Royal DSM CFO Rolf-Dieter Schwalb discusses DSM's new shared services center in Hyderabad, India and how it supports acquisition integration. The shared services center performs transactional finance and administrative processes and plans to increase its headcount to over 250 employees by 2015. Schwalb notes that shared services helps DSM integrate acquisitions in a more agile way compared to the past. The shared services center is also driving process standardization across DSM's businesses.

1. WINTER 2013
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Royal DSM CFO Rolf-Dieter
Schwalb explains how shared
services support growth
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2. O
ver the last 100 years, DSM has
transformed its portfolio several times.
Originally a mining company, DSM moved
into fertiliser in the 1930s and petrochemicals in
the 1950s. By the 1990s, it had taken its first
step into nutrition and biotechnology.
A marked shift in direction took place
in 2001 as it sold the petrochemicals
division and acquired the vitamins
business Roche.
Then, in 2007, DSM again
divested 15−20% of its
company as it prepared for a
spree of acquisitions totalling
€2.8 billion, the majority in the
nutrition space. The portfolio
is now split into materials
sciences and life sciences,
which each contribute roughly
50% of its $12 billion in annual sales.
Shared services and
data management
DSM also has a growing presence in
emerging markets. By 2015, it expects
half of its sales to come from high-growth
economies such as Brazil, China and India;
the latter, in particular, is a current focal
point. It is no surprise that Hyderabad
was selected as the location for the
company’s new shared services centre
(SSC) in order to align with the rest
of the business.
The SSC has over 75 people delivering
transactional finance and administrative
(F&A) processes, and plans to increase
headcount to over 250 by 2015.
Royal DSM has transformed itself from a commodity
chemicals company to one focused on high-performance
materials and ingredients for the food, feed and
beverage markets. Steve Dunkerley caught up with CFO
Rolf-Dieter Schwalb before the Q4 FDE briefing in
Amsterdam − and the company’s decision to spin
off its pharma division − to talk about DSM’s new
shared services centre (SSC) in Hyderabad, India, and
the role it plays in speedy acquisition integration.
Insight > Shared services & GBS
Shared services aids
acquisition integration
Finance Director Europe | www.the-financedirector.com24
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3. Insight > Shared services & GBS
Finance Director Europe | www.the-financedirector.com 25
“To help the connection between
the back office in India and the
business, we have a few what we
call ‘front offices’ around the world,”
explains Rolf-Dieter Schwalb, chief
financial officer at DSM. “They are
also part of the shared services
organisation and intermediaries
between the back office in India
and the businesses. They also
function as a buffer for solving
issues – particularly in the first year.”
The impetus behind the company’s
relatively late move into shared
services was wrapped into its profit
improvement programme – and the
cost benefits are obvious.
“Also, this shared services project is
a catalyst for process standardisation
in the company,” continues Schwalb.
“Take purchase to pay, a very
simple process in theory; you order
something, you get the goods and
services delivered, and you get an
invoice and then you pay. Very
often if you don’t focus early on
process, then you get broken
processes, where you touch the
same invoice several times until
it is ready for payment because
people are not careful enough.”
Naturally, some of the biggest
challenges in migrating operations to
India were cultural and people related.
“You want to move the accounting
function of a certain location to
Hyderabad,” says Schwalb. “You hire
the people in India and send them
to that operation and they sit next
to the people whose job will be
going to India. Those people basically
train their successor and then lose
their role. You have to manage this
carefully, taking care of people from
DSM and at the same time being very
open with communication at all levels
and helping people find alternative
roles within the company.”
From an operational perspective,
properly harnessing data from
end-to-end processes relies on
improving master data quality in the
enterprise resource planning (ERP)
system, and investing in business
process management to ensure the
processes are well documented.
“You have to do something with
your internal controls and segregation
of duties to adapt to this new
situation, since it’s a very broad-based
project,” adds Schwalb.
As the function develops, the case
for a bigger business-services model
in India gains credence, but anything
more at this moment in the project’s
evolution would premature. But key
performance indicators (KPIs) such as
Shared services helps to support
acquisition integration in a much more agile
way than what was possible in the past.
Rolf-Dieter Schwalb
Rolf-Dieter Schwalb is chief financial officer and a member of the managing board at DSM.
Prior to joining the company in October 2006, he worked for Procter & Gamble, where he
was responsible for the planning and controlling of all European activities, and Beiersdorf,
where he was CFO and a member of the company’s executive board.
Rolf-Dieter Schwalb (right) opens DSM’s shared
services centre in Hyderabad in the presence of
Shri Ponnala Lakshmaiah (left), minister for IT
and communications, Andhra Pradesh, India.
FDE045_104_DSM_Article.indd 25 28/11/2013 15:41

4. Insight > Shared services & GBS
Finance Director Europe | www.the-financedirector.com26
the speed between what is received
and executed, and responsiveness to
problems, are encouraging.
Mergers and acquisitions
In terms of growth strategy, DSM has
been very acquisitive over the last three
to four years. Notable transactions
include Martek ($1.1 billion), Ocean
Nutrition ($536 million), Tortuga
($600 million) and Fortitech ($629 million).
This means that acquisition integration
and delivering synergies have been a
focal point for DSM.
The basic synergy for the first three
deals was global infrastructure and an
extension of the active ingredients
portfolio. The last acquisition,
Fortitech, was already a global
company serving the food industry
with custom blends and premixes, and
as such was a seamless fit for DSM’s
human nutrition and health business.
“We had a premix business already,
but the Fortitech acquisition has given
us another route to market for own
ingredients, as Fortitech did not buy
from us before,” adds Schwalb.
With this increased momentum in
terms of acquisitions, DSM has a very
clear vision of how to integrate a
company and remain agile.
“We have a very experienced
in-house M&A team, which is very
important to us,” Schwalb says. “We
are rather risk averse, so if we find
problems in due diligence, we would
rather step back from the whole idea.
Shared services also helps to support
acquisition integration in a much
more agile way than what was
possible in the past.”
And even though DSM doesn’t have
a single instance of ERP running
through the organisation, Schwalb
doesn’t see this as a major hurdle in
creating shared services, since it has
developed a ‘middleware’ between the
ERP system and the shared services
centre, so it acts in the same way as if
it were a sole instance of ERP.
“We are a company with many
portfolio transformations and
divestments in its history, and it was
never intended for us to get a single
instance of ERP,” he says.
We are a company with many portfolio
transformations and divestments in its history,
and it was never intended for us to get a single
instance of enterprise resource planning.
(Left to right): Rolf-Dieter Schwalb; Shri Ponnala Lakshmaiah; Alphonsus Stoelinga, the Dutch Ambassador in India; and DSM India president Bharath Sesha.
Rolf-Dieter Schwalb became CFO and a member
of DSM’s managing board in October 2006.
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5. Insight > FDE event review
Finance Director Europe | www.the-financedirector.com32
effective
Sustainable and
Having interviewed Rolf-Dieter Schwalb prior to the Q4 Finance Director Europe
breakfast briefing in Amsterdam regarding sustainable and effective business models,
Steve Dunkerley gleaned some additional insight from the Royal DSM CFO, and Genpact’s
vice-president and head of Benelux and France Koen de Rijcke during the event itself.
O
n a mild morning in late
October 2013, Finance Director
Europe hosted the second
of two breakfast briefings sponsored
by REL, a member of the Hackett Group,
and Genpact at Amsterdam’s Hotel de
l’Europe. A month earlier, Gijsbert de
Zoeten (see page 54), CFO of Unilever
Europe, addressed 40 finance leaders,
predominantly from the AEX 25, on the
importance of Unilever’s sustainable
living plan to its group strategy and
finance function. Rolf Dieter Schwalb’s
subsequent keynote address continued
where de Zoeten left off, as sustainability
has become an important pillar of DSM’s
own growth strategy.
“Sustainability is a focal point for our
investment in innovation. Not only is
DSM developing materials that protect
the environment and serve customer
demand, but we, as a company, are also
benefitting from increased margins,”
explained Schwalb.
He highlighted this with an example of
the production process for a sustainable
plastic for the automotive sector.
“During the development of DSM’s
EcoPaXX material, the CO2
generated
during its production process offsets the
amount of carbon dioxide absorbed in
the growth phase of the raw material; in
this case, castor beans, explained
Schwalb. “In addition, it provides DSM
with a gross margin ten points higher
than the mainstream plastics.”
Serving customer demand for
sustainable niche plastics also shows
how DSM’s business portfolio has
evolved in recent years. In the past, the
focus was on bulk commodities, but
today it has far more product lines in
order to satisfy increasingly specific
customer needs across a greater number
of countries. In the nutrition space, DSM
sells tens of thousands of products, and
therefore has developed large sales and
marketing organisations, along with an
agile approach to manufacturing.
Moving business closer to
the customer
In addition to a transformed business
culture, 40% of DSM’s total revenues
currently come from emerging markets,
and this is set to increase to 45%
in the next few years. Customers are
diminishing in the local Benelux and
wider European market, and as a
consequence, DSM has followed them by
moving five of its eight business group
headquarters out of the Netherlands.
The company’s innovation centres
have also been moved closer to
customers, leaving just two in the
Netherlands. The back office has
followed suit and transactional finance
is now delivered from Hyderabad in
India as part of a project known as
Arjuna, named after a character in the
Hindu Mahabharata, a loyal servant to
Krishna and a skilled archer. This name
Shared services is an enabler of the
strategy. It is not just about taking out costs;
it’s about integrating acquisitions and
supporting standardisation across markets.
Rolf-Dieter Schwalb (centre) enjoys breakfast with REL’s Rutger Ford (left) and Genpact’s Ahmed Mazhari.
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6. Insight > FDE event review
Finance Director Europe | www.the-financedirector.com 33
is therefore appropriate for an operation
that aims to target cost savings.
“We started Arjuna under what we
called the ‘finance management agenda’,”
said Schwalb. “Just after a strategy
announcement in 2010, we defined ten
key ways to develop the finance
organisation; one of these is called
‘leverage finance operations’, which
evolved to become the project Arjuna.”
While Arjuna is the finance and
accounting part of the back office, DSM
is busy developing its global business
services model.
“HR shared services, finance shared
services and IT shared services now fall
under the remit of one leader – Aloys
Kregting, who is DSM’s CIO and head of
DSM business services, and whose
department already comprises 1,200
people globally,“ said Schwalb.
Global business services
The move to a global business services
(GBS) operating model was the first of
five trends noted by Koen de Rijcke,
Genpact’s vice-president and head of
Benelux and France, who provided the
supporting address at the event.
“We are seeing this concept of GBS really
gaining traction,” de Rijcke said. “There
are some companies that are already there,
but moving to a broader, multifunctional
scope on a global basis, while also looking
at covering end-to-end processes, such
as order to cash and source to pay.”
The second and third trends noted
by de Rijcke related to the motivation
driving companies toward a shared
services or GBS model.
“It’s an enabler of the strategy,” he
said. “It is not just about taking out
costs; it’s about integrating acquisitions
and supporting standardisation across
markets, and therefore enabling the
business to service its customers across
geographies. It’s also helping to bring
insights back into the business so
companies can develop into more of a
business partner role.
“This brings us onto the trend of
shared services delivering value over
and above cost reduction. If you look
at the end-to-end processes order
to cash and source to pay, shared
services can help drive out leakage in
the order-to-cash cycle and optimise
working capital to drive down days
sales outstanding (DSO) or bring
insights to the source-to-pay cycle, so
that the total cost of ownership and
sourcing costs actually go down.”
The fourth trend identified by de Rijcke
was around how shared services are
delivered. He noted that hybrid operating
models that comprise outsourced and
in-house delivery components are now the
norm. He then highlighted the importance
of optimising process, technology and
analytics to achieve target outcomes in
the end-to-end processes of order to
cash and source to pay.
“In the order-to-cash cycle, how can
you use customer segmentation data?”
he continued. “How can you use detailed
analytics insight in terms of payments
patterns to improve your collections
strategies? Similarly, in the source-to-pay
cycle, how can spend and supplier
analytics help you to bring down the
total cost of ownership? This combination
of process, technology and analytics
is something that we will see more
frequently, and is something that we
are investing in very strongly.”
Need for speed
Following his supporting address, de
Rijcke chaired the Q&A and one of the
questions he himself asked Schwalb was
whether he would have done anything
differently in regard to the Arjuna project.
“I would have done the first part more
quickly,” he responded. “I joined the
company in 2006 and was told that the
company had decided to move to shared
services. I had to learn after I joined that
this statement – that the company had
decided to introduce GBS – did not mean
that it was being done now, but rather that
the next round of discussions starts now.
It took me a while to understand this.
“In my previous two companies, I was
used to faster decision-making processes.
This has a lot to do with the governance
of the company. Businesses are the
kingdoms of the company, which have
the P&L responsibility, and whenever
you want to do something more
centrally, you have to really convince
them in order to get the buy-in.”
The next FDE breakfast briefing takes
place in London on 7 February 2014.
The keynote speaker will be Andy
Halford, CFO, Vodafone Group.
Caption copy white ra
caption copy white ra
Koen de Rijcke
of Genpact.
Schwalb delivers his keynote address to guests
at October’s FDE breakfast briefing.
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