“Information Management in a

“Information Management in a

‘networked’ business environment”

The impact of an integrated supply and demand chain on an IT department

Jan Coerts

Faculty of Management and Organization University of Groningen

Apeldoorn, 2003

“Information Management in a

‘networked’ business environment”

The impact of an integrated supply and demand chain on an IT department

Written by:

Jan Coerts

Faculty of Management and Organization University of Groningen

Apeldoorn, 2003

Under the auspices of:

Faculty of Management and Organization University of Groningen

Prof. dr. ir. J.L. Simons Drs. D.J. Schaap

Written for:

DSM Coating Resins Drs. J. Besamusca

© 2003 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system of any nature, or transmitted in any form or by any means, electronic, mechanical, now known or hereafter invented, including photocopying or recording, without prior written permission of the author. The author is responsible for the content in this thesis.

“It is not the biggest nor the strongest who will survive, it is the one who is most able to adapt to change.” (Charles Darwin, 1809-1882)

T

C

EXECUTIVE SUMMARY ... 1

INTRODUCTION ... 3

1 COMPANY PROFILE... 5

1.1 DSM NV ... 5

1.1.1 History & profile... 5

1.2 DSM RESINS... 6

1.2.1 History ... 6

1.2.2 DSM Coating Resins... 7

1.2.3 Automation... 7

1.2.4 Demand Chain Management... 9

1.2.5 ICT... 9

2 PROBLEM FORMULATION ... 10

2.1 THE ASSIGNMENT... 10

2.1.1 Problem Statement ... 11

2.1.2 Relevance & clients... 14

2.1.3 Information sources... 14

2.1.4 Theoretical concepts ... 14

2.1.5 Limiting conditions... 15

3 THE IM ORGANIZATION ... 17

3.1 INTRODUCTION... 17

3.2 STRATEGY... 18

3.3 INDIVIDUALS & ROLES... 21

3.4 MANAGEMENT PROCESSES AND STRUCTURES... 22

3.5 TECHNOLOGY... 25

3.6 CAPABILITIES... 26

4 EBUSINESS AT DSM COATING RESINS ... 30

4.1 INTRODUCTION AND HISTORY... 30

4.2 SELL-SIDE... 33

4.2.1 Introduction ... 33

4.2.2 Web publishing ... 35

4.2.3 Online ordering ... 37

4.2.4 ERP – ERP Connectivity ... 39

4.2.5 Vendor Managed inventory ... 41

4.3 BUY-SIDE... 44

4.3.1 Introduction ... 44

4.3.2 Reversed auctioning ... 45

4.3.3 Connectivity ... 47

4.4 ORGANIZATION... 47

4.5 CONCLUSIONS... 47

5 EBUSINESS INFLUENCES ... 50

5.1 INTRODUCTION... 50

5.2 DIFFERENCES EBUSINESS... 50

5.2.1 Marketing and sales ... 51

5.2.2 Analyze... 52

5.2.3 Build ... 53

5.2.4 Maintenance and support ... 54

5.3 INFLUENCES ON INFORMATION MANAGEMENT... 55

5.3.1 Strategy ... 55

5.3.2 Individuals and roles ... 56

5.3.3 Management processes and structures ... 57

5.3.4 Technology ... 59

5.4 ADDITIONAL INFLUENCES... 60

5.5 CONCLUSIONS... 61

6 CHANGES NEEDED... 63

6.1 INTRODUCTION... 63

6.2 STRATEGIC CHOICE... 63

6.3 STRATEGIC IMPLEMENTATION... 65

7 CONCLUSIONS... 68

7.1 THE CURRENT IM ORGANIZATION... 68

7.2 THE CURRENT EBUSINESS STRATEGY... 68

7.3 THE MAIN INFLUENCES OF EBUSINESS... 69

7.4 THE CHANGES TO BE CARRIED OUT... 70

APPENDICES ... ERROR! BOOKMARK NOT DEFINED. INTERVIEWS... ERROR! BOOKMARK NOT DEFINED. THE EBUSINESS ABC ... ERROR! BOOKMARK NOT DEFINED. LIST OF FIGURES... 73

REFERENCES... 74

E

It is especially the past few years that the attention for eBusiness has increased. With the main reason to optimize the value chain (and therewith reducing costs from that chain), DSM Coating Resins started to implement several eBusiness implementations. In reality, information from existing information systems, was shared with business partners, by the means of using internet technology. In optima forma, this should result in “networked firms”, where business is conducted electronically and information is being shared to optimize processes, not only within the different companies, but also between the different companies in the value chain.

The fact that information systems get integrated and information is being shared with several business partners, does not only have an impact on the DCR organization itself, but also on the Information Management organization, responsible for delivering the different eBusiness solutions.

Although literature on eBusiness and its business impact is widespread, the consequences of eBusiness on IT departments can hardly be found. This is exactly what this report is about.

The main question in this research is:

What are the consequences of the eBusiness strategy implementation for the Information Management organization and what changes are required to deal with this implementation in a proper and pro-active way?

The current eBusiness strategy within DCR enables the integration of information, currently present in existing information systems, with external systems. In order to realize this, different eBusiness solutions are being offered to business partners. The most important are:

- Web publishing;

- Online ordering;

- ERP – ERP connectivity;

- Vendor Managed Inventory;

- Reversed auctions.

During the implementation of these initiatives, it appeared that requirements in the field of eBusiness confronted the IM organization with some significant differences compared to the already being delivered services. These main differences are:

- Business needs are emerging, and as a consequence, are less planned in advance;

- Faster delivery times are required;

- More cross-functional integration is required;

- Technologies often change;

- A partner focus is required, resulting in different service levels.

As eBusiness is seen by the DCR organization as a strategic ICT service in realizing their business strategy, the importance of dealing with these differences in a proper way, increases tremendously.

Especially these differences result in the fact that the current IM organization is not capable of dealing with the eBusiness implementations in aproper and pro-active way.

Different capabilities are required in order to deal with eBusiness as requested by the DCR organization. These main capabilities include:

- Understanding the eBusiness strategy; As indicated by J.F. Rockart and J.E. Short, IT executives must educate themselves and their staffs about all significant aspects of the business.

- Structured ICT planning; As the customer base of the IM organization is increased with business partners (due to system integrations), agreements also need to be made with business partners. This requires a stable planning.

- Integration management; As information systems get connected with eBusiness, this integration needs to be managed. Changes in existing, internal, information systems might influence information systems of business partners as well.

- Proper knowledge and skills, at all levels within the IM organization; As also indicated by J.F. Rockart and J.E. Short, the design, programming and maintenance and support of business-critical, highly complex systems present a far greater challenge than do systems of previous eras.

- Knowing the ICT market; In order to become pro-active towards the DCR organization, relevant ICT market knowledge is required.

The author even argues that a strategic change is preferred in order to deal with eBusiness in a proper and pro-active way. A differentiation strategy will help the IM organization to realize that, although there is only one customer (DSM Coating Resins), there are several markets (customer groups) within that one customer, asking for a differentiation in service levels. The way to respond to those markets can however be quite different.

It is according to the author that the following actions need to be carried out in order to implement this changed strategy:

- Clearly define the ICT strategy and create alignment with the business strategy. It is the opinion of the author that the creation of the ICT strategy should become part of the overall creation of the business strategy. It is important to realize that in order to align the ICT strategy, clear communication and reflection with the different customer groups is required;

- Structure the organization along “process areas” instead of “application areas”. As identified as a major consequence of eBusiness, integration management needs to be identified as an important activity within the IM organization. By introducing process areas, the

integration management task can be organized at this level;

- Define the requested service levels and formalise them. To align the expectations of the different customer groups and the IM organization, formalised service levels should be agreed upon. These “service levels” should contain agreements on support and

maintenance, new developments, application structure and procedures, cost structures and security. These service levels should be created for each application the IM organization delivers services for;

- Formalise existing structures and procedures. In order to comply with the agreed service levels, current structures and procedures need to be more formalised. It is exactly this formalisation which will help the IM organization create a stable ICT planning;

- Create an education plan. As seen throughout the whole research there is a knowledge gap within the IM organization related to: 1) eBusiness technologies, 2) Communication skills and 2) General ICT market understanding. This needs to be accounted for.

INTRODUCTION

This thesis has been written as an assignment of DSM Coating Resins Europe bv in Zwolle.

It is also my paper for graduation at the Faculty of Management and Organization, University of Groningen.

This thesis could never have been completed without the encouragement and support of a vast number of people, some of whom I would like to mention specifically.

First of all I would like to thank DSM Coating Resins in general for giving me the opportunity to experience the atmosphere of working within a real Dutch Multinational Enterprise.

The diversity of the business (and the ever present politics), the people and the fun during work even resulted in the fact that I had to finish this thesis while I was working….for DSM of course.

It is especially this finishing that I would like to thank my parents for. They have always provided me the encouragement, in particular by not continuously asking how the thesis was progressing, and by trusting me, that eventually, it would be finished. Pap & mam, Bedankt!

My thanks also go out to Bram Adema, for helping me to shape the theoretical framework. I very much appreciate his willingness to spend his valuable time on sharing his thoughts with me.

A special word of thanks goes to my supervisor, Mr. Simons. He inspired me at moments when the outcome of this thesis wasn’t as sure to be what it is today.

And last, but not least I would like to thank the people at DSM Coating Resins who helped me to provide the information and feedback I needed: IT manager Hille van Spanje, Process engineers Hans van der Hoeven and Jan vd Broek and eBusiness manager Jan Besamusca.

I end this introduction by mentioning Odile, for her ever present love and support…

Jan Coerts

Apeldoorn, April 2003

1 C

1.1 DSM NV

1.1.1 HISTORY & PROFILE

The Dutch State Mines Company (DSM) was established in 1902 by the dutch government to provide the Dutch state with energy, without being dependent on foreign and private coalmines. Since 1960 however, coal as an energy source was being gradually replaced by oil and gas world-wide. This made the Dutch coalmines unremunerative. As a result of this,

the Dutch government ordered DSM to close the mines in a ten year period (1960-1970) and DSM started using oil and gas for its chemical activities instead of coal. Since then, DSM has been growing both by extending it’s own activities and by taking over other companies. DSM mainly operates in Europe, the United States of America and Asia. Currently DSM has a turnover of € 6 billion and a workforce of 20.000 people.

“Vision 2005: Focus and Value¹” is the company strategy that will carry DSM to a turnover level of

€ 10 billion by 2005. About 80% of this will come from specialties such as high-quality biotech and chemical products and materials. These, in turn, make their way to the pharmaceutical industry, food sectors, the automotive market, and to manufacturers of electrical equipment and electronics.

DSM has a decentralised organisational structure built around business groups that are

empowered to carry out all business functions. There are a total of 14 business groups, which have been grouped into three clusters:

• Life science products

This cluster focusses on the manufacture of products for the pharmaceutical sector, the food and feed industry, and the agrochemical industry.

• Performance materials

Business Groups within Performance Materials produce high-quality materials including UV-curable coatings for optical fibers, elastomers, engineering plastics, and thermoset resins for use in dry and wet paints and for the production of pipes, tanks and containers.

• Industrial Chemicals

The Industrial Chemicals’ business groups concentrate on the production of melamine, caprolactam and artificial fertilizers.

DSM Resins, consisting of the Business Groups DSM Coating Resins and DSM Composite Resins is part of the Performance Materials cluster.

1Source: Internet address “www.dsm.com”, 2003

1.2 DSM R

1.2.1 HISTORY

In 1971 the company Synres was taken over by DSM. At that moment, Synres had locations in Hoek van Holland (Netherlands), Filago (Italy), Compiègne (France) and Santa Margerida (Spain).

In 1983 DSM acquired Scado (Zwolle, Netherlands) and Sheby (France) both part of Urachem, a division of Unilever. Synres and Urachem were both to small to operate in a heavily competitive market during the recession that was taking place in the chemical industry during 1982-1983. To enhance their position in the market, Scado and Synres fused (1983) into a new division of DSM NV: DSM Resins².

The first years after the formation of this new division were used for rationalization. Several production locations were closed and functional units were combined. A company structure raised based on country level profit centers. Economical growth and approval plus stimulation to expand by DSM NV led to an expansion policy. Starting taking over smaller companies in 1985, DSM Resins became an important resins producer at the end of the ‘80s. In 1988 and 1989 annual turnover and net-profit reached record heights.

In 1989, DSM Resins was composed of a group of fairly autonomous operating companies. These companies were responsible for their own level of turnover and operated on their local market.

There was hardly any co-operation between the companies located in the various countries and overlap in production while customers could not purchase all products needed from DSM Resins through one sales office. This was an inefficient and undesirable situation in an increasingly competitive market, where a large number of competitors and low switching costs for customers meant loss of customers if not serving them well enough.

In response to this problem, a new business unit structure and the European Site Plan (ESP) were introduced, starting in 1989. With the ESP, production sites became dedicated sites, which each produced part of the entire DSM Resins product range, which enabled more efficient production.

Sales departments were decentralized, and starting co-operating.It was now possible for customers to buy all products needed from DSM Resins at one sales office³.

Due to the fact that the diversity in markets was too big, it was decided in 1999 to split the business group DSM Resins into two different business groups, DSM Coating Resins and DSM Composite Resins. Because this thesis will be executed for DSM Coating Resins, this Business Group will be further described in the next paragraph.

2 Resin = thermosetting plastic, the main raw material for the paint industry

3 DSM Resins Communiqué January 1997, DSM Resins 1997

1.2.2 DSM COATING RESINS

DSM Coating Resins is a dynamic Business Group, specialising in the development, manufacture and sale of coating resins and coatings for optical fibres.

DSM Coating Resins has production plants and sales offices throughout Western Europe with facilities in both the USA and the Far East. The head office is situated in Zwolle. Currently DSM Coating Resins has a turnover of € 500 million and a workforce of 800 people.

DSM Coating Resins has following business areas:

• Automotive and Plastic Coating Resins

Automotive coatings are based on many types of resins to meet the specific and stringent demand of the car industry for primer surfacer, metallic basecoat, clear coat and solid topcoat.

• Can and coil Coating Resins

Can coatings are used for metal packaging. A thin coating layer protects the can against corrosion and acts as an inert barrier between contents and substrate.

• Decorative/Protective Coating Resins

Decorative, protective & maintenance coatings are used for a wide variety of applications and must therefore meet diverse requirements.

• Powder Coating Resins

Powder coating resins are used for the production of solvent free powder coatings.

These coatings have proven to be technically strong, economically attractive and environmentally friendly.

• Fibre Optic Coatings (UV)

DSM Desotech, a business unit of DSM Coating Resins, is the world's leading producer of UV-curable coatings, inks and matrix materials for glass optical fiber and cable used by the telecommunications industry. DSM Desotech also produces a

variety of UV-curable materials for other industries, including CD (compact disc), lacquiers and DVD (digital versatile disc) adhesives for the Optical Media industry and UV-curable hardcoats for use in the Optical Display industry.

1.2.3 AUTOMATION

When the new business unit structure and the European Site Plan were introduced within DSM Resins, the various production and sales departments would now constantly need to change information.

Mostly operational information like, status of production orders, production planning, inventory, transport planning etc. The information system that was chosen for this operational information was SAP R/3 (SAP=Systeme Anwendungen Produkte). SAP enabled the coordination of functional areas (purchasing, production, marketing, sales and logistics) and linked them together.

SAP registers all operational data at DSM Coating Resins. This data helps the management to make better and faster decisions than before. In order to have this information presented in an aggregated, structured way, a Management Information System (MIS) has been developed (see figure 1). Chosen was to use an add-on product from SAP, the SAP Business Information Warehouse (BIW).

The BIW can generate management reports for five functional areas: Marketing Sales, Purchasing, Logistics, Finance and Production.

The implementation of SAP did not only remove the boundaries between the functional areas, it also allowed management to centrally control different functional processes like purchasing, inventory planning and order acceptance. These processes were managed by the different locations itself. In 2000, sales locations and manufacturing locations became non-profit centers.

Herewith they could focus on their “core competence”, either selling or manufacturing. The overhead processes were now controlled by the “principal”, the head office.

In 2001, the management of DSM Coating Resins decided not only to use this “central” information from SAP for its own purposes, but to share it with other business partners. The so called “internet technology” was used to share the data. Product and sales information needed to be exchanged with customers. Raw material stock information needed to be exchanged with purchasers and transport data was needed for the transport companies. Lately “Webmethods” has been chosen as software product to enable information exchange between DSM and its partners. Asera has been chosen to transact via the internet with business partners. The relationships between the SAP R/3, BIW, Webmethods, Asera and its partners can be seen in figure 1.

Optimizing the complete demand and supply chain by exchanging information with business partners by using the internet (further referred to as “eBusiness”⁴) is currently the key challenge in the field of automation for DSM Coating Resins.

FIGURE 1;RELATIONSHIP BETWEEN SAP R/3, BIW, WEBMETHODS, ASERA AND PARTNERS

4Source: “e-Business: Roadmap for succes”, Dr. Ravi Kalakota and Marcia Robinson, 1999

SAP R/3

Marketing

Purchasing

Production Finance

Sales

Logistics

SAP BIW (Reporting)

Webmethods

Webmethods

Carriers Customers Suppliers Banks Elemica AserA

(internet)

1.2.4 DEMAND CHAIN MANAGEMENT

After deciding to centralize quite some processes that were previously managed by the different locations, DCR established an organizational unit that was responsible for these activities, the Demand Chain Organization. This organization is responsible for:

- Procurement;

- Logistics;

- ICT;

- eBusiness;

- Demand chain management.

By having all these functions managed via a central organization, DCR tries to optimize the integration between them.

FIGURE 2; THE DEMAND CHAIN MANAGEMENT ORGANIZATION

1.2.5 ICT

One of the buildingblocks of the demand chain organization is the ICT department, called

“Information Management”. “Information Management (IM)” is the department which shall have the focus of this thesis.

This department is responsible for all information and communication technology (ICT) related matters. This comprises:

- Development Information and Communication (ICT) vision;

- Management (maintenance and development) of infrastructure;

- Management (maintenance and development) of business applications;

- Management of data;

- Management of operations and services;

- Configuration management and security;

- Scouting ICT opportunities.

Currently the “Information Management” department manages the ICT infrastructure for 22 locations worldwide, around 150 applications and has a workforce of 30 people.

It is this department that will be the subject of chapter three.

Demand Chain Director

Procurement Logistics ICT eBusiness Demand Chain

Management

2 P

2.1 T

Since 1996 (the start of the implementation of SAP) a central “Information Management” team has been appointed to take care of the different SAP implementations. Currently, 20 different locations are running on SAP R/3. Over the years, this department has evolved from initially an

implementation team for SAP, to a professional organization that is responsible for all Information and Communication Technology (ICT) related matters. Over the years, the main focus has been to create and maintain a standard, high quality business model (reflected in SAP R/3) to ensure one way of working at all DSM Resins locations. As a result, the focus was mainly on process

optimization “within” the organization. As from the year 2000, DSM Coating Resins discovered that a lot of the internal processes could even be further optimized by sharing information with business partners. Not only the value chain of DCR was taken into account, but also those of suppliers and customers. Referred to as “Demand Chain Management”, DCR started to move the orientation to

“external process optimization”. The main driver for this change of focus was the technology potential offered by ICT. Internet technology made it very easy for DSM Coating Resins to link up (technically) with business partners. By doing this, necessary information could be shared, with ultimate process optimization as a result. From an ICT perspective, it is exactly the current

“template” and internal focus within the IM organization that is now resulting in a reactive organization, not capable of dealing with this fast changing, complex environment created by eBusiness.

Attempts to find the reasons for the organization’s reactiveness has directed to (among others) strategic management. Lack of knowledge and business understanding in the field of eBusiness results in the fact that the IM organization is not able to realize the importance for its “customers”.

Business networks are evolving and connections need to be established very fast. Also according to the IM organization, strategic management is the main reason for its reactivity. Although there is a clear business vision on eBusiness and its future within DSM Coating Resins, the IM

organization is not able to deal with it in a proper way.

Currently the IM organization is facing many problems during the implementation of the eBusiness strategy, caused by its reactiveness. Therefore a research need to be conducted to explain the consequences of the eBusiness strategy for the IM organization. The purpose of this research is to define the changes required within the IM organization to be able to deal with this implementation in a proper and pro-active way.

The assignment cq company goal of this research therefore is:

Define the changes required within the Information Management organization to deal with the eBusiness strategy implementation in a proper and pro-active way.

2.1.1 PROBLEM STATEMENT

Research goal

In the assignment, attention is aimed at strategic management as one of the ways to achieve improvement in proactivity.

Therefore the purpose of this research is:

Define the changes required within the IM organization in order to deal with the implementation of the eBusiness strategy, taking into account:

- The requirements as derived from the current eBusiness strategy and

- The consequences of these requirements for the strategy, individuals and roles, management processes, technology and structures.

Questions

Together with the IM organization this problem statement has been explored and translated to a main question for this research:

What are the consequences of the eBusiness strategy implementation for the Information Management organization and what changes are required to deal with this implementation in a proper and pro-active way?

In order to allow for a manageable execution of the problem statement, several subquestions have been formulated.

1. What does the current Information Management organization look like in terms of strategy, individuals and roles, management processes, technology and structures?

2. What is the current eBusiness strategy of DSM Coating Resins and how is it implemented?

3. What influences does the eBusiness strategy imply for the strategy, individuals and roles, management processes, technology and structures within the Information Management organization?

4. Which changes need to be carried out within the Information Management organization to deal with the eBusiness implementation in a proper and pro-active way?

In order to allow a manageable research, a research framework has been created. This framework will show in detail how this research will be pertained. Within this framework it is important to realize that the IM organization during this research will be seen as a separate entity, as a separate company within its existing environment. The IM organization will be seen as a

“company“, delivering services instead of products, to its customer(s). In this case the assumption is made that there is a mismatch between the services the IM organization delivers to its

customer(s) and the wishes they have (eBusiness requirements). For that reason it seems most appropriate to do a strategic analysis as a method of analysing this situation.

After identifying the main strengths and weaknesses of the current IM organization, the opportunities and treaths of the environment (eBusiness requirements) will be described.

The main consequences of the above mentioned analysis will be presented and will form the basis for a strategic choice (or read “alternative direction” of the current strategy).

The recommended changes in order to deal with eBusiness in a proper and pro-active way, will finally be presented.

Johnson and Scholes⁵ give (in their book “Exploring the corporate strategy”) a very helpful method to conduct such a strategic analysis. Their theory will form the basis for this paper.

For a graphical representation of the above mentioned, please refer to figure 3.

5Source: “Exploring corporate strategy”, G. Johnson & K. Scholes, 1988

All subquestions will be handled in a separate chapter:

Chapter three will give a description of the current situation within the Information Management organization. It will include a description of the current strategy, the individuals and roles, the management processes and structures and the main technologies used. A value chain analysis will be performed in order to define the major strengths and weaknesses within the IM organization.

Chapter four contains a description of the eBusiness strategy and explains the different services DSM Coating Resins offers in this field. Because the IM organization is perceived to be a separate entity, this eBusiness vision of DSM Coating Resins is seen as the main environmental force, determining the need to develop services within the IM organization. From here, the main opportunities and threats of this environmental force will be described.

Chapter five will present the consequences of the chosen eBusiness strategy for the IM

organization by looking at 1) current identified problems and 2) additional consequences provided by literature. Especially Venkatraman⁶ (The corporation of the 1990s) will be used. The

consequences will be described in relation to the strategy, the individuals and roles, the management processes and structures and the technolgy.

Finally, chapter 6 will provide the recommended changes for the Information Management organization in order to deal with the eBusiness implementation in a proper and pro-active way.

For a detailed overview of the literature being used in this paper, please see the reference list in the appendices.

6Source: Article “The networked organization and the management of interdependance” , J.F. Rockart and J.E. Short, published in “The corporation of the 1990s”, M. S. Morton, 1991

FIGURE 3; THE RESEARCH FRAMEW ORK

Strategic choice & implementation Chapter: 6

Authors: Johnson & Scholes Strategic analysis Chapters: 3,4

Authors: Johnson & Scholes

Vision

Internal

Value chain analysis

Subquestion: 1 Chapter: 3 Author: Porter

External

eBusiness requirements eBusiness vision

Subquestion: 2 Chapter: 4

eBusiness consequences

Subquestion: 3 Chapter: 5 Author: Scott Morton

Strategic choice/alterna-

tive direction

Subquestion: 4 Chapter: 6 Author: Porter

Strategic implementation

Subquestion: 4 Chapter: 6

2.1.2 RELEVANCE & CLIENTS

As eBusiness has been defined as one of the major pilars in the business strategy for DSM

Coating Resins, a smooth implementation is required. A proper operating IM organization is crucial for realizing the targets defined in the business strategy.

Therefore the problems have not only been identified by the IM organization itself, but also by the management team of DSM Coating Resins. This is the reason that the clients are:

- The Business group management team of DSM Coating Resins;

- The management of the IM organization;

- The management of the eBusiness organization.

2.1.3 INFORMATION SOURCES

Three groups of information sources have been used:

- Key people within the IM organization and the eBusiness organization. These sources have been used for a definition of the current problems and for a determination of the influences of eBusiness on the organization. The information has been retrieved via personal

interviews.

- Management team members. These people were used to determine the eBusiness strategy. Personal interviews have been conducted to retreive this information.

- Documentation in libraries and at DSM Coating Resins. Literature has been used to find more information on concepts and theories that have been used in this research.

Documents within DSM Coating Resins have been used to find information on how the IM organization is currently operating. For an overview of the most important theoretical concepts used, please see paragraph 2.1.4.

2.1.4 THEORETICAL CONCEPTS

Throughout this paper several theoretical concepts are used. The most important concepts will be described in this paragraph as they are crucial for pertaining this research.

1) Corporate Strategy by G. Johnson and K. Scholes⁷.

This concept is mainly used as a framework for this research. Johnson and Scholes describe in their book “Exploring corporate strategy” several approaches to strategic management.

They use a framework which can be used in case of strategic questions and/or problems. See figure 4 for a graphical representation of their concept.

It is their opinion that strategic management should start with doing an analysis of the current position in terms of the environment, expectations, objectives and resources. After the analysis, a generation of strategic options might follow, ultimately resulting in a strategic choice. After a strategic choice, the implementation constraints can be investigated. The consequences for people, organization structure and systems need to be determined.

It is this model which will guide as a framework through this research. The same path will be followed in order to make a final judgement on the changes required for the IM organization.

7Source: “Exploring corporate strategy”, G. Johnson & K. Scholes, 1988

FIGURE 4; ELEMENTS OF STRATEGIC MANAGEMENT

2) Value Chain Analysis by M. Porter⁸.

The concept of the value chain is particularly useful in understanding an organization’s strategic capability since it concentrates on value activities and the linkages between activities rather than simply resources alone. The Value Chain Analysis concept helps to identify the strenghts and weaknesses within the organization. This is exactly what it will be used for within this research.

3) The corporation of the 1990s by M. Scott Morton and others⁹.

In “The corporation of the 1990s”, M. Scott Morton and others describe the impact ICT is having on organizations. The title might seem a little bit alternated, but in reality DSM Coating Resins does fit perfectly within the description they give from the organization of the 1990s.

Within this paper, especially the impact of networked firms will be used. Within chapter 5 their results will be used as an addition to the results that were found in this research.

2.1.5 LIMITING CONDITIONS

The approach used for the research process can be described as the “exclusive approach”¹⁰. The research procedure follows a static path. The problem statement will be attuned to the need of the client only at the beginning of the research process. After that, the research will be static. It is expected that the eBusiness needs and the problem statement of the client will stay the same.

Of course this research is subject to certain limiting conditions that are worth mentioning because of their possible adverse consequences. The clients have been made aware of their possible adverse consequences and they agreed to proceed with this research.

8Source: “Competitive Advantage”, M. Porter, 1985

9Source: “The corporation of the 1990s”, M. S. Scott Morton, 1991

10Source: “Bedrijfskundige methodologie”, A.C.J. de Leeuw, 1993

Strategic analysis

Strategic implementa-

tion Strategic

choice Environment

Expectations

& objectives Resources

Resource planning

Organization structure

People &

systems Options

Evaluation of options

Selection

Five limiting conditions have been identified:

1. Interviews with the IM organization are to be kept at a minimum due to the enormous workload;

2. The interviews with the IM organization need to be conducted very carefully as people might feel offensed, caused by previous research. This research implied quite some changes for the organization;

3. Interviews are to be conducted at the headoffice in Zwolle only. The IM organization in the United States (Elgin) will be kept out of scope.

4. In general, the assumption is made that the IM organization will continue to operate as a staff department within the DSM Coating Resins organization. Strategic options that will deviate from this assumption will not be evaluated (e.g. DSM Coating Resins could decide to outsource the complete IM organization). In the case DSM Coating Resins does want to take these options into account, additional research is needed.

5. The eBusiness vision and requirements as defined by DSM Coating Resins will be fixed during the research. In the case one of the two above mentioned variables will change during the period of the research, additional research might be needed.

Because of the low amount of interviews allowed as indicated above, there may be an effect on the outcome of the project. The effect being a deviation of the project outcome from the situation as it is in reality. Clarification for this is that statistically seen, the greater the sample (the more

interviews are conducted), the more accurate the picture of the reality. In the research the assumption is made that the changes as recommended for the IM organization will also apply for the IM organization in the United States. Because they are not involved in the research, this might cause a low level of acceptance or no acceptance at all of the results.

3 T

IM

3.1 I

Since 1996 (the start of the implementation of SAP) a central “Information Management” team has been appointed to take care of the different SAP implementations. Forming One Company Using Sap (FOCUS) was the key stroke during the late 90s. Globalization of the resin and paint industry required DSM to operate as one company, all over the world. ICT was clearly recognized as being the enabler to do this. The main focus at that time for the organization was to create and maintain a standard, high quality business model (reflected in SAP R/3) to ensure one way of working at all DSM Resins locations.

It was actually this moment that DSM Resins (at that time the DSM Coating Resins and DSM Composite Resins were still merged) decided to centralize its ICT activities. Until that time, ICT activities were completely the sole responsibilities of the different locations (sales offices and manufacturing locations).

In 1996 DSM Resins decided to globalize its ICT infrastructure by establishing a physical

connection between the different locations within Europe (WAN, Wide Area Network). By doing this an organization broad platform was created for data and communication facilities. In 1999, also the USA locations became part of this infrastructure. This platform enabled the desired, fast

implementations of SAP over the different locations.

Currently, anno 2003, 20 different locations are running on SAP R/3. During this period, the IM organization has evolved from initially an implementation team for SAP, to a professional organization that is responsible for all Information and Communication Technology (ICT) related matters.

This chapter will be used to get a good insight at the current way of working within the IM organization. Figure 5 will be used as a framework for this chapter. This framework has been derived from M. Scott Morton and others¹¹, who used it in their research on the impact of IT on business missions, organizational structures and operating practices. It gives a good overview of the internal processes, ICT will have impact on.

As you can see, the five forces represent the different elements in subquestion 1:

What does the current Information Management organization look like in terms of strategy, individuals and roles, management processes, technology and structures?

In paragraph 3.3 (Management processes and structures), a value chain analysis (derived from M.

Porter¹²) will be done in order to show the different process strengths and weaknesses in relation to eachother. Furthermore, the different elements of subquestion 1 as stated above, will be answered sequentially in this chapter.

11Source: “The corporation of the 1990s”, M. S. Scott Morton, 1991

12Source: “Competitive Advantage”, M. Porter, 1985

FIGURE 5; THE FIVE FORCES WITHIN AN ORGANIZATION THAT ICT WILL HAVE IMPACT ON

The framework as shown above, fits in the research framework as described in chapter 2. It will describe the “expectations and objectives” and “resource” part within the research framework as provided by Johnson and Scholes.

.

3.2 S

This paragraph will describe the main elements of the strategy within the IM organization. To start with, a description of the strategy process will be given. One important remark upfront concerns the validity of the information contained in this paragraph. Within the IM organization there is very little or sometimes even no physical documentation available concerning their strategy. All the

information in this paragraph has been collected during personal interviews and has been reviewed by the persons interviewed.

In some cases the author will add personal opinions. In those cases, it will be mentioned.

It is the author’s opinion that the current strategy, as described below, has mainly been developed emergently, rather than deliberately¹³. Over the years, more deliberate elements have been added.

In general the strategy of the IM organization is derived from the DSM Coating Resins business strategy. The strategy planning cycle is being performed every five years. The purpose of the

“Business Strategy Dialogue”, as it is called, is to review the strategy for the complete business DCR operates in. Since 1999 the BSD also contains a chapter “ICT”. This chapter shows the influence and impact ICT will have in order to realize the strategy as developed within the BSD.

13Source: “The strategy process”, H. Mintzberg and J.B. Quinn, 1992

Strategy

Structure

Technology Management

processes

Individuals &

roles

The ICT part has sofar been very limited and very high level. The IM organization is not involved in creating this part of the strategy. Based on this chapter, the IM organization is responsible for creating its strategy. The outcome of this activity, is currently a document with general guidelines on ICT within DCR and a high level overview of the major areas of work. The frequency of creating this “strategy” is based on the BSD.

Below, a description will be given of the main strategy elements within the IM organization.

As the Information Management organization started, their main task was to ensure a smooth implementation of SAP at all DSM Coating Resins locations. It is especially this historical reason of existance that influences the way the organization currently operates. Although the organization is responsible for over one hundred ICT applications, SAP is their core application. After the major implementations in 1998, the main objective for the IM organization was to improve the way of working at all locations. During the several implementations, slight deviations in working processes were accepted and straight project scope definitions were limited, mainly due to the big change for the local organizations. Since 1998 though, these deviations were no longer accepted and

processes needed to be standardized. Next to this rationalization, SAP functionality needed to be extended, as more functions became available in new releases.

After this improvement phase in 2000, a clear vision on SAP had been developed:

Standard SAP needed to be used as much as possible (no custom made add-ons) and whenever business processes needed changes, the process in SAP was investigated first. Business Process Reengineering (BPR), as it is called by many authors¹⁴ was widely accepted within DCR.

“We are not unique and others may have done this before” was a well known statement during the interviews. Actually, the above mentioned does not only apply for SAP. It has been and will be applied to all the applications the IM organization is responsible for. Custom made applications are planned to be abandoned and replaced by “off the shelve” software packages.

One of the major consequences of this approach was that the focus of the whole organization shifted more and more to the maintenance and support areas as standardization increased. New custom made developments were evaluated very thoroughly and the initial innovative character of the department slightly reduced. Still in 2003, this is the case.

Furthermore, there is an increasing movement to centralize ICT activities at DSM corporate level, as overall efficiency benefits could be realized. As from the end of 2003 all infrastructure related activities will be transferred to DSM corporate ICT.

This also applies to SAP, as plans are being developed to create one SAP template model for all business groups within DSM.

Summarizing it can be said that the IM organization is:

- Striving to implement “best practices” including “off the shelve” standard software solutions;

- Focussing on SAP as its main service;

- Focussing on the maintenance and support of the applications as their main competence;

- Striving to implement a global standardized infrastructure (hardware);

- Confronted with an increasing force to centralize standard ICT applications at a corporate level.

The above mentioned can be illustrated by looking at the current market segmentation.

This will be done based on the following attributes:

- Customer type; Although the IM organization has one “big” customer (the DCR

organization) a distinction can be made within that customer. A clear difference within the different functional areas within DCR can be found when looking at the importance of IT in realizing their strategy. Two groups have been identified. First, the group who is using ICT as a competitive element in their strategy. For this group, ICT in general, or more specific certain applications (services) are crucial in order to realize their strategic goals. For the

14Source: “Informatiestrategie”, Prof. drs. J.A. Oosterhaven, 1994

second group, ICT in general, or more specific certain applications (services), are supportive in order to realize their strategic goals.

- Degree of service required; Because ultimately, the IM organization is not only

responsible for the implementation of new ICT services, but also for the maintenance and support afterwards, it is important to distinguish between different service levels, required per application (service) area. These can either be high, medium or low;

- Degree of innovativeness; Per application area, a clear difference can be found in the field of new developments. This attribute concerns the frequency of new developments required. The values can either be high or low.

- Application (service) areas; The last attribute refers to the areas the different applications (services) can be grouped into. A distinction is made between: Infrastructure, groupware, SAP, research and eBusiness. For a detailed description of these application (service) areas, please see paragraph 3.3.

The above mentioned is illustrated in figure 6.

F^IGURE 6; A MARKET SEGMENTATION FOR THE IM ORGANIZATION

It is the opinion of the author that the main attention within the IM organization is currently paid to the “diagonal patterned” segments (infrastructure and SAP) and thereby focussing on medium and high levels of maintenance and support, for customer groups using ICT as a supportive element in realizing their strategy. It is clear, when looking at the generic strategies of Porter¹⁵, that the original strategy within the IM department was a strategy of “focus”. In the IM case, the focus was on costs. There was a clear need to standardize SAP usage against a cost effective level, thereby implicitly creating a “cost focus” strategy.

15Source: “Competitive Advantage”, M. Porter, 1985 Com-

petitive

Suppor- tive

Low Medium High

Research

Groupware

Infrastructure

eBusiness

SAP

High

Low Degree of service

Degree of innovativeness

Customer type

3.3 I

&

The IM organization is mainly organized according to the applications (services) it delivers:

- Infrastructure; This part of the organization mainly focuses on the organization’s ICT infrastructure. It includes all used hardware, networks and information architecture related subjects. The maintenance of the existing infrastructure has been outsourced to different third parties, specialized in this field. The IM organization is particularly involved in case of changes and/or new developments. For each location a local coordinator has been

appointed to take care of first line support in the case of problems. The establishment of the common office environment is part of this cluster (desktop, operating system, word

processing, spreadsheet, mail functionality etc).

- Groupware; Within the groupware cluster the main activities concern the applications, used especially for sharing information within the organization. Main applications include Lotus Notes (IBM) and Intranet applications.

- SAP; SAP is used within DCR as the main Enterprise Resource Planning (ERP) software package. SAP has been designed as integrated transaction processing system and includes the following areas: 1) Purchasing, 2) Production/manufacturing, 3) Sales, 4) Logistics and 5) Finance. Due to the fact that all of the above mentioned functional areas are integrated, financial reporting can be done very quick at a central level. This area includes Business Information Warehouse (BIW), the reporting application manufactured by SAP.

- Research; The main application in this area is ILIS (Industrial Laboratory Information System), which is used in the research departments within DCR. It contains recipe information and safety information on raw materials and developmental products.

- eBusiness; Two applications form the basis for this cluster: 1) Webmethods, which is being used as an integration platform and 2) Asera, which is the application that is used to

transact via the internet. Online ordering, as described in chapter 4 is an example of this application. Webmethods is the standard solution within DSM to integrate data from external partners with data from SAP.

- Management operations; In order to establish alignment between the different areas, a manager operations has been appointed.

Within the IM organization several roles can be distinguished:

- Information manager; The overall responsibility of the department is delegated to the information manager. Main tasks include: 1) Development of the Information and

Communication (ICT) strategy, 2) Human Resource Management, 3) Ensuring alignment with DSM Corporate ICT, 4) Budget control and 5) ensuring alignment with business management.

- Manager operations; This role is mainly responsible for the alignment of the different services being delivered by the IM organization. Main tasks include: 1) Ensuring alignment between the different application (service) areas, 2) Yearly ICT planning, 3) Overall project coordinator, 4) Purchasing of third party services.

- Business process engineer (BPE); The main responsibility for a business process engineer is to translate business requirements into ICT applications and to scout opportunities in the field of ICT that could be beneficial to the DCR organization. The business process engineer is also the linking pin between the developments within a certain application (service) area and the maintenance and support activities. This makes this role responsible for a certain application (service) area. Main tasks include: 1)

Alignment between business requirements and ICT opportunities, 2) Alignment between developments and maintenance, 3) Project management and 4) Management of third party resources.

- Application management (AM); The main responsibility for application management is to keep the applications in the appropriate application (servie) area up and running. Main tasks include: 1) Application maintenance, 2) Application support and 3) Application training.

- Local coordinator; This role is responsible for maintenance and support of the ICT infrastructure (hardware). In principle, every location of DSM Coating Resins has its own local coordinator. Main tasks include: 1) Maintenance of hardware, 2) Support for hardware, 3) Purchasing hardware and 4) management of third party resources.

For all of the above mentioned categories, a clear distinction is being made between maintenance and support of the application (service) and new developments that are being carried out.

For each application, a “Business Process Engineer (BPE)” is installed, who is, on behalf of the IM organization, responsible for the application. In some cases (e.g. SAP), the application is split into functional areas, with several process engineers, in order to keep it manageable.

For a graphical representation of the organizational structure of the IM organization, please see figure 7. A list of all applications used within DSM Coating Resins can be found in paragraph 3.5.

FIGURE 7; INFORMATION MANAGEMENT ORGANIZATION

3.4 M

In this paragraph, the major management processes and structures within the IM organization will be described. The roles as described in paragraph 3.3 will be used as entities. A distinction is being made between structural coordination and ad-hoc coordination. The following structures can be defined:

- Information manager – Business management; The coordination between the

information manager and business management (customer groups) is arranged via the so called “business group – ICT meeting”. The frequency of this coordination is quarterly and the main outcome should be agreement on the ICT planning. This meeting is often initiated by the IM organization and the input from business management is limited. Budget

reporting is being discussed within this framework.

- Information manager/manager operations – Suppliers / corporate ICT; The

coordination between IM and suppliers (including DSM corporate ICT) is arranged on an Information

manager

Infrastruc- ture

Groupware Management

operations

SAP Research eBusiness

BPE

Local coordinators

BPE

AM

BPE

AM

BPE

AM

BPE

AM

ad-hoc basis. There is no formal and/or structural coordination. The main deliverables of this structure should be the resource planning (forecast) and corparate ICT guidelines.

Although ICT within DSM is decentralized over the different business groups, there is a clear trend for more centralization in the future. Currently this movement can be seen by looking at the increasing number of corporate standards that are being defined within the field of ICT. Especially in the field of the infrastructure management, DSM ICT corporate is playing a crucial role.

- Information manager – Manager operations; Between the information manager and the manager operations there is a monthly, formalised structure, called “staff meeting”. The main topics are the ICT planning, resource planning and human resource related subjects.

- Manager operations – Business process engineers; Although a formalised structure between business process engineers and the manager operations is crucial, this formalised meeting, called “BPE meeting”, is often ad-hoc. The proposed frequency for this meeting is monthly, although in practice it is organised quarterly. Main subjects for discussions

concern the new business requirements, project progress reporting and resource allocation.

- Business process engineers – Business management; There is no formalised structure to ensure coordination between business management (customer groups) and the business process engineers. In case of new business requirements, new opportunities and/or

business critical changes, the coordination is arranged. Due to the informal culture within DSM Coating Resins none of the interviewed people seemed to have problems with this non formalised structure.

- Business process engineers – Application management; To ensure coordination between new developments and maintenance and support, a monthly “AM meeting” has been installed. This meeting is very structured and deals with maintenance planning, major support issues and recent developments.

- Application management – clients/users; Although the way of communication is

formalised and structured, there is no formal coordination between the IM organization and its clients/users. In case of needed support, coordination will be arranged.

The above mentioned is illustrated in figure 8.

FIGURE 8; STRUCTURES WITHIN THE IM ORGANIZATION

Information manager

Business management Suppliers /

corporate ICT

Manager operations

BPE

Application managers

Clients / users

IM – Supplier coordination

Ad-hoc Staff meeting

Monthly

Business group – ICT meeting

Quarterly

BPE meeting Monthly

AM meeting Monthly

IM – User coordination Ad-hoc

Business group - BPE meeting Ad-hoc

3.5 T

Below an overview is given of the most important technologies, the IM organization is delivering services for. For each application it is indicated what it is used for, whether the technology is common (for each customer group) or whether it is customer group specific. It is also shown what activities the IM organization is performing (marketing and sales, analyze, build, and maintenance and support).

In case a certain activity is being outsourced to a third party, this is also shown.

Please be aware of the fact that DSM Coating Resins is using over 250 applications! Only the main applications are shown here. In some cases, for the same application several technologies are being used. It is the opinion of the author that the information as provided in this paragraph should be sufficient to indicate the enormous diversity in technologies used within the IM organization.

Application area

Application Used for Common /

specific

Sales &

marketing

Analyze Build Maintenance

& support ADOBE Acrobat Document

viewing

Common Outsourced

CD-FOON Phone numbers

Common Outsourced

Declare Declarations Common IM IM IM IM

Drums Hour registration

Common IM IM IM IM

Euro Currency Converter

Currency converter

Common IM IM IM IM

Internet Explorer Web browsing

Common Outsourced

Microsoft Office Office tools Common Outsourced

MS Project Project managem ent

Specific Outsourced

NS Reisplanner Travel information

Common Outsourced

Winzip File size

reduction

Common Outsourced

Dunn & Bradstreet Market information

Specific Outsourced

Electronic Banking Electronic Banking

Specific IM IM IM

EY/PD Plus Tax declarations

Specific Outsourced

Autocad Technical design

Specific Outsourced

Ncm Credit information

Specific Outsourced

PAL Remote dial

in

Common Outsourced

PMS Pension information

Specific IM IM IM IM

Infrastructure

VIP Pension information

Specific IM IM IM IM

SAP R/3 Transaction processing

Specific IM IM IM IM

Business Information Warehouse

Reporting Specific IM IM IM IM

EXACT Transaction processing

Specific Outsourced

EXPODOS Logistic information

Specific IM IM Outsourced IM

TRAX Logistic information

Specific IM IM Outsourced Outsourced INTRASTAT Export

information

Specific IM IM Outsourced Outsourced SAP

Chemmate Safety information

Specific IM IM Outsourced Outsourced