Dimension Data
Introduction
The benefits of managing regional logistics chains online are well documented. But some companies are beginning to realise huge cost efficiencies by moving to the next stage – global ‘technologistics’ frameworks managed from a single central hub. Dimension Data, who relocated its Commerce Centre to the Isle of Man, is an example of how this works in practice.
Dimension Data is a specialist IT services and solution provider that helps clients plan, build and support their IT infrastructures. Dimension Data applies its expertise in networking, security, operating environments, storage and contact centre technologies and its unique skills in consulting, integration and managed services to create customized client solutions.
Like all global companies that have expanded through acquisition, Dimension Data realised in 2001 that there was a need for a certain degree of rightsizing of the group. It needed to eliminate duplication of processes and group its services. This would allow Dimension Data to remain focused, whilst retaining its depth and breadth of skills. At the same time, the group was also continuing to build partnerships with leading technology providers such as Cisco, so as to ensure it was offering its customers the best solutions available in next-generation technology.
Requirements
Dimension Data recognised that its global service offerings and strong alliances with technology vendors would be best supported by establishing a centralised coordinated Commerce Centre. The primary objective for the Dimension Data Commerce Centre (DDCC) was to consolidate working capital management within global group companies, thereby enabling them to contribute positively to the group’s overall profitability. The service provided by DDCC covers all aspects of international commerce chain management, such as procurement, freight and foreign exchange management.
Dimension Data’s operations are truly worldwide. It has companies in South Africa, South America, Europe, Asia, USA and Australia, and undertook an extensive due diligence exercise when considering an appropriate location for the location of its DDCC.
Isle of Man – the perfect location
Following the due diligence process, Dimension Data decided that the Isle of Man offered the best match location for the new DDCC in terms of both Dimension Data’s requirements and company culture. The Isle of Man offered all the necessary key components that would help encourage new business and investment, and had impressed upon Dimension Data’s its commitment to companies engaged in the field of e-business.
The biggest benefit the island offered to Dimension Data was its state-of-the-art telecommunications and world-class regulatory standards. The Isle of Man’s government had invested over £22m in e-business developments, which is a significant investment for an island of only 76,000 inhabitants. The government also had the vision to upgrade telemetry fibres to the Isle of Man, with the main fibre link to the island having a 1.2 terabits capacity, which is capable of carrying up to 10 times the current North Atlantic internet traffic.
Manx Telecom has itself invested significantly in its infrastructure in recent years to ensure it can guarantee high levels of reliability and resilience to businesses located in the Isle of Man. The decision taken by Dimension Data to locate its DDCC in the Isle of Man has meant that it has benefited from excellent telecommunications links that have facilitated international procurement and a more effective approach to working capital management, cost containment and customer service.
In today’s economic climate, the emphasis placed on effective management of working capital has never been greater. New applications, such as web-based technologies, promise businesses the flexibility to accurately manage their international commerce chains and, in turn, realise substantial improvements in working capital management. Speed and integrity of information are critical success factors in facilitating any e-business environment, and the emphasis placed by the Isle of Man on establishing a next-generation telecommunication infrastructure was considered an important factor when Dimension Data was choosing its location.
Benefits realised
Prior to establishing the DDCC, Dimension Data’s individual divisions and subsidiaries were procuring and importing international products independently. There was no uniformity of pricing, no cohesive foreign exchange management and no global consolidation of placement of orders or freight.
Excellent telco infrastructure
Dimension Data has been able to take advantage of the Isle of Man’s impressive telecommunications infrastructure, which offers both wide bandwidth and fast speed. Both factors are essential for companies that hope to realise benefits from using technology to more effectively manage logistics. Using such a “technologistics” approach, businesses are able to manage critical details regarding inventories in transit and ensure a product arrives on time to meet a requirement. No longer does a company have to allow 20 – 30% tolerances in lead-time as an entire supply chain may be managed live via the web.
In response to this, Dimension Data has developed its own “technologistics” solution called TransIT, which is a web-based tool for global commerce chain management. The solution links into Cisco Systems in the US and logistic companies both locally and internationally. Orders processed by DDCC are electronically processed and interfaced with both hardware and software suppliers and freight companies.
Geographically neutral
Although most of Dimension Data’s global companies had the necessary logistics skills and core competencies in place already, it was felt that the most mutual benefit would be achieved if the skills and intellectual capacity were collectively housed in a geographically neutral territory.
Within the IT technology arena, negotiating one global contract across geographical boundaries can be extremely difficult. Global companies often find that they are unable to secure the best contract for their customer in an attempt to remain loyal to regionally based partners.
The Isle of Man location provided Dimension Data with a borderless society that fell under no specific geographical boundary. This environment gave the group increased advantage, particularly in the network integration marketplace, during a period of product commoditisation and rapidly decreasing margins.
The independence of the Isle of Man and its non-affiliation to any specific body means that negotiating global deals for Dimension Data has become substantially simpler to own and negotiate from the DDCC’s island location.
Financial drivers
Prior to the centralising of the DDCC, group companies were paying different amounts for freight, with the prices differing considerably for the same product, depending on where it was being imported from. Dimension Data realised that there was an opportunity to consolidate its strength as in importer and manipulate the freight forwarding and clearing agents to consolidate the buying strength and apply beneficial rates for both the US and Europe to the group as a whole.
In particular, Dimension Data has benefited significantly from moving its commercial arm from Africa to the Isle of Man, as the former attracts high freight costs from most agents. Relocation to the Isle of Man has resulted in the group being able to negotiate its freight rates down significantly.
Other cost saving benefits include savings made on communications with Europe or the US via telephone, fax or even email, which is cheaper from the Isle of Man than from Africa.
Flexible legislation
The Isle of Man has a separate legal system and jurisdiction. The Manx government prides itself on having excellent relations with the island’s business community and on being responsive to its needs in terms of legislation, financial assistance and taxation. In particular, it has considered the impact of e-business operations on the island and has ensured that future developments are catered for in future legislation. Current legislation can be modified quickly in a rapidly changing technology age.
Strong legislation is essential when dealing with global contracts electronically as the risk within million dollar deals across borders is amplified when electronic trade occurs. The Isle of Man’s legislative structure offered Dimension Data credible data protection and is well placed to support any e-business related business, with electronic transactions being legally binding under Manx law, and electronic evidence being fully admissible in Manx courts. The island has excellent support services, including lawyers, accountants and corporate financiers, who are experienced in working for companies with an international focus, such as Dimension Data.
Summary
The development of a centralised commerce centre has helped to bring together technical skills in connectivity and integration from different areas of Dimension Data’s acquired businesses. Through the elimination of overlaps, regional business units have been able to share in the scales of economy that the DDCC allows and grouped offerings around solutions have enabled the group companies around the world to become leaner, tighter and more focused global organisations.
