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Group 2: IT Stalwarts Balaji Kannan Carlos Salvador Gary Kwang Kathleen Ojo Kurtis Franklin
OUTLINE
General Issues Main Stakeholders Theory and Concepts Symptoms and Problems Alternatives & Evaluation Criteria Best Solution & Implementation Plan Evaluation and Review Current Status Update
IT Stalwarts
GENERAL ISSUES
Facts
Royal DSM N.V. was founded in Netherlands in early 1902 as a coal mining company. Mined coal from 1906 to 1973. First produced coke oven gas in 1921. In 1930s expanded into plastics and started Caprolactam production in the 1950s; polyethylene and melamine in the 1960s. Started restructuring and diversifying in the 1980s into specialty chemicals. 1990s saw DSM transforming into petrochemicals, life sciences and performance materials. DSM saw opportunity to merge spin-off units in life sciences, performance materials that resulted from large mergers during the 1990s (Exxon-Mobil, BP-Amoco-ARCO) Vision 2005 program initiated in 2000.
GENERAL ISSUES
Challenges:
Choice between highly competitive low-margin petrochemicals or specialization in performance materials, life science products. How to resolve issues in IT at DSM [DSM had a fractured and disjoint IT operations during the 1990s because of vertical silos in its operations]? How to standardize technology infrastructure across departments and business units?
Consolidation of pharmaceutical and food industries led to spin-offs of smaller companies that attracted DSM to acquire because of stable earnings. DSM acquired Andeno, Gist Brocades, Deretil, and Chemie Linz, and Catlytica, in the pharmaceutical and food ingredients industries. DSM divested and sold its petrochemicals business to SABIC in 2002, for 2.25 billion euros. Immediately, DSM acquired the Vitamins & Fine Chemicals Division from Roche, which doubled the size of DSMs life sciences business. DSM purchased NeoResins in 2005.
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IT Stalwarts
MAIN STAKEHOLDERS
Stockholders Acquired Companies
Customers
Financial Institutions
IT Stalwarts
Value
Diversify portfolio for long term growth and sustainability. ICT has a cross-industry outlook that is able to support innovation processes.
Capabilities
Decentralized ICT is able to adapt to a changing business environment. Small reliable supply base. One-jump strategy allows for immediate transition and integration. EVITA program brought immediate attention and resolutions to problems. 6
IT Stalwarts
Differences in IT infrastructure among business units Newer and cheaper products in the market
What part of the infrastructure needs to be standard and what should be determined by the business unit? Realign business by acquisition or invest in current business to grow ? Is there opportunity to grow in the current business?
During the 1990s several global trends started to change and technological advances
Shift attention to global industry consolidation? React to price pressure or change approach to divestment/acquisition?
DSM launched Vision 2005: Focus and Value. Objective was to focus the company on growth opportunities.
IT Stalwarts
Cultural differences between DSM and acquired businesses Disconnected IT implementation at various business units
Is resistance widespread or in specific employees? Assimilate or trench employees resisting change? Will standardization hinder or improve the communication? What level of customization is required at the business unit? Can merged business contribute to change in other areas of DSM? Can other areas of DSM improve the newly merged business?
IT Stalwarts
Pro
Cons
Least disruption to the status quo Allows business units to define ICT strategies and solutions Easier to hit deadlines Less chance for encountering pitfalls along the way Allows for business process integration to occur sooner
Costly Least conducive to M&A growth or divestiture No economies of scale Loss of momentum post acquisition Increases time necessary to full integrate new M&A businesses Costly to run different non-standard systems to support M&A business
IT Stalwarts
Pro
Cons
Keeps momentum following purchase Allows the business processes to benefit from the M&A faster using single ICT platform Eases disentanglement by not introducing the need for integration with the new parent company
Potential for spectacular failure if every pitfall and deadline isnt defined and planned for Rarely used with success by others No business efficiencies by utilizing common business systems No unified reporting and purchasing power Increased complexity with less standardization
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IT Stalwarts
Best solution is to do a single jump integration strategy with company-wide standardization Acquisition IT System integration/replacement within 18 months following purchase Each location to receive a 23-week plan
Focus on standardization of hardware, network, systems, and support infrastructure Implement unified standard at each location around standard
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IT Stalwarts
IMPLEMENTATION
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IT Stalwarts
As the CIO charged with consolidation and revitalization of the ICT, Jo van den Hanenberg introduced and directed many programs to achieve strategic goals of divestures of old businesses and acquisition of new companies. The programs VITAL, eVita were instrumental in successfully integrating DSM Nutritional Products (earlier Roche Vitamins). Vision 2005 goals were met. The factors leading to its success were
Installation of a Program Support Office to oversee individual projects in eVita Program Overcame organizational differences and make it a lean and powerful machine in 15-18 months Business groups had no influence on infrastructural decisions leading to a close alignment with core DSM ICT serving as the backbone for the transformation
Success at Vision 2005 allowed the organization to set a more ambitious Vision 2010. Increased presence in Emerging Markets and decentralizing ICT services to satellite locations. Project Apollo led to operational excellence due to enhanced clarity around business operations.
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IT Stalwarts
CURRENT STATUS
Based on Annual Report for 2010 published in December 2010, some key statistics
China Sales
Net Profit Market Cap EBITDA
1,631
507 7,730 1,161
513
170 1,478 327
As of 30 Sep. 2011, DSM has completed acquisition of majority share (91.75 %) in China-based UHMWPE fiber manufacturer. Earlier this year, in July 2011, DSM acquired 51% stake in AGI corporation of Taiwan. DSM inks a strategic partnership in July 2011 with KuibyshevAzot of Russia.
DSM ranked as #1 in Dow Jones Sustainability Index in 2011 for the third consecutive year.
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IT Stalwarts
FUTURE PLANS
DSM has set ambitious targets for the near future (2013)
Increase EBITDA to 1.6 billion Increase ROCE to more than 15 % Organic Sales Growth : 5-7 % growth annually China Sales: From USD 1.5 bn to USD 3 bn High Growth Economies Sales: from ~ 32% of sales towards 50% of sales Innovation Sales: from ~12 % of sales to 20 % of sales. EBA Sales: > 1 billion
High growth economies: Russia, China, India, Brazil Ref: DSM in motion: driving focused growth A letter from the Chairman Feike Sijbesma
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IT Stalwarts
FUTURE PLANS
DSM will combine a stronger regional infrastructure with clear board level accountability for regional growth. Over the next two years DSM intends to:
establish a dual desk for members of the Managing Board responsible for regional growth in Asia and the United States; relocate the headquarters of the business groups DSM Fibre Intermediates, DSM Engineering Plastics and DSM Anti-Infectives to Asia; relocate the DSM Biomedical business headquarters to the United States; relocate the biofuel business, a part of DSM Bio-based Products & Services (formerly named DSM White Biotechnology), to the United States; establish new Innovation Centers in China and India; expand the existing Innovation Centers in the US and Japan; strengthen regional capabilities, infrastructure and management to provide regional insights to the business and support growth and innovation in the regions.
Ref: DSM in motion: driving focused growth A letter from the Chairman Feike Sijbesma
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IT Stalwarts