Practical considerations

for evaluating an Oracle

R12 upgrade
June 2011
Table of contents
The heart of the matter 2
An in-depth discussion 4
Financial reforms pay off in business value in a big way 7
Comparing paths to migration 8
Key lessons for an effcient migration 10
Case study: A fast-food restaurant on the fast track to R12 12
What this means for your business 14
The heart of the matter
Migration to Oracle
E-Business Suite
Release 12 (R12)
presents an opportunity
to create a fexible,
global business platform
forfuturegrowth.
3 The heart of the matter
A powerful Enterprise Resource
Planning (ERP) system is
indispensable for pace-setting
organizations that seek a continuous
competitive edge. Yet in many ways
an ERPs features and functionality
are only as good as its last upgrade.
Upgrading ERP is a business
decision thats top of mind among
top executives at companies that
rely on Oracle E-Business Suite.
As Oracle Premium Support for
E-Business Suite R11i comes to a
close, stakeholders must determine
whether to perform a technical
upgrade, a technical upgrade with
business process improvements, or a
re-implementation of R12.
A technical upgrade to E-Business
Suite R12 is a fast and comparatively
inexpensive approach. Yet it doesnt
enable the enterprise to customize
and fully correct existing faws in
processes and implementation.
In the middle ground, a technical
upgrade with specifc process
improvements or addition of new
modules fuses the advantages
of a technical upgrade with
re-implementationwith some
compromises, of course.
A re-implementation of R12 holds a
powerful appeal for organizations
that, for instance, plan international
expansion and standardization of
business processes. This ground-up
approach enables enterprises to
leverage effcient new modules and
to streamline and reduce existing
customizations, but it requires a
sizable investment in resources
andfunding.
Among PwC clients, we have found
that E-Business Suite R12 has
demonstrated great potential for
business transformation. Accordingly,
we believe organizations with Oracle
Financials should consider planning
a migration to R12.
The frst step an organization must
take in planning the migration is to
determine the right approach:
1

A technical upgrade
A technical upgrade with targeted
improvements
A business transformation/
re-implementation
What follows are key considerations
in navigating the transition path
toR12.
1 Because an organization cannot migrate
directly from R11i to Fusion, we omit a
migration to Fusion in this discussion.
An in-depth discussion
Determining the
right migration path
demands a disciplined
assessment of current
and future objectives.
Are you preparing for
business expansion
or merely business
as usual?
5 An in-depth discussion
For organizations that must keep pace
with constantly evolving business
strategies and processes, migration to
Oracle E-Business Suite Release 12 is
not a matter of ifbut when.
And for many leading companies,
whenis now.
The call to action is growing
increasingly insistent as the economy
shows signs of improvement and
CEOs renew their focus on sustainable
revenue growth. For those planning to
revise business models and processes
to achieve growth, E-Business Suite
R12 will provide a fexible, powerful
platform for thefuture.
R12 represents the most powerful
and appropriate choice among
Oracles existing E-Business Suite
products, which ranges from Release
11i to the best-in-class Fusion
Applications.(See Figure 1).
Release 11i, which debuted in the
mid-1990s, has been adopted across
a wide variety of industries and
global locations. Release 12 was
introduced in January 2007; the
platform demonstrated real maturity
with the launch of E-Business
Suite Release 12.1 in May 2009.
Since then, an uptick in companies
launching or planning a migration
has demonstrated an unambiguous
confdence in E-Business Suite
Release 12.
Evolution of Oracle applications: From 11i to Fusion
How Oracles E-Business Suite has evolved from Release 11i to the best-in-class
business architecture of Fusion.
Release 11i Release 12 Fusion
Release 11i became
available in the mid-1990s
and has been implemented
across industries
It is very stable
Release 11i supports
multi-GAAP and shared
service requirements
It uses a limited adoption of
Oracle Fusion Middleware
Regular maintenance
expired October 31, 2011
A premium for support took
effect November 2011
No support after 2013
Release 12 was introduced
in January 2007
It has been very stable
since Release 12.1
R12 offers enhanced
features and support for
shared service and
multi-GAAP requirements
and Global Tax rules
It is based on Oracle
Fusion Middleware to
provide best-in-class
integration
R12 provides an upgrade
path to Fusion
Fusion has been
redesigned from the
ground up to deliver
best-in-class architecture
It incorporates intelligence
and analytics into
Applications
Fusion offers seamless
integration of
functionalities from
PeopleSoft and Siebel
It is now available for early
adopters in business
processes like financials,
procurement, and CRM
Figure 1: Evolution of Oracle applications
6 Practical considerations for evaluating an Oracle R12 upgrade
Fusion represents the next generation
of Oracles E-Business Suite,
combining best-in-class business
applications with standards-based
technology. While not all modules
are currently available, Fusion will
become a truly viable migration
option over the coming months
as both Oracle and its partner
community develop new applications.
However, it is not possible to migrate
to Fusion directly from R11i; you
must migrate to R12frst.
A migration to E-Business Suite
R12 can drive effciencies for many
facets of the business, including
product design and delivery, fnancial
functions, internal and external
communications, and management
of global supply chains, among others.
With more than 300 enhancements
to its fnancial moduleincluding
support for sub-ledger accounting
and a new global tax engineR12
will hold particular appeal to CFOs
andcontrollers.
For many organizations, the move
to R12 will be driven by strategic
or tactical factors like reducing
customizations, leveraging new
functionality, or creating a launch
pad to Fusion.
A decision in the transition path
will come down to three choices
(See Figure 2):
1. Perform a technical upgrade
to E-Business Suite R12 with
select process changes in certain
pre-determined areas.
2. Perform a technical upgrade
with targeted improvements of
select processes or the addition
of newmodules.
3. Treat the migration as a new
implementation of E-Business Suite
R12a business transformation/
re-implementation, in other
wordswith a ground-up design
for every process.
No single template for migrating to R12
Selecting the right approach to move to Oracle Release 12 depends on your
business objectives and evolving needs. Industries with changing business models
and processes use the migration as an opportunity to transform the organization.
Low Low to medium Heavy
Transformational scale
Technical upgrade Technical upgrade with
targeted improvements
Re-implementation/
business transformation
Description
Goal
Time
Cost
Business
value
Risk
Straight migration of
current applications and
existing customization
to new target release
Upgrade applications and
refine targeted process
improvement areas,
e.g., upgrade with P2P
centralization or addition
of new modules
Re-implement and
redesign processes
andsystem Ground-up,
e.g., restructure every
process to align with
organizational structure
Vendor support
compliance
Support compliance
and added functionality
Business value
Business model changes
Transform processes
Fastest Medium
Medium
Longest
Lowest
Lowest
Moderate
Moderate
Highest
Highest
Lowest High
Figure 2: No single template for migrating to R12
7 An in-depth discussion
Figure 3: A global nancial architecture
In determining the approach and
scope of the migration, stakeholders
must assess how evolving business
requirements have impacted the
effciency of E-Business Suite. For
instance, mergers and acquisitions
(M&As) add (or subtract) business
units from the corporate ecosystem,
and over the course of years that
typically results in a patchwork
of fractured business processes.
Changes in operating processes often
generate haphazard customizations
to E-Business Suite. A migration
particularly a re-implementation
presents an ideal opportunity
to clean up processes and retire
unnecessarycustomizations.
A migration also encourages
stakeholders to review and revise
strategies for future business
development. It is critical that
stakeholders approach the migration
from a business perspective because
the evolution of business processes,
strategies, and user needs will drive
technology requirements. Technology
enables business needs; it does not
defne them.
And lets not ignore the white
elephant in the boardroom: funding.
Given the ftful economic recovery,
the discussion will inevitably
turn to costs. It is imperative that
stakeholders judiciously consider
short- and long-term value to the
business and champion a revenue-
expanding strategy that emphasizes
growth and competitive advantage.
Financial reforms that
pay off in business value
in abig way
Oracle E-Business Suite R12 delivers
overarching advances in centralized
and standardized business processes
that can greatly improve effciencies.
For example, PwC believes the
redefned architecture of the fnancial
module, which comprises more than
300 enhancements, represents a
move toward a truly global fnancial
architecture and will strengthen
fnancial systems across the
enterprise. (See Figure 3.)
A global financial architecture
Ledger & ledger sets
Subledger accounting (SLA) DrCr
E-Biz Tax Inter company Bank model
Inventory Purchasing Receivables Payables Projects
Multi-org
access
control
Work in
process
R12 includes a significant redesign of financial features with enhancements
that include:
Ledger and ledger sets
Multi-org access control
Sub-ledger accounting
Unified bank model
Oracle payments
BI publisher
Oracle payments
E-business tax engine
8 Practical considerations for evaluating an Oracle R12 upgrade
Support for International Financial
Reporting Standards (IFRS) is
a powerful enhancement to the
fnancial module in R12. Although
the US will not adopt IFRS until
2015 (at the earliest), more than
100 countries around the world
already adhere to the standard. In
additions, support of IFRS is a key
capability for US companies with
global operations or those that plan
to acquire international frms, as
well as for non-US organizations
that acquire US frms.
Support for sub-ledger accounting
(SLA), in R12 will provide consistent
accounting rules to all transactions
and will enable parallel reporting
between IFRS and Generally
Accepted Accounting Principles
(GAAP) systems. SLA support
also empowers an organization to
streamline its access, processing,
and reporting across operating
units using a common data model.
The new Multi-Org Access Control
(MOAC) feature enables seamless
role-based access to multiple
operating units from the same
responsibility. This capability
allows organizations to defne
and manage all business units from
a single location without logging
onto individual responsibilities.
The new E-Business Tax module
provides a single repository of global
tax transactions and enables the
organization to centrally manage
all tax transactionsacross the
enterprise and across the globe.
The module can be confgured for
country-specifc taxation and offers
a consistent tax repository that
can help an organization reduce
compliancerisks.
Other improvements to R12 include:
Strategic sourcing
Support for reporting and analysis
in its Corporate Performance
Management applications
A powerful tool for analysis and
reporting of proftability
New ways to manage and assess
aglobal supply chain
Innovative global inventory-
management features
Enhanced global talent-
management capabilities
Comparing the
pathstomigration
Each path to migration to E-Business
Suite R12 holds certain advantages,
and deciding which approach is right
for you requires that you assess the
organizations future business state
as well as more in-depth
examination of existing processes
and technologies. Furthermore,
it is crucial to gain agreement
among all key stakeholders before
deciding on the path forward. In
general, companies that aim to
transform their business will opt for
a re-implementation, while those
seeking less sweeping business
expansion will opt for a technical
upgrade or a technical upgrade
with targeted improvements.
Technical upgrade: A technical
upgrade to E-Business Suite R12 can
be a viable choice for frms that are
satisfed with current applications and
do not anticipate major organizational
or business process changes, or
require revisions to customizations
and processes.
9
A technical upgrade holds two key
advantages over a re-implementation
(and, to a lesser extent, a technical
upgrade with process improvements):
Faster deployment and a signifcantly
lower cost. Deployment is accelerated
because an upgrade requires fewer
resources to confgure the applica-
tions and migrate data. Whats more,
data conversion is limited and data
migration is often a smooth process.
The technical upgrade assumes that
a minimal number of customizations
will be necessary, which also hastens
the migration.
Despite these advantages, PwC has
found that an upgrade may require
signifcant database modifcations
and may be more likely to generate
technical challenges. To avoid
compatibility issues, organizations
considering a technical upgrade
should reconcile and clean up data
before it is converted. Conversion
of data to the new fnancial module,
particularly sub-level architecture
and tax, tends to create technical
problems in an upgrade.
All things considered, a technical
upgrade may be too limiting for
companies that plan business
expansion and transformation. A
technical upgrade will not enable the
organization to take full advantage
of the capabilities of Release
12 because it does not allow for
simplifcations of processes and clean
up of customizations. PwC believes
a technical upgrade is suitable
primarily for businesses whose
operations are not likely to change.
Technical upgrade with
targeted improvements: This
approach is similar to a standard
technical upgrade, yet it enables
an organization to prepare for
future expansion by adding certain
modules or process improvements
that are critical to its operations.
For instance, a company can
greatly beneft by modernizing and
centralizing its overall procurement-
to-payment processes.
As discussed earlier, the fnancials
module of R12 includes a number
of key upgrades that are key to
supporting compliance and adding
functionality for the future. We have
found that the fnancial and, to a
lesser degree, technology modules
present the greatest opportunities
for process improvements.
Not surprisingly, these complex
modules often require considerable
attention and care when they
are implemented. In some cases,
such as AP/PO accruals, Oracle
has fundamentally updated the
functionality of R12.
Another consideration to the
technical upgrade with targeted
improvements approach is that while
the cost will typically be midway
between a technical upgrade and a
re-implementation, organizations
must consider the impact of key
confguration changes.
Business transformation/
re-implementation: This approach
will deliver the maximum potential of
R12, yet it is a larger endeavorand
a more substantial investmentthan
either type of technical upgrade. Top
executives must perform a disciplined
review of current processes and
future business objectives and work
closely with IT to determine IT
needs to support the future state
of theorganization.
Re-implementation is also a more
complex technical initiative. The
IT department must begin with an
empty database and implement
E-Business Suite R12 as if upgrading
from a legacy system, necessitating
more resources and a longer
implementation timeframe.
For organizations planning
enterprise-wide transformational
change to business models or
processes, a re-implementation of
E-Business Suite R12 will deliver
the most long-term value. A
re-implementation provides a blank
slate for redesigning the technology
confguration and business strategies
for the future state of the company.
This can be particularly advantageous
for frms that foresee major shifts in
the operating environment, such as
adopting new partners, channels, or
reporting structures. Whats more,
organizations that intend to grow
through international M&As will
require an adaptable global business
platform that supports IFRS and other
advanced fnancial capabilities.
An in-depth discussion
10 Practical considerations for evaluating an Oracle R12 upgrade
A re-implementation also opens a
window of opportunity to revise
business processes that have been
incorporated in E-Business Suite over
its life cycle. Effcient automation
of processes hinges upon a set of
processes that are logical, effective,
and up to date.
At the same time, a re-implementation
allows organizations to review and
retire technical customizations that
have become obsolete or ineffcient.
Similarly, a re-implementation
enables the review and optimization
of module-level business documents
and transaction interfaces that have
become outdated over time.
The long-term advantages of
re-implementation are indisputable,
yet it would be foolhardy to discount
the inherent challenges. Chief among
them: Re-implementation will require
an upfront investment at a cost
that may rival that of the original
deployment. The lingering effects
of the global recession have left
many CFOs loath to approve capital
investments, even as the recession
begins to lift and businesses face
pressure to grow.
Additionally, signifcant efforts
in applications confguration and
data migration will be necessary.
In particular, the new fnancial and
accounting architecture of E-Business
Suite R12 may demand time-
consuming data conversion.
Companies that have re-implemented
E-Business Suite R12 have found
that changes in the technical
architecturealong with new
functionality of E-Business Tax,
sub-level accounting and Trading
Community Architecturedemand
as much as 70% more storage space.
Finally, the broad scope of a
re-implementation requires
considerably more time to plan and
complete. Development, testing,
troubleshooting, and staff training
will call for substantial resources
andexpertise.
Key lessons for an
effcientmigration
Regardless of the migration path
chosen, our experience shows that
businesses that have implemented
R12 successfully make a thorough
and earlyassessment of the impact
on three critical components: people,
processes, and technology.
Overall, we have seen that many
companies underestimate the time
required for a migration to R12.
As a rule, stakeholders should
plan activities and deliverables
on the same timeframe as a new
implementation of E-Business
Suite. PwC has found that generally
a migration to R12 requires a
minimum of six months for planning
and deployment. Organizations
with complex global installations
of E-Business Suite should allow
signifcant time for planningand
know that a complete implementation
could stretch multiple years. We
have successfully helped clients
perform and understand pre-upgrade
assessments in workshops designed
for key stakeholders, leveraging our
experience from a large number of
R12 implementations.
11
Tips for an effcient migration
Allow signifcant time for planning.
Commit to early and frequent communications with end users.
Revisit and revise all business processes and customizations
beforemigration.
Clean up interfaces and data to obtain the greatest value.
Allow for a 50% increase in database size.
Provide product workshops for the migration team.
A smooth and effcient transition
to R12 should not be treated as
a technical upgrade; rather, it is
a critical business initiative that
can signifcantly contribute to the
companys future success. It essential
that top executives understand the
future state of the organization and
plan accordingly to ensure fexibility
for future growth.
The people component of a transition
to R12 is a critical step that should
be addressed early. Business and
IT leaders should ensure that
employees receive initial and frequent
communications and training. As
with any substantial organizational
change, you must prepare your people
for a successful transition.
Specifcally, we have seen
implementations falter when
organizations dont have the full
support and participation from
the company leaders, as well as
meaningful input from stakeholders
and end users. Also key is adequate
time for testing, training, and
gathering feedback from users and
business units.
Organizations should allow time
to test all normal and exception
scenarios, focusing on end-to-end
testing. It is essential that all technical
and process issues, as well as glitches
in non-core capabilities, are resolved
before go-live. To help ensure effcient
and timely testing, we recommend
that organizations provide workshops
for the migration staff on new
features and functions.
Take time to clean interfaces and
data before the migration begins.
Interfaces and errors must be
corrected to help maximize the
effciency and deliver the greatest
value to the upgrade. We also have
found that reconciliation of data
between the pre- and post-upgrade
instances may require additional
time because reports are presented
differently in the two versions of
E-Business Suite.
One of the notable challenges we
have seen around technology is a
substantial increase in database
size during the upgrade, primarily
due to data model differences with
sub-ledger accounting. Oracles
guidance calls for a 20% increase
in storage capacity, but in our
experience a 40% to 50% increase is
more likely. We recommend that you
calculate disk-space requirements for
all instances during the project, and
be prepared for approximately 50%
growth in database size.
PwC has helped a range of companies
across the spectrum of industries
successfully migrate to R12, and
based on our experience, we believe
that R12 is stable and robust. But
careful planningand taking the
precautions noted abovewill ease
the migration.
An in-depth discussion
12 Practical considerations for evaluating an Oracle R12 upgrade
Case study: A fast-food
restaurant on the fast
track to R12
A fast-growing fast-food restaurant
chain, which had mushroomed from
one location to more than 1,000 sites
in 15 years, found that its Oracle
Applications Release 11.5.9 was
no longer meeting its needs. The
companys R11i implementation
required too many manual processes,
lacked adequate interoperability
with other systems, and needed
updated fnancial capabilities for
globaloperations.
The company decided that the most
effective way to resolve these issues
and to prepare for future growth and
fnancial regulatory requirements
was an upgrade to Oracle E-Business
Suite R12.
A key factor in the decision to
migrate was the new releases ability
to improve and automate its business
processes. The company also wanted
to explore the new functionalities
available in R12 and, at the same
time, streamline the size and usability
of the application by rationalizing
its existing customizations. Looking
forward, the restaurant chain wanted
to ensure that its application architec-
ture could support growth and new
standards such as IFRS compliance
and Extensible Business Reporting
Language (XBRL)reporting.
The restaurant company engaged
PwC to help it effciently plan,
migrate, and beneft from an R12
migration that could be implemented
without interruption of current
business operations. Our team of
Oracle E-Business Suite experts
helped the company assess its
business requirements and prepare
for an R12 migration that accounted
for its entire operations chain,
from procurement to fnancial
closereporting.
Our approach included detailed
design reviews and rigorous testing
to ensure the accuracy and effciency
of the architecture. Our team of
Oracle experts carefully planned
the implementation to clean up all
customizations and to help ensure
that all system interfaces were
correctly confgured. Throughout
the implementation, we worked
13
with the companys managers to
facilitate user acceptance testing
and help ensure training and
seamless knowledge transfer to
business users. To back that up, we
delivered thorough documentation
for all phases of the project
following PwCs Oracle Applications
Implementationmethodology.
PwCs assistance in planning and
implementing the migration enabled
the fast-food restaurant company to
realize a wide variety of automated
process improvements in the course
of a year. The company achieved
signifcant gains in internal and
external fnancial reporting. Monthly
close processing and reporting is
being accomplished 25% faster.
Whats more, the fast-food restaurant
company is now prepared to support
IFRS and XBRL reporting, and the
addition of a secondary ledger has
streamlined the companys reporting
for its UK operations. Business users
can now create new reports and
modify existing reports, a capability
that has reduced the time required
to deliver new reports by 65%.
The restaurant chain also gained
signifcant effciencies in key
business processes such as approval
of purchasing documents, validation
of invoices, and accounting tasks
like depreciation calculation of
fxed assets. Implementation of the
Procurement suite has streamlined
processes and yielded multi-million
dollar savings in indirect spending.
Shared services centers that
leverage MOAC functionality have
seen productivity enhancements of
upto15%.
Using our business-led technology
approach, we helped the restaurant
company carefully plan and manage
its migration to Oracle E-Business
Suite R12. PwCs integration of
process and technology solutions
helped put the fast-food company on
the fast track for future functionality
and growth.
An in-depth discussion
What this means for your business
A carefully planned
transition to E-Business
Suite R12 requires
a results-focused
assessment of business
processes and
futureneeds.
15 What this means for your business
Migration to Oracle E-Business
Suite R12 can set the course toward
a competitive advantage and a
readiness for the business needs
oftomorrow.
We believe organizations that
seek growth, global expansion,
and transformation of business
models and processes will achieve
the greatest results from a
re-implementation of E-Business
Suite R12. A technical upgrade,
while less costly, will update the
organizations ERP platform and
will in some cases improve
processes, but will not deliver
truly transformational results.
Whether upgrading or
re-implementing, the transition is
no easy task. Top executives must
assess the organizations current and
future business needs and oversee
a sweeping variety of decisions
that encompass changes to people,
processes, and technology.
Thats where PwC can help. We
have proven expertise in assisting
organizations with the design and
implementation of Oracle E-Business
Suite migrations. We fuse our
disciplined business-process expertise
with deep technical knowledge of
Oracle E-Business Suite to build a
framework for strategic, sustainable
business success.
We dont believe in implementing
technology for technologys sake,
however. Our approach is built
around solving a business issue
and delivering measurable results.
We take the time to understand
your business needs and align the
E-Business Suite implementation
with your unique requirements and
objectives. We help you identify,
manage, and achieve specifc benefts
of upgrading to E-Business Suite
R12, then monitor and measure
the benefts after the transition to
help ensure that it drives future
performance improvements.
A successful migration to
E-Business Suite R12 is a critical
step in preparing for the business
environment of tomorrow. PwC
can help you make the move
withconfdence.
www.pwc.com
For a deeper conversation about
migrating to Oracle E-Business
Suite R12 and what it means for
your business, please contact:
Gerard Verweij
PwC Oracle Global Practice Leader
617-530-7015
gerard.verweij@us.pwc.com
Eric Schillig
Director, PwC Oracle Practice
408-817-8114
eric.schillig@us.pwc.com
Sanjeev Dutta
Director, PwC Oracle Practice
925-457-5042
sanjeev.dutta@us.pwc.com
Susanna Pippen
Director, PwC Oracle Practice
703-203-6029
susanna.pippen@us.pwc.com
2011 PwC. All rights reserved. PwC refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member rm of
PricewaterhouseCoopers International Limited, each member rm of which is a separate legal entity. This document is for general information purposes only,
and should not be used as a substitute for consultation with professional. PM-11-0262