Solutions

Revenue Management Defined

Improving gross margins and increasing market share in the highly competitive semiconductor and electronic components market is top of mind for high tech executives. However, until now the management tools at their disposal have been limited.

With opportunity tracking, design registration, pricing, quoting, contracts, and channel incentive payment reconciliation being processed in an "over the wall" fashion across different departments, revenue life cycle management becomes a great challenge (see graph below). The process also involves external representatives and distributors with data that often resides in multiple systems or spreadsheets.

The impact is significant and can lead to:

• Price erosion due to poor visibility and internal bidding wars
• Margin erosion due to inconsistent execution and enforcement of pricing policies and unmerited discounts
• Low quote to order conversion rates due to volume overload and long quote cycle times
• Revenue leakage through overpayment of channel incentives
• Increased risk of non compliance with revenue recognition regulations and Sarbanes-Oxley requirements

Revenue Management Vision

Revenue Management software enables semiconductor and component manufacturers to control revenue leakage, improve margins, and reduce risks associated with non-compliance with financial reporting requirements. Revenue Management software enables greater visibility into demand and improves pricing strategies, pricing rules enforcement, and channel incentive payments management.

Revenue Management offers a holistic and strategic approach to managing the entire revenue life cycle, from planned revenue (price strategy, price planning and setting, and margin objectives) to negotiated revenue (mapping demand visibility and registrations to margin agreements, quoting, price negotiations, and contract compliance) to actualized revenue (managing channel incentive payments and reconciling POS data for revenue recognition decisions).

The technology that supports Revenue Management is a unified, transaction-focused platform that integrates people, processes and data across the extended enterprise and regions. Revenue Management solutions allow companies to align business processes and individual execution through a transactional system that extends and compliments existing legacy investments to manage the core processes that impact price, margin, and revenue recognition.

The solutions offer a closed loop platform that connects opportunity and registration information to pricing rules, margin agreements, quotes, contracts, debits, and POS records.

Key benefits include:

• Improved visibility into demand by resolving duplicate opportunities and connecting POS and contract fulfillment back to opportunities and registrations
• Reduced price erosion by avoiding sales conflicts
• Improved margins through effective price execution and enforcement across all channels and regions
• Improved top-line revenue by improving quote to order conversion through faster turn around time
• Reduced overpayment of channel incentives by accurately reconciling POS with debit data
• Reduced risk of non compliance with SOX and revenue recognition regulations through consistent and controlled adjudication of transactions and a full audit trail of all automated and manual decisions

Enhancing Existing CRM and ERP Investments

Model N's Revenue Management solution is designed to compliment Oracle and SAP ERP systems by providing an end-to-end platform that supports opportunity tracking, design registrations, interactive quoting, global price management, contract compliance, debits, and POS reconciliation.

Generic ERP systems can manage finance, manufacturing, and the order to cash process, which tend to be generic, easily adapted, and implemented across multiple industries. Typical implementations often require that customers make some adjustments to their business processes to conform to ERP suite functionality.

Generic ERP systems are not designed to manage price negotiations, sophisticated segmented pricing rules, and optimal price resolution at the point of transaction; support deal analytics; track contract compliance; or manage the POS and debit data adjudication process. These are the processes where gross margin is determined.

Traditional CRM solutions offer tools to track and report on opportunities. However, CRM by default is a non-transactional system, making it difficult to make data actionable at the point of transaction.

Model N's Revenue Management solution leverages ERP investments using existing data to extend key areas of functionality without duplication of effort. Following are primary examples of how revenue management software can compliment ERP.

1. Pricing - extends the basic capabilities of ERP from list price management to real-time price resolution based on hundreds of pricing rules with all required processes for handling price exceptions and escalations with a full audit trail and history of negotiated prices and decisions

2. Quote to Order - compliments ERP by providing powerful quoting and negotiation tools that can extend to channel partners. Additional, final quoting information is stored back in the ERP system so it can easily append appropriate prices to orders that come in against a negotiated quote or contract

3. End-Customer Management - allows aggregating and easily managing the information of thousands and potentially tens of thousands of end customers without having to go through the complex process of setting Corporate IDs and accounts in ERP

4. POS - extends basic ERP ability to manage POS data cleansing and then store the cleansed data, including the reconciling and adjudication of all claims delivered back to the ERP system