If you use PayPal, you may not have heard of
MoneyGram, but millions of people around the globe
use this service to send money anywhere within min-
utes. Dallas-headquartered MoneyGram is the sec-
ond largest money transfer business in the world,
with 293,000 agent locations and 2,350 employees in
197 countries and territories. Most of MoneyGram's
money transfer services are provided through its
worldwide network of third-party agents using
MoneyGram's money transfer system, ranging from
Walmart to tobacco shops in Paris. MoneyGram also
operates its own outlets in key countries, including the
United States, Belgium, France, and Germany. In 2012
MoneyGram generated over $1.3 billion in revenue.
Customers send cash at an agent location and
within two minutes it is available for pick up by the
recipient at a MoneyGram agent anywhere in the
world. In many locations, consumers can collect
funds in local currency, U.S. dollars or euros. In some
markets, customers also have the option to send and
receive money through alternative channels such as
online services, mobile phones, ATMs, kiosks, call
centers, and home delivery.
For a global money transfer company, it's essential
to be able to move money between two points around
the world within minutes. MoneyGram uses an auto-
mated financial management system to make this hap-
pen. The system handles hundreds of thousands of
money transfer transactions each day and ensures that
all of the retail stores, banks, and other MoneyGram
agents receive proper financial settlement and com-
missions for each money transfer.
Despite many years of double-digit growth,
MoneyGram's operations were not working well. The
company was saddled with outdated systems that
required the use of spreadsheets and time-consuming
manual processes to calculate payments and close the
books each month. Those systems were adequate for
a long time, but eventually their complexity and lack
of scalability constrained MoneyGram's ability to
address market demands, add new products, and serve
the sales team. Moreover, lack of a central data store-
house made it difficult to create reports, analyze mar-
ket opportunities, and spot bottlenecks in the system.
Senior management decided to examine
MoneyGram's business processes and legacy systems,
some of which were redundant. It assembled the com-
pany's top business and technology managers, includ-
ing the company's chief financial officer, controller,
treasurer, head of sales, and executive vice president
of operations and technology. They concluded that in
addition to updating technology, MoneyGram needed
to change some of its key business processes.
Culturally, MoneyGram's managers made changes
in staff responsibilities to make employees more aware
of the company's business processes and ways to
improve them. Employees were instructed to under-
stand each step in the business processes that they
were part of, instead of their own individual job func-
tions. The company used numerous Webinars and
other tools to show employees how business processes
were being altered.
To that end MoneyGram created a subset of man-
agers called global process owners or GPOs. Each
GPO is responsible for the performance of an indi-
vidual process, such as cash management, customer
onboarding, or credit processing. GPO's were asked
to define the current state of their processes, how
processes impacted each other, and how they felt
they could be improved. They also defined how the
success of their process could be measured, and were
tasked with gathering performance data to gauge that
improvement
MoneyGram still uses GPOs in its operations,
along with subprocess owners (SPOs), who are respon-
sible for handling day-to-day activities and problems.
This new process orientation has moved MoneyGram
from the old siloed departments to cross-functional
work groups that collaborate closely with a long-range
view of what's best for the business.
For the technology to support its new global
processes, MoneyGram selected Oracle's E-Business
Suite with the Oracle Incentive Compensation module.
Oracle E-Business Suite consists of enterprise resource
planning (ERP), customer relationship management
(CRM), and supply-chain management (SCM) appli-
cations using Oracle's relational database management
system. Oracle Incentive Compensation module auto-
mates the process of designing, administering, and ana-
lyzing variable compensation programs. Management
believed the Oracle software was capable of handling
the customization work required to integrate with
the processes used by the company's back-office and
proprietary agents and to handle other unique business
requirements. The Oracle system included capabili-
ties for creating, viewing, and managing customer
information online.
MoneyGram started implementing Oracle E-Business
Suite in September 2012. The new software and business
processes streamlined most of MoneyGram's back-office
operations, making it easier to process more customer
transactions and settlements with agents and billers and
to update the company's General Ledger. New partners
can be added at a much faster rate.
Commissions are critical for driving profit-
ability in MoneyGram's existing and new products.
MoneyGram must track a large number of different
plans for calculating the commissions of its partner
agents throughout the world. Its legacy system was
unable to automate many of the commission plans,
so MoneyGram had to use spreadsheets and manual
processes to manage several hundred commission
plans. MoneyGram built a flexible commission model
using Oracle Incentive Compensation that has been
able to automate more than 90 percent of its nonstan-
dard commission plans.
MoneyGram business managers can also deliver
new products faster to maintain their competitive edge
in the global market. In the past new regional innova-
tions took months to plan, but the Oracle implementa-
tion has cut that time by approximately 40%. This is
because one of the bigger challenges with new product
introductions is to ensure that they will integrate
seamlessly with MoneyGram's backend processes so
that new transactions are recorded and accounted for
correctly. The new Oracle system allows MoneyGram
to configure the processes easily simply by adjusting
currently existing parameters instead of coding or
developing new software. MoneyGram is less likely to
go to market with a product that has to be initially run
on manual processes.
Having an enterprise-wide repository of data
located centrally allows MoneyGram employees to
better serve customers and agents conducting the
money transfers. Centralized data are up-to-date and
easily available. Reports used to take 40 hours and
three employees to create, but now take 80% less time.
Those workers can spend more time analyzing reports
and less time putting them together.
The cost savings of consolidating more than 40
MoneyGram legacy IT systems into one enterprise-
wide implementation of Oracle E-business Suite
amount to millions of dollars. The company can
now handle more transactions without having to hire
additional staff. The company estimates that the
Oracle software has paid for itself within one year.
Sources: www.moneygram.com, accessed March 19, 2013; www.busi-
nesswire.com, February 6, 2013; and Alan Joch, "On the Money" and
"MoneyGram Exploits the Flexibility of Oracle Incentive Compensation,"
Profil Magazine, February 2012.
CASE STUDY QUESTIONS
1. Why was it so important for MoneyGram to pay
attention to business processes? How were they
related to the company's global growth plans?
2. What are the advantages of using an enterprise-
wide software suite such as Oracle E-Business
Suite in a global company such as MoneyGram?
3. How much did the new system and process
improvements change the way MoneyGram
ran its business? How did these changes help
MoneyGram compete on a global scale?
Business Process Reengineering
Many business process improvements are incremental and ongoing, but occasionally, more
radical change is required. Our example of a physical bookstore redesigning the book
purchasing process so that it can be carried out online is an example of this type of radical,
far-reaching change. This radical rethinking and redesign of business processes is called
business process reengineering (BPR).
When properly implemented, BPR can lead to dramatic gains in productivity and
efficiency, even changing the way the business is run. In some instances, it drives a "para-
digm shift” that transforms the nature of the business itself. This actually happened in book
retailing when Amazon challenged traditional physical bookstores with its online retail
model. By radically rethinking the way a book can be purchased and sold, Amazon and
other online bookstores have achieved remarkable efficiencies, cost reductions, and a whole
new way of doing business.
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