Visual Trace
According to Michael Brennan, Head of Product and Services at MagicOrange, the overall solution is designed for the shared services environment, enabling business units or other entities in the enterprise value chain to understand costs and how these apply to services offered or received.
“The difficulty with costs in the shared services environment is that there is a great deal of complexity surrounding these. If you think of it as a value chain, different costs flow through each point along the chain, and a true understanding of the total cost requires that the cost be measured at each point. Once this has been achieved, improved management or even reduction of these costs becomes a much simpler matter,” he states.
“Visual Trace allows users of MagicOrange to model the cost flow visually, so that it is easier to determine, at each point along the value chain, whether the user is getting the required value. In effect, it allows one to build a transparent model that is much more than just numbers on a piece of paper. It creates a map of service consumption and details how this affects the costs thereof, from the point of origin through to the final end-point.”
Brennan explains that in any shared services value chain, there is a lot of very complex data “under the hood.” He suggests that it is a lot like a large bowl of spaghetti – there many strands, all intertwined with one another, which makes understanding the details of an individual strand virtually impossible.
“What we have done with Visual Trace is to provide customers with the ability to take a single strand of spaghetti and follow it, however much it winds and twists, from start to finish, through the entire confusing ball of strands. As with anything complex, it becomes much easier to grasp when you can see it in diagrammatic form. Value chains are even more complex than spaghetti – individual costs split into multiple components that merge & split in turn.”
“This visual aspect is what we believe provides us with a key differentiator over our competitors, as it is a significant improvement on most earlier costing models, wherein the user had to conduct the analysis in a data grid. This is often attempted using Excel spreadsheets. The latter, of course, becomes really difficult when you get to some of the more complicated areas of the value chain.”
“The idea with Visual Trace is to enable the user to trace a cost from source through to the end of the value chain. It provides customers with a razor-sharp focus on the specific details of costs and services.”
Moreover, he adds, the new functionality not only makes it simple to explore specific costs, it also explains why the costs are affected in the way they are by changes in other related factors. In other words, it not only provides a visual explanation, but also delivers context to go with this.
“I have no doubt that this extra functionality is going to have a significant and positive impact on our clients going forward, with respect to how they look at and investigate their shared services cost models. It is a logical and simple way to explore and explain the cost and allocation model, which will definitely have a positive impact on both those providing and those receiving services.”
“By providing a mechanism that enables both an understanding of the origin and of the whole journey of each cost, the conversation can shift from focusing on why these costs accrue, to one that instead considers how things can be changed in order to optimise, minimise or eliminate these costs. And that, after all, is a far more productive conversation to be having,” he concludes.
