Supply Chain of Reval

[Indian Institute of Foreign Trade]

EPGDIB09-11
Supply Chain Management
Submitted To - Nitin Seth
Submitted By - Anushree Singh
Roll No -11
Date – 21-Nov-10

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 Table of Contents
INTRODUCTION...............................................................................................................3
COMPANY’S OVERVIEW...............................................................................................3
Vision...............................................................................................................................6
SCM – IT SERVICE INDUSRTY......................................................................................6
SUPPLY CHAIN OF REVAL............................................................................................7
Supplier Sourcing............................................................................................................8
Development and Testing................................................................................................8
Delivery...........................................................................................................................9
Sales and Marketing........................................................................................................9
Logistics...........................................................................................................................9
PRODUCT DEVELOPMENT SUPPLY CHAIN.............................................................10
ADVANTAGES OF PRODUCT DEVELOPMENT SUPPLY CHAIN..........................13
PROBLEMS IN THE EXISTING SUPPLY CHAIN.......................................................14
PERFORMANCE METRICS...........................................................................................15
WAY AHEAD...................................................................................................................16
CONCLUSION..................................................................................................................17

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INTRODUCTION
I am working with Reval. It is a financial software development organization
having a product called HedgeRx. This product is SaaS (Software as a service)
based and is hosted on a web platform.

In this project I would try to capture the over all Supply Chain of my organization
with focus on the detailed supply chain of PRODUCT DEVELOPMENT (software
development). I am choosing Product Development because being a part of
Product Engineering department would help me to understand the product
development activities better and analyze the information to produce a fruitful
output. This supply chain would a service supply chain where output of
operations would be services or software application.

The software development can be in the form of new development or

maintenance of the existing product. In the project both modes of development
would be considered. Further the product Development supply chain cover one
release cycle. In one year we have 2 major releases with each release spelling to
over 5 months. Release in a layman language can be understood as an umbrella
under which a pre-decided quantum of work/ development would be undertaken
and the work completed or functionality implemented is then made available to
the client.

COMPANY’S OVERVIEW
Reval was founded in 1999, to help companies properly use derivatives to
manage their risk and comply with stringent derivative regulatory requirements
through the use of Reval’s easy‐to‐deploy, single version Software‐as‐a‐Service
(SaaS) platform. Reval has become a recognized global leader in derivative risk
management and hedge accounting solutions to clients comprising multinational
companies, financial institutions, accounting and advisory firms.
Highlights

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 • Recognized global leader in derivative risk management and hedge
accounting
• Reval has headquarters in New York and regional centers based in
Chicago, San Francisco, Toronto, London, Sydney, Hong Kong, and
Gurgaon.
• One of the best in Industry - 92% client retention rate
• Revenue – $1.5 Mn
• Employees – 250 across all locations
• Provides SaaS / Web platform to Financial Services companies dealing in
the derivatives (risk management capability)
Reval delivers a best‐of‐breed derivative risk management solution to some of
the world’s smartest and most sophisticated multinational companies, financial
institutions, and accounting firms. These clients use Reval’s internationally
acclaimed Software‐as‐a‐Service (SaaS)/Web platform to improve their
derivative risk management capability. With Reval,® they simplify and strengthen
the documentation, valuation, and hedge accounting requirements of their
hedging transactions in order to comply with accounting standards ranging from
FAS 133 to IAS 39.

Key functionalities include the ability to:

• Value financial instruments spanning major asset classes – interest rates,
structured rates, foreign exchange, energy, agricultural, metal, and credit
– using independent market data validated and published daily by Reval.
• Use market data and analytic tools, such as advanced regression to
assess and measure hedge effectiveness for compliance with accounting
standards such as FAS 133, FAS 157, FAS 161, IAS 39, IFRS 7, CICA
3865, and other standards around the world.
• Deploy a single version of Reval, which is upgraded semi‐annually at no
cost to clients, eliminating the need for them to run parallel and quality
assurance tests. Clients can simply use their Web browser to gain
secured, 24/7 access to Reval’s hosted database and application platform.

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Benefits of Using HedgeRx
• Create opportunities to reduce earnings volatility
• Improve risk and exposure management.
• Produce accurate, independent, and timely valuations.
• Improve hedging flexibility and hedge accounting compliance.
• Cut operating costs.

Product Distinction
There are few features of product that distinguishes it from the traditional
products available in the market. These features are:-
• Smaller package with flexible coupled component
• Cost effective
• Easily deployed, reconfigured and updated
• Standardized financial application
Traditional enterprise Software was cumbersome to use and have following
disadvantages:-
• Delivered as a large package
• Charge high license fee
• High deployment and maintenance fee

Advantages of SaaS over Traditional

Characteristic of Web Services
• Provide interoperability between various software application
• Standard interface on server
• Enable to run on disparate platforms

Benefit of Web Services

• Allow to share business logic, data and processes as services
• Reduce the software purchasing cost
• Form the technical foundation for software as service business model

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Vision
“To continue to be the recognized leader in the space defined by the intersection
of derivatives, accounting, and technology by providing SaaS that spans the life
cycle of a derivative – from pre-trade decision making to post-trade accounting
required by end users of derivatives”.

Mission
“To help companies properly use derivatives to manage their risk and comply
with stringent derivative regulatory requirements through the use of Reval’s
easy-to-deploy, single version Software-as-a-Service (SaaS) platform”.

Core Competency
Reval provides the world’s leading companies and financial institutions with a
best-of-breed solution to meet the challenges of hedge accounting and derivative
valuation. Clients rely on our three core competencies:
1. Deep understanding of the derivative marketplace
2. Demonstrated expertise in hedge accounting
3. Proven world-class Software-as-a-Service technology
4. On time Delivery

SCM – IT SERVICE INDUSRTY

A service is also a product except that it has very short shelf life and can not be
stored. Service is an integral of the product that a consumer enjoys. The SCM
integrates the resource flows—the movement of products, people, information,
and finances. In connecting all of these resources, SCM is always about
servicing resource integration by managing flows on both the demand and supply
side.

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 Generally speaking it is very difficult to gauge the customer expectation in case
of service. There are many examples that suggest that after each interaction the
expectation is likely to increase. And to be successful in service industry it is very
necessary to be agile and responsive. The competitive advantage is not
dependent of the underlying software/ application features but responsiveness to
the customers and sustainability. So serving the customers requires agility,
visibility, service returns, redistribution and alternative product info.

SUPPLY CHAIN OF REVAL

The supply chain of any service/ software industry has three important inputs
Human Resource (Most Important), Software and Hardware. Out of these Human
resource is utmost important. The supply chain of Reval will give the holistic view
of the overall functioning of the firm.

Conduct client business process

review
Delivery/ Installation of product/ Customer Services

PC Vendor
IT Operations/ Human Resource Procurement

Gather functional requirements

Client Location

Server Decide priority of request

Vendor
Install product
Release Planning and estimation
Internet
Service Development Integrate with existing
provider Applications
Unit/Integrated testing
Human
Resource Customer
Release Chuck of items
Software
License Go Live

Client Training

Supplier Sourcing Development and testing Product Delivery Customer

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Supplier Sourcing
The inputs required for making a software product includes hardware, Software
licenses and human resources.
Reval has Dell as the vendor for computers and servers. When a computer or
server is sold the Annual is also signed with Dell and it is for 3 years. The IT
support department maintains a small inventory of RAM, hard disk etc (hardware
devices) so as that software production is not affected.
The technology used for software development is Microsoft and we have
licenses of Visual Studio, SQL server and Microsoft services. So Microsoft is also
our vendor.
When we talk about human resource, it is actually difficult to pin point the
vendor, however I think the Job portals to certain extent may be thought of as
vendors and HR department can be looked upon as a facilitator. Having a rich
talent pool is an asset to any service industry and so recruitment, though a
support activity, becomes very critical to Supply chain of service industry.
In a software industry where distributed development is done across several
location, the internet services / connectivity becomes very crucial. If the link is
down then production suffers. Reval has two Inter Service Providers. Bharti Airtel
is the primary one and VSNL is the secondary one. VSNL is used only when the
Airtel link is down and it supports as a backup.

Development and Testing

The development and testing is the medium though which the services are
delivered to the customers. We have a product called HedgeRx and development
takes care of enhancement of this product as per the clients needs. When a
client subscribes to our product he may request for several customized feature
suited to his needs. Then the management does planning for the implementation
of the required feature. The requirements are documented and software
development is initiated. The development is followed by several rounds of
testing before the feature is delivered to the client.

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Delivery
After diligent testing the feature is made available to client for User acceptance
test. When the output is satisfactory the feature is implemented at server and
made available to clients. Since this a SaaS based product so the
implementation part is not cumbersome and not required to be done at each
client’s location. And this is how to the product is delivered.

Sales and Marketing

We have four region in which the sales and marketing is done. One is APAC,
EMEU, North America and Canada. Most of the clients are located in North
America. The sales model is based on referrals given by exiting clients. We have
a great relationship with our clients they help us to grow functionally and give
friendly inputs from time to time.

Logistics
The following chart shows the Inbound, Operations and Outbound Logistics of
Reval. The inbound consists of the activities related with the hardware, Software
and human resource procurement. Operations mainly deal with planning and
software development. And outbound consists of the activities related to
providing service to the customers.

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PRODUCT DEVELOPMENT SUPPLY CHAIN

Pre-decided chunk of work is taken in a release the task is divided between

teams and planning is done for each items. Supply chain is iterated for each
release. There are several activities associated with inbound, operations and
outbound. Many activities are ongoing and few related to set up etc are one time
activity and not release dependent

In this context the product development will not restrict to just the development of
software, it would also include the strategic level of activity which is involved in
the release. When a release planning and execution is to be done it actually
happens in 4 phases.
The first phase is the one in which all the strategic level decisions are made and
objectives of the release is set. It also states how to achieve the objectives.
The second phase which is the project management phase considers all the
nitty gritty of the project/release starting from release planning to allocation of
resources. The strategic phase lists out the items which are to be worked upon in
a release and then estimation of each item is done and schedule is prepared.
The third phase is the phase of design/development and testing. In this phase
the requirement specifications are made and assigned developer works on the
same. Then after successful testing the piece of code is build and user
acceptance testing is done on the same. Once the users are fine with it the
release is done and deployed on user servers.
In the fourth phase come the customers.

The chart below illustrates the detailed supply chain of Product Development.
Each phase is illustrated by each column and the following activity cannot be
initiated without the inputs from the previous one.

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Strategic Level Project Planning Operations Delivery

Client Request/ Release planning Requirement

new specification
development preparations

Set Objectives Allocation of Software

for release resources Development

Issue/ QA’s
Decide items and Estimations of Testing
set priorities of items
each

Roadmap of how Kick-off meeting Build

to achieve the team wise
objective

Make teams Items updated in Integration

Vader Testing

Decide User Acceptance

Milestone testing

Release / Live

CLIENTS

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The product development supply chain as shown above depicts the whole set of
primary activities performed for delivering the solution to the customers. The
trigger of the supply chain can be a client request (feature requested by client),
Bug Request or new strategic development. In all the three cases the supply
chain would be initiated. The supply chain can be an effect of all of the three. In a
project release CR, BR and new development can be scheduled for development
and testing. For understanding, the supply chain is divided into 4 levels and
levels are based on the level of control and decision making authority.
The whole process begins at the Strategic level where the objectives of the
release are set and the roadmap is decided. In this phase the management
decides the priorities to be associated with each of the items (CR/BR). If the
development is to be done for a very valuable client than may be his items would
receive priority on other items. At level the teams are also decided. There are
mainly 7 teams each focused on different functional area/modules. One team can
be dedicated for Market Data, one for Hedge Accounting etc. There is also one
SWAT team which works on weekly or monthly maintenance release items. Each
team has developer, Business Analyst, Quality Analyst, Project Manager and
Owner. Then the milestone is set.
Once all the activities at strategic level are over the Project planning starts
where then it is decided which item is to be allocated to which resource. The
estimation is also the part of planning where in the efforts in person days are
decided. The task is divided into Requirement specs writing, Development, Unit
testing, system testing, moving changes to Production for user acceptance
testing. Once the whole planning is over, the kick-off meeting is done team wise
and work plan is shared with each team member. There is one system Vader, in
which the items are logged schedule wise and contains the due date. Each
member has login to this system and it facilitate better monitoring and execution
of work. Resources can also book time in this system which they have spent o
each task which further helps in billing the clients.
After this phase the actual Development of software begins. The business
Analyst make the specs and then development team develops the code. The

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coding is followed by several rounds of testing. If there is any discrepancy in the
testing the issue is sent back to the developer and again the testing starts. After
obtaining satisfactory results the code is moved to production and is made
available to client for doing the user acceptance test. If everything goes fine the
code is deployed on the website and made available to the clients.

ADVANTAGES OF PRODUCT DEVELOPMENT SUPPLY

CHAIN
1. Planning at strategic level helps in aligning the goals with the supply chain
objective.
2. The resources are restructured into team such that each team specializes
in one functional area. This reduces the resource allocation time and
defines the hierarchy. So a developer knows whom to contact if
requirements are not understood and whom to contact when project slips
timelines. In a way the whole operation becomes simple and transparent.
3. Weekly meeting are arranged for each team so that each member knows
what the other person is working on and if stuck issues are escalated at
an early stage rather than issues coming at the time of delivery.
4. The rapport with customers is very good. Customers are very involved and
give feedback for the improvement of product.
5. The customer satisfaction index measure very high which translates into
the high customer retention rate of 92%.
6. From the technology perspective since the product is developed on a
cutting edge technology its helps to gain the competitive advantage over
competitors.
7. Post- release analysis of defect is done and managers along with teams
try to figure out the impact of the defects and which client got affected.
This is a very good way to find what went wrong and it can be avoided in
the future.

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PROBLEMS IN THE EXISTING SUPPLY CHAIN
1. The project planning has not matured and so after each release the
resources are free and no allocation is done. This wastes 40 man days
approx in a release.
2. The developer is not involved since the nascent stage of the task
discussion so extra time is wasted in making him understand the
requirement.
3. The Product knowledge is still not sufficient and this problem is more in
the development team. Code changes made under ignorance can lead to
the huge functional impact which can cost a lot the company.
4. The post – release analysis of this Oct’10 release shows that the number
of defects is more than expected. The code quality needs to be improved.
5. The dissemination of information is not proper. This lead to
communication gap between different teams and the kind of synergy
required is not achieved.
6. As we can see the current supply chain does not involve preparation of
formal test cases. The test cases is a table which lists all possible
scenarios that can tested on the implemented feature. The test plan helps
to figure out a missing link if one exists.
7. The database is at times unstable due to huge amount of data.
8. There should be proper planning for environment refreshes

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PERFORMANCE METRICS
Instead of making activity chart the performance metrics is used. This metrics
express time in percentage as actual time will vary from one release to other on
the basis of quantum and complexity of work.
Q1'10
Q2'10 Q3'10 Q3'10 YTD YTD
Metric Goal ACTUA
ACTUALS ACTUALS TARGET ACTUALS TARGET
LS
Employee
90% 84% 85% 85% 90% 84% 90%
Retention %
R&D Expense $
23% 29% 29% 29% 30% 29% 30%
/ Revenue $
Production
100% 100% 100% 100% 99% 100% 99%
system uptime
% Time -
Defects;
30% 32% 45% 32% 35% 36% 35%
Maintenance;
Compliance
% Time-
30% 34% 32% 49% 25% 38% 25%
Strategic
% Time- Wish
list & 15% 25% 15% 10% 15% 17% 15%
Enhancements
% Time -
25% 10% 8% 9% 25% 9% 25%
Change request
% critical client
defects resolved
100% 100% 100% 100% 95% 100% 95%
by 2nd month-
end
% of high
priority defects
100% 92% 100% 96% 95% 96% 95%
resolved w/in 3
mos
Defects per
0.75 0.6 0.5 0.48 1.0 0.52 1.0
client*
Customer loss
due to s/w 0 0.0 0.0 0.0 0.0 0% 0.0
defects
% planned
FIRST
functionality 100% 100% 50% 99% 90% 83% 90%
migrated on
time
% planned 100% 90% 90% 94% 90% 91% 90%
release
functionality

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delivered on
time
This performance metrics had two fold benefits.
1. It helps to identify the value add activities and the % of time required by
them
2. And the column “goal” suggests what are we targeting for future and did
the performance over a period meet the goal.
The goal is set on the basis of strategy decide by management to reduce the
time of value added activities.

WAY AHEAD
The way ahead is to “Plan Globally – Execute Locally”. So the planning would be
done at Reval US and the subsidiary can decide on how to implement it. The
goal is set for each value-add activity and it’s the call of the regional centers to
deliver it. The strategy say for employee retention may vary at different location
but goal is pre-decided. In reference to the India office following strategies can be
adopted to make the product development supply chain more effective and
efficient.
1. The project planning can be improved by starting the planning way ahead
the release is going to start. This will ensure that task for next release are
ready for development once the current release is over and it will also
reduce the resource waiting time and save the man days that are waste
otherwise.
2. Involve developer from the task discussion phase. So need is not work In
isolation but follow an integrated team approach. This would achieve
synergies and lead to lots of time and money saving.
3. Plan for Product and functional training to enhance the knowledge.
4. Avoid including tasks to the release bucket towards the end of the release.
Due to pressure the development is done rapidly and so the testing and
this can leave open ends. Preparation of test cases in the beginning can
also help to resolve this problem.

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 5. Instead of loading one database better make more servers for operations
such as market data collection.

CONCLUSION
The product development supply chain can be made effective by following the
recommendations. The efficient supply chain would lead to an efficient delivery
and happy customer. And it is very important to seamlessly integrate Product
development supply chain with other supply chain so as to achieve overall
efficiency. The better management of supply chain can further improve the
competitive advantage of Reval and help it to retain its leading position in the
financial solutions space.

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