Presentation on theme: "DAI/BSM Telematica Outsourcing A customer case: DSM Anti-Infectives R.J. van der Horst, 21 th March 2006."— Presentation transcript:
DAI/BSM Telematica Outsourcing A customer case: DSM Anti-Infectives R.J. van der Horst, 21 th March 2006
DAI/BSM Contents 1.Who is DSM Anti-Infectives 2.Why Outsourcing of Telematica activities at site Delft 3.Objectives of Outsourcing 4.Scope of the Activities 5.Compliant Purchasing Process Followed 6.Experiences until so far 7.Lessons Learned 8.Conclusion
DAI/BSM 1. Who is DSM Anti-Infectives DSM is active worldwide in life science products, performance materials and industrial chemicals.The group has annual sales of around €8 billion and employs about 24,000 people worldwide. DSM is a leading world player in many of the markets in which it operates and has plants and facilities on every continent. The company’s head office is in the Netherlands. DSM Anti-Infectives (DAI) comprises DSM’s activities in the field of development, production and sale of raw materials, intermediates, and bulk actives for anti-infectives such as antibiotics (for combating bacterial infections) and anti-fungals (for combating fungal infections). DAI is present in 9 locations in The Netherlands, Spain, Sweden, Egypt, Mexico, India and China.
DAI/BSM 1. Situation of DSM Anti-Infectives at Delft Business Group Head Quarters and main production site Site is shared with 2 other business groups: DSM Food Specialties DSM Bakery Ingredients Site restructuring executed; facility services have been: Outsourced or Decentralized All restructuring activities to be aligned with other BG’s Telematica site-wide: one ICT infrastructure for whole site
DAI/BSM 2. Reasons for Outsourcing DSM Anti-Infectives (DAI) is concentrating on core activities: Innovation Production Marketing & Sales Non-Core activities (like ICT) are outsourced to a specialized party By doing so DAI expects to obtain: more flexibility in services; a lower price, because of economies of scale; better access to new technologies and new services; a reduced risk of premature write-off and replacement of technologies; standardized Telecom services.
DAI/BSM 2. Alternatives for NOT Outsourcing Continue current situation But: impossible to standardize Telecom services in-house Split shared services to Business Groups But: there is one ICT infrastructure at site Delft Move function to Central Facility Department But: there is no natural relation between Facilities Services and Telecom
DAI/BSM 3. Objectives of Outsourcing Endorse the “Black Box” concept DSM focus on contract management only Build level of trust in service delivery Concentrate on objectively measurable results Aim for standardized, flexible and reliable services Rely on partner to implement the services (they have done it before) Look for creative solutions Find a reduction in TCO during contract period Aim for open book cost calculation Jointly find cost reductions over time
DAI/BSM 4. Scope of the Activities Management of Telecom equipment Central and non-moving devices Mobile devices Cabling and monitoring Patching of data points Explosion save equipment Consultancy Not: call cost
DAI/BSM 4. Deliverables of the Project Works Council Advice Trade Union Acceptance Works Council Acceptance Commercial Agreement Preferred Supplier selection Commercial Terms & Conditions Transfer Documents Human Resources Assets Contracts Process Descriptions Incident & Problem management Change management Service Level management Contract management Internal Resale Service Contract Internal Agreement Internal Communication Stakeholder Communication End User Communication
DAI/BSM 5. Evaluation Over All Company 4Company 3Company 2 Siemens Product Portfolio -++++ Contract 0000 Other Conditions -++++ Personnel -++--+ Price *) +++0+ Sub Total --++-+ Partnership 00-++ Culture 0---++ Trust 000++ Ability --+0+ Total --+ ++ *) based on NPV over 5 year
DAI/BSM 5. Details: Compliant/Non compliant Product Portfolio Siemens Company 2 Company 3 Company 4 Contract Terms & ConditionsCompany 3 Company 2 Company 4 Siemens Other Terms & ConditionsCompany 3 Company 2 Siemens Company 4 compliantnon compliant
DAI/BSM 5. Details: Qualitative Evaluation 1 2 3 4 5 partnership culture trust ability Company 4 Company 3 Company 2 Siemens
DAI/BSM 5. Details: Personnel Take Over All suppliers have taken into account: Differences in personnel compensation package Individual development aspirations Proposals are sufficient quality to merit qualitative ranking: 1.Company 3++ 2.Siemens+ 3.Company 4- 4.Company 2-- Analysis of personnel take-over cost can only be done in the next stage, when more information is shared
DAI/BSM 5. Decision 1: “Do Outsource Telematica” Four out of five tenders can be considered compliant enough to anticipate a successful award with clarification The business case is financially sound We recommend to outsource Telematica activities. (Advice given to Project Steering Committee)
DAI/BSM 5. Selecting The Last 2 Initial negotiations started with Siemens and Company 3 As decided by Project Steering Committee Aiming for “Open Book” pricing and maximum flexibility With focus on bringing out “hidden cost” For both parties the original proposal has been adjusted Reference visits paid to customers of suppliers PWN for Siemens Large City in The Netherlands for Company 3 Further analysis made of expected employee compensation
DAI/BSM 5. Decision 2: “Outsource to Siemens” Company 3Siemens Product Portfolio 3.04.0 Contract 2.0 Other Conditions 3.0 Personnel 3.0 Price *) 4.03.0 Sub Total 3.0 Partnership 1.0 4.0 Culture 1.04.0 Trust 1.0 4.0 Ability 4.0 Total 2.43.4 *) based on NPV over 5 year
DAI/BSM 5. Details: Employee Compensation Negotiations have shown Employee compensation band was not in line with function Applying Fuwa would down-rate the employee positions 2 or more scales In corrected band, pay level within DSM was still above market Initial probing Works Council and Trade Unions showed: Not in favor of Outsourcing Rather see full redundancy compensation Reached agreement compensation package Reorganization cost amounts to € 630k Requested income guarantee for 5 years will not be rewarded by Siemens
DAI/BSM 6. Experiences so far… Our cultures do not fit, that’s why we match so well! Both organizations are complementary Siemens brings in a structured approach DAI is continuously reorganizing We conducted tough but fair negotiations Both parties aim for a long term relationship Siemens demonstrates an eagerness to show good results (but faced some difficulties)
DAI/BSM 7. Lessons Learned Pit-falls we found: We had misunderstandings on findings in the Due Diligence There was a slow start up of Transition (3 months later, things are moving) We experienced performance issues with ex-DSM staff Do not underestimate the HR&O issues! Conduct customer reference visits for decision making Engage a specialist in ICT sourcing or seek in-house specialist Have your supplier conduct a full Due Diligence Invest in a sound relationship Focus on Governing Principles of Service “Contracts are for lawyers”
DAI/BSM 8. Conclusion Telematica case Endorse the “Black Box” concept DSM focus on contract management only Build level of trust in service delivery Concentrate on objectively measurable results Aim for standardized, flexible and reliable services Rely on partner to implement the services (they have done it before) Look for creative solutions Find a reduction in TCO during contract period Aim for open book cost calculation Jointly find cost reductions over time
DAI/BSM 9. Other experiences DSM Anti-Infectives has experiences with different kinds of sourcing models: Own managed ERP & Plant Maintenance systems Hybrid situation for IT sourcing of desktop/infrastructure and services, a mixture of outsourced operations and strong DSM controls on these operations Black box model with Telematica The experiences show a wide variety but depend fully on the local situation Generic conclusions are difficult to draw but one thing is clear: there is no fixed model for each situation!!
DAI/BSM The outsourcings paradigma +/- Type of in/outsourcing:Own Managed Hybrid Black box Required managementLittle ContinuouslyMore than expected attention FlexibilityToo much Little Acceptable Cost: - visibilityReasonable Difficult Clear - TCOAcceptable More than expectedAccording to expectation Overall score+ +/-- ++/-