

The Treasury organization has steadily transitioned from regional, siloed, paper- or spreadsheet-based processes in favor of sophisticated global, enterprise-level information solutions that demonstrate a high “analytics quotient” or AQ. This has led to greater efficiency and quantifiable improvements in business outcomes.

Business need:
The Omnicom Group Inc. is a leading global marketing and communications services company with over 1,500 agencies serving more than 5,000 clients. Due to the company’s decentralized structure, its Treasury function faces challenges in the areas of cash management, risk management, asset control and banking.

Solution:
The Omnicom Group Treasury organization met these challenges with a series of applications using IBM Cognos Business Intelligence and IBM Cognos Planning, often in combination with other products or solutions, implemented in a joint team effort with IBM Business Partner Genware Computer Systems. A key success factor in these initiatives was the IBM Cognos software’s ability to readily access and integrate various databases and third-party applications and to be deployed quickly and repeatedly.

Results:
• Savings of more than $1 million per year in banking fees and an approximately $200 million reduction in the company’s debt requirements • Annual reduction of $75 million or more in leasing operations and a reduction in leasing costs as a share of revenue from 2.14 percent to 0.57 percent • Immediate $200 million increase in cash flow, due to reduced receivables aged more than 60 days

Benefits:
The benefits of the business analytics applications developed by the Treasury operation within the Omnicom Group include: • Greater confidence for senior managers in making borrowing and investing decisions • Bad debt expense level kept constant during 2009, at the depth of the global recession • Faster approvals for capital expenditures, including leasing • Greater job satisfaction and better use of staff skills

Case Study

Many of the engaging ads you see every day were likely created by one of the agencies that make up the Omnicom Group, which also manages agencies in the fields of public relations, media buying, direct marketing and customer relationship management. Its agencies, which include global leaders such as BBDO, DDB and TBWA, regularly receive top awards and other recognition from their peers in the industry.

Formed in 1986, the Omnicom Group in 2011 had revenues of over $13.7 billion. Omnicom has grown organically and through acquisition, using a strategy that allows agencies to operate independently so they can continue to serve the unique needs of their clients. The company has a centralized infrastructure, including the diverse and complex functions that make up Treasury.

Omnicom is well regarded in the global investment community for its sound financial practices and strong financial disciplines. Its Treasury organization manages Omnicom’s global liquidity and capital requirements, investing and borrowing activities, working capital, capital expenditures, and banking relationships.

"Our Treasury systems are guided by three principles," states Omnicom Treasurer Dennis Hewitt. "Standardization, globalization and straight through processing. Data is standardized and there is no re-keying." These principles enable his organization to continually improve processes to achieve greater efficiency and control over Omnicom Group’s complex, global financial requirements.

The Treasury organization has steadily transitioned from regional, siloed, paper- or spreadsheet-based processes in favor of sophisticated global, enterprise-level information solutions that demonstrate a high “analytics quotient” or AQ. This has led to greater efficiency and quantifiable improvements in business outcomes.

Analytics brings greater visibility and control
Omnicom’s Treasury operation consists of regional Treasury centers, each with special areas of responsibility, located in Greenwich, Connecticut; Dublin, Ireland; and London, UK. All Treasury centers are fully integrated and use the same underlying business analytics information technologies.

"Having a consistent platform for business analytics means a shorter learning curve when developing and delivering information to support Omnicom’s business," explains Treasury’s Director of Information Technology Tracy Held. It also allows the team to increase its level of expertise and efficiency with each deployment.

Held has provided IT support for Treasury since 1995 and has overseen numerous projects to advance the Treasury vision, including one that Treasury Today recognized in 2011 with its Adam Smith award for Best Practice and Innovation in Global Liquidity Management and gtnews the same year honored with the Global Corporate Treasury Award for Treasury Technology Implementation Project of the Year.

Daily cash monitoring and analysis
Like many large, global companies, the Omnicom Group continually moves cash between different parts of the organization in the form of internal transfers. While a variety of methods were used to track these internal balances, the company lacked an efficient system for obtaining a comprehensive view of internal balances. In 2005, the Omnicom Treasury team upgraded and unified the previously disparate systems.

    What is an “analytics quotient”?
    An organization’s “analytics quotient,” or AQ, measures its readiness, ability and capacity to locate and apply insight, and thus re-orient itself to make decisions that deliver better outcomes.

    AQ also measures an organization’s ability to act based on its understanding of historical data and its capacity for anticipating likely outcomes to optimize recommendations and judiciously automate decisions. IBM considers organizations and individuals that use analytics to drive their business as having a high AQ.

    Studies show that the more organizations infuse analytics into their business, the higher their AQ. And the better their organizations will perform. Learn more at ibm.com/analytics/aq.


The internal cash management system uses IBM Cognos® Business Intelligence on top of a custom-built datamart into which each Omnicom Treasury center feeds its account balances. This system enables Treasury to balance Omnicom’s internal accounts daily – and, as a result, manage the organization’s borrowing and investing with greater confidence and precision. Individual agencies can see, on demand, reports and graphs showing their internal cash balances. This helps them manage their profitability more easily and effectively.

The Treasury team built on the success of their internal cash management system in tightening its process for managing external bank balances.


"We knew exactly what we wanted to achieve with our internal cash management system. Because the IBM Cognos Business Intelligence software was extremely adaptable, the implementation only took about three months."
    – Tracy Held, IT Director, Omnicom Treasury

Managing external cash balances
Due to the nature of their business, Omnicom agencies manage hundreds of millions in cash, much of it in the form of payments that have been received from clients for media purchases. Since these funds are passed through to vendors such as broadcast or other media companies, keeping account balances secure is a top priority for the firm.

Omnicom’s decentralized structure is a core business strength but creates cash and risk management challenges for the Treasury team. The company had efficient cash structures in place but lacked consistent visibility and control over accounts and cash outside the Treasury centers.

To address this issue, Conor Leyden and the Dublin Treasury team took the lead in developing Omnicom’s Global Cash Control System (GCCS), working with consultants from IBM Business Partner Genware Computer Systems, Inc. The system combines a central database of all bank accounts worldwide with a daily feed of balance information. It also contains online workflow to control bank account openings and closures, as well as analytical management reporting enabled by IBM Cognos Business Intelligence.

GCCS has proved to be a major success and is so innovative that it won the prestigious industry awards mentioned earlier. With this system in place, Treasury now has full daily visibility over every account and balance worldwide. Among other benefits, Treasury has closed 600 bank accounts and reduced the number of banks by more than 50 over the past year, saving over $1 million annually in bank fees. Cash outside the Treasury centers has been reduced by over $50 million, and counter-party risk has been reduced as well.

"A critical benefit is that we can manage and move funds so as to protect our principal," Omnicom’s Assistant Treasurer Maeve Robinson points out. For example, early in 2010, when Greece experienced a credit crisis, millions in Omnicom funds were moved to safer havens within 48 hours.

Assessing risk in working capital
Another highly effective Omnicom Treasury application is one that supports more precise management of the organization’s working capital. It uses IBM Cognos Business Intelligence software to generate detailed reports on accounts receivable for each of Omnicom’s more than 1,500 agencies. Managers examine these reports every week, looking for potential risks. Implemented during 2009, at a time of great economic strain, the solution improved Omnicom’s cash flow by $200 million by reducing receivables aging while holding the company’s bad debt expense at pre-recession levels.

This system interfaces with a credit assessment tool that lets managers compare accounts receivable data with qualitative data showing how much credit Omnicom has agreed to extend to each client. This component of the system protects the organization’s bottom line by guarding against unexpected losses due to clients’ business risks.

"Our external cash management solution is a real game-changer for Treasury.”"
    – Connor Leyden, Managing Partner, Dublin


Managing capital expenditures: the digital advantage
Yet another innovative application that Omnicom Treasury developed, in conjunction with Omnicom’s Internal Controls Group, is one designed to give senior management and board members greater insight into the company’s capital expenditures (or CapEx) budget.

The challenges that Treasury faced included the complexity of the Omnicom organizational structure and the large volumes of data involved. The new CapEx management solution uses IBM Cognos Business Intelligence to aggregate information from formerly separate US and European databases so that managers can compare budgeted to actual expenses by agency, by “networks” of agencies, by country and by region. The solution, implemented in a joint team effort with consultants from Genware Computer Systems, includes calculations to ensure accuracy and rigorous security so that managers see only the information that pertains to their areas of authority.

In addition to improving the company’s ability to analyze and allocate capital expenditures, this initiative also streamlined the approval process for capital requests. This results in faster, more efficient deployment of critical assets, allowing the agencies to focus on their expertise in serving clients.

Centralized leasing
Each year, leasing comprises close to one-third of the Omnicom capital budget. From 2001 to 2010, Omnicom revenues grew from $6.9 billion to $12.5 billion, but lease
expense declined by $75 million and, as a percent of revenue, dropped from 2.14 percent to 0.57 percent. Lease management is a global issue; as a result, representatives from IT and from all Treasury centers were involved in a key Treasury initiative led by Assistant Treasurer Eric Huttner.

Working with Genware Computer Systems, Omnicom Treasury devised a holistic solution focused on saving costs and improving the effectiveness of the process.

The number of leased equipment providers was reduced from about 350 to 15 "preferred partners." This helped Omnicom obtain the most cost-effective lease financing by leveraging the company’s investment-grade credit rating and made it easier to manage vendor relationships. To support this process, the Treasury team implemented a new paperless system globally that provides secure, straight-through processing of lease agreements.

Now, everything flows through a portal: agencies request equipment, leasing partners submit their proposals and then Treasury staff members process the approvals and notify both the requesting agency and the leasing partner. Local agencies can easily obtain and analyze the financial and asset management information they need to meet local compliance and financial reporting requirements, thanks to the reporting component built on Omnicom Treasury’s IBM Cognos Business Intelligence platform. Huttner checks a dashboard daily showing the status of global leasing activities, which gives him insight into problem areas – or opportunities.

A culture of "solution finders"
The Omnicom Treasury team typifies a world-class “learning organization” that builds on the experience gained in each project. This puts the organization among the leaders with respect to its "analytics quotient."

"We used to aggregate leasing data quarterly, but until we got IBM Cognos Business Intelligence we couldn’t do it efficiently. The beauty of our new system is that it manages documents and data together, which lets us focus on business issues instead of time-consuming manual processes."
    – Eric Huttner, Assistant Treasurer

A key success factor has been working with the team at Genware Computer Systems who understand both the technical capabilities of IBM Cognos software and the
business needs of the Omnicom Group.

"Working collaboratively with our Omnicom clients and building upon previous experience is a very efficient way to get good results across the entire operation," says Sherlock Holmes, president of Genware Computer Systems.

In the past two years, Genware Computer Systems has supported nine Omnicom Treasury projects and more than fifty implementations across the Omnicom Group. Additional Treasury projects are already under way.

Financial Manager Karen McClure leads a project that will enable her team to provide rolling forecasts monthly to senior management. It will also allow rapid assimilation of new Omnicom acquisitions. IBM Cognos Planning is a key capability for this project and, even before full deployment, management has been able to make more insightful adjustments to its investment strategy, according to McClure.

Making the most of IBM Cognos software
Having a consistent platform on which to build business analytics applications has been another key factor in driving better outcomes with these initiatives.

As the IT Director supporting Treasury, Tracy Held had worked with other software applications but found IBM Cognos Business Intelligence and IBM Cognos Planning to be best suited to meeting her internal clients’ needs.

"The fact that IBM Cognos software can easily integrate with other software and systems is absolutely critical to our successfully rolling out one application after another," she says. "And because users can generate their own reports, my team can focus on projects that really add value to Omnicom."

Held sees next steps in Treasury’s journey toward mastery in business analytics as involving greater use of IBM Cognos Business Intelligence mobile reporting and the implementation of more advanced types of reports. “We’ll never stop trying new things that can enhance the value Treasury brings to Omnicom.”

About Omnicom Group, Inc.
Omnicom Group Inc. (NYSE-OMC) (www.omnicomgroup. com) is a leading global marketing and corporate communications company. Omnicom’s branded networks and numerous specialty firms provide advertising, strategic media planning and buying, digital and interactive marketing, direct and promotional marketing, public relations and other specialty communications services to over 5,000 clients in more than 100 countries.

About Genware Computer Systems, Inc.
Genware Computer Systems, Inc., headquartered in Wayne, New Jersey, is a consulting firm specializing in Business Intelligence and Performance Management solutions. The Genware team comprises IBM Cognos-certified professionals trained in the technical and business aspects of solutions. Genware has delivered successful solutions to customers across a variety of industries including financial services, manufacturing, retail, healthcare and government. Using the proprietary Genware Methodology, consultants assess, design and implement business analytic solutions. Genware has a continuously growing client base of over 100 leading firms now successfully using applications included in the IBM Business Analytics Suite of Products. For more information: Web: www.GenwareCS.com Email: Service@GenwareCS.com Tel: (973) 633-6606.

About IBM Business Analytics
IBM Business Analytics software delivers actionable insights decision-makers need to achieve better business performance. IBM offers a comprehensive, unified portfolio of business intelligence, predictive and advanced analytics, financial performance and strategy management, governance, risk and compliance and analytic applications.

With IBM software, companies can spot trends, patterns and anomalies, compare “what if” scenarios, predict potential threats and opportunities, identify and manage key business risks and plan, budget and forecast resources. With these deep analytic capabilities our customers around the world can better understand, anticipate and shape business outcomes.

For further information or to reach a representative please visit ibm.com/analytics.





Products and services used

IBM products and services that were used in this case study.

Software:
Cognos Business Intelligence, Cognos 8 Planning

Legal Information

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