Photo of Ng Cheng Chang, Dell Technologies and Saurabh Gupta, Citi.
When in 2016, Dell completed the flagship acquisition of EMC, it signalled the firm’s transition into a global technology leader. This brought new opportunities and challenges for its treasury operations organisation. It set about delivering a global framework, serving over 500 legal entities across 69 countries via treasury operations leadership in Singapore and regional hubs for Asia Pacific and Japan, EMEA and the Americas. By employing a ‘test, learn and grow’ strategy, more usually associated with start-up operations rather than with mature multinational corporations, it has been able to fulfil its ambitions. This is teamwork in action.
Dell Technologies
Dell Technologies is a unique family of businesses that provides the essential infrastructure for organisations to build their digital future, transform IT and protect their most important asset, information. The Company services customers of all sizes across 180 countries – ranging from 99% of the Fortune 500 to individual consumers – with the industry’s most comprehensive and innovative portfolio from the edge to the core to the cloud. It is today one of the largest privately controlled technological corporations in the world, employing more than 145,000 with revenue across all its companies totalling US$80.3bn, combined non-GAAP FY18 revenue (non-GAAP net revenue for the fiscal year ended February 2, 2018).
in partnership with
Delivering a global integrated treasury operations framework across one of the world’s largest tech corporations in record time
When, in 2016, Dell completed the flagship acquisition of full-suite technology business EMC, it signalled the firm’s transition into a global end-to-end technology leader. This brought new opportunities and challenges for its treasury operations organisation.
Today, Dell’s treasury organisation serves over 500 legal entities across 69 countries. Its global treasury operation is organised through regional concepts spread across three core hubs in the Americas, APJC and EMEA and a Treasury Shared Services Centre (TSS) in Bratislava, with its leadership based out of Singapore.
The three regional teams are responsible for cash and liquidity management, bank account management, governance and control, working capital, trade finance and bank relationship management. TSS manages global treasury technology infrastructure and integration, global liquidity management, treasury operations controls and business intelligence.
Relishing challenge
The rapid integration of EMC’s treasury activities whilst equipping the business to deliver on its dynamic change and innovation strategy, created particular challenges for Dell’s treasury team. Over the past 18 months, Dell’s treasury team has been working with key banking partners in transforming its activities, delivering a robust, secure and scalable treasury operation. Not only has the treasury team been ambitious in its objectives, but it has also delivered in a remarkably short time. One key to success was its culture for embracing change and collaborating with internal and external stakeholders.
The integration included creating efficiencies and harmonisation as a combined company, enhancing treasury decision-making by leveraging banking technology and big data analytics. It also accelerated transformation by using a build-learn-grow strategy more akin to start-ups than a mature multinational.
Innovative approach
Treasury transformation was structured around three pillars:
- Operational efficiency.
- Liquidity management.
- Operational controls.
Operational efficiency
In terms of operational efficiency, an objective view of banking infrastructure across both Dell and EMC was carried out using analytics on a country-by-country basis to determine the most appropriate banking model. This included account structures, payments, collections, FX and risk management and liquidity management. Dell then consolidated its activities with its primary banking partners, leading to significant cost savings and new liquidity management opportunities.
With Dell and EMC using different business models and ERPs making it difficult to standardise and create economies of scale in a shared services environment, the treasury team played an instrumental role in the group-wide initiative to align global deployment for payments, collections, bank account management and technology.
Liquidity management
For the liquidity management pillar, a global liquidity solution was established. With an increased debt burden, the treasury team found innovative ways to service the debt. This included optimising cash mobility and centralisation, and unlocking trapped cash wherever possible.
A comprehensive, fully automated liquidity solution was implemented for convertible currencies, including country level pooling for all entities, a global physical pool for 20 currencies and a notional layer across 189 legal entities/accounts. In restricted markets, such as India, China and Brazil, Dell has implemented highly bespoke compliant solutions. Dell also used its global cash management banks to create a pool-volatility analysis tool to track and predict cash flow.
Dell implemented innovative solutions to achieve working capital metrics whilst increasing the resilience of its complex supply chain. It standardised trade terms with common global suppliers and its partnerships with strategic suppliers were strengthened, scaling up its supply chain financing programme more than five-fold over a period of nine months to more than US$1bn.
This is a testament to the outstanding work the team has consistently been doing over the years. We are humbled by the recognition; a significant part of our achievements can be attributed to the excellent advisory and innovative support provided by our global banking partners who taught us what we know.
– Ng Cheng Chang, VP, Global Treasury Operations
Operational controls
When tackling operational controls, Dell evaluated and market-benchmarked treasury policy, based on extensive analysis of current requirements and the flexibility needed to support future business, market and regulatory change. This resulted in a unified platform for processes and controls, and the simplification of treasury activities, including the removal of legacy structures and processes and redundant bank accounts.
Both Dell and EMC had modern treasury management systems and had embraced XML ISO 20022 standards and BAI for bank reporting. An evaluation of existing technology and current and future needs saw Dell adopt one global standardised TMS – FIS’s Quantum system, together with its Trax payment processing solution for integration between its Oracle and SAP ERPs.
Leading with bold ambition
Mature treasury organisations often deal with change in a regimented way, resisting new ideas. Dell’s outlook was to embrace a start-up culture by encouraging teams to think differently, to leverage technology, to accept failure and be aggressive with the execution roadmap.
Dell’s treasury leadership welcomes change and sets clear goals. The team set a hectic pace both on the integration project and when building its ‘2020 future visions’, the latter leveraging financial technology innovations to achieve best in-class global treasury operations and scalability for future growth. The strategic mind-set was such that only focusing on integration would not be good enough.
Dell treasury has deployed technology both for execution (TMS, ERP, Trax, ISO XML) and decision-making (using advanced data analytics and a big data pool). The fully digital treasury outlook, as planned in its ‘future of treasury’ notion, enables the evolution of treasury monitoring, control and deployment to next level. While it is important to focus on operation efficiency and effectiveness in the integration, deleveraging is firmly on the agenda. Indeed, debt servicing and repayment was given the highest priority by effective deployment of operating cash across the firm. The three-tier multi currency notional cash pool structure for free and semi-restricted market currencies, and bespoke liquidity extraction solutions in India, China and Brazil, have been instrumental in reducing interest cost for the firm, adding to bottom line in times of need.
Dell’s effort to date is even more admirable, given the complexity of the stakeholder network that spreads across the company. Dell treasury was a focal point internally across the business, controllership, finance, compliance, procurement and a number of other functions. Externally, treasury worked with central banks and financial institutions to promulgate their overall business objectives and priorities.
Future vision
Although Dell already had highly effective liquidity and risk management structures, robust policies and processes, and sophisticated technology in place, the acquisition of EMC created a new set of functional and integration requirements, including the need to service large debt volumes.
Driven by major structural changes and armed with a fully mapped-out vision of how this will play out, Dell treasury formed a bold plan to deliver a fully frictionless operations model for the integrated company.
The team is highly growth oriented and focused on creating a sustainable platform from which the entire business could benefit. Dell treasury also knew it had to take a leadership position, both in the technology industry and in the wider treasury profession, to equip the company for future growth, change and innovation.
By employing a ‘build, learn and grow’ strategy, more usually associated with agile start-up operations than mature multinational corporations, the team has been able to realise its ambitions and dispense with legacy tools, processes and assumptions.
Reaping rewards
One of the key outcomes of this journey has been the delivery of a consistent and global integrated framework across the organisation. In terms of operational efficiency, consolidation, standardisation and simplification across Dell, including the EMC acquisition, the project has delivered cost and liquidity advantages. But just as importantly, the integration has provided a scalable treasury and banking organisation that is able to support future growth and innovation.
The banking infrastructure review, which saw the consolidation of global cash bank relationships and the standardisation of banking fees and interest rates, has resulted in substantial annual cost savings and interest income across the combined company. Furthermore, this banking strategy is scalable to support future organic or M&A growth.
Dell has been able to unlock substantial amounts of liquidity through its global liquidity management strategy, enabling it to service its debt and fund future strategic investments. With 60% of operating liquidity now accessible through Dell’s global multi currencies notional pool, treasury has been able to unlock more than US$2bn of surplus cash. In restricted markets, such as India, China and Brazil, where bespoke liquidity solutions have been put in place, Dell has also freed up more than US$1bn in liquidity.
Working capital optimisation was always a key part of the plan and Dell has vastly expanded its supply chain financing programme, which has increased fivefold to over US$1bn in only nine months. This is now providing considerable working capital benefits for the group’s strategic suppliers.
Treasury technology integration has played a major part in this transformation. Indeed, as a result of consolidating onto a single treasury management system and adopting industry standards to improve integration, Dell has streamlined resources for redeployment preparing for the treasury of the future.
The company has significantly reduced operational complexities in managing approximately 45 different payment file formats, and is embracing ISO20022 XML going forward. In addition, enhanced data analytics will be instrumental in improving the quality of decision-making, achievable by the adoption of emerging treasury technologies such as artificial intelligence (AI).
Of course, Dell recognises that building for the future is not a one-off activity but a constant process of review and refinement. It must keep identifying new technologies and solutions to shape the digital treasury of the future.
Some of the future initiatives in which the treasury team are engaged include:
- Virtual banking.
- Automated cash application using robotic process automation and artificial intelligence.
- Cyber-security and controls using machine learning technology.
- Predictive cash forecasting using AI and machine learning.
The result is a highly sophisticated treasury organisation. Having established the groundwork, Dell’s treasury team is now delivering on its future-of-treasury vision, adding yet more value for the enterprise.
Key takeaways
- Always challenge the status quo to drive for operation excellence.
- Change is a constant, be prepared to adapt and adopt.
- Embrace a culture of technology innovation.
- Invest in human capital: cultivate employees, engage them in the vision for the future – and the journey required to achieve that future-state.
