The 'virtual' Dutch company: a free

Proxima THE VIRTUAL The modern Dutch corporation has externalized its cost base. This paper seeks to understand the extent to which this has occurred in the Dutch AEX25, and explores the implications for Dutch business leaders. COMPANY TODAY'S DUTCH CORPORATION IS Dutch AEX 25 spends... NOT WHAT IT USED TO BE 76% 10% of revenues on of revenues on nor-labor costs labor costs (i.e, external) (i.e. internal) The externalization of the cost base is a trend that has continued WHAT IS THE TREND? over the last three years. (2009 - 2011 figures) Nor-labor cost as a percentage of revenue has Labor cost as a Revenues increased EBITDA increased 2.2% 3.5% percentage of revenue has 44% 59% DECREASED INCREASED Numɔer of employees increased Revenue per employee increased Revenues for the Dutch AEX have increased significantly from 2009 to 2011, and E3ITDA has increased by an even greater amount. This trend suggests that the increase in revenue has been fuelled not by more employees, but by greater use of suppliers. 6% 36% And yet the number of employees has increased at a much lower rate, meaning productivity has risen significantly. Labor costs as a % of revenue decreasec Non-labor costs as a % of revenue increased The research shows tha: the trend of Interestingly, the proportion of revenues spent on labur has reduced over the same period, while the proportion spent on non-labor has Increased broadly in-line with the increase in revenue. "Corporate Virtualization' (i.e. using external providers and suppliers to access new skills, capabilities, technologies t0 create competitive advantage and enhance sharehclder value) is set to continue. 27% 3% Suppliers now form a critical part of a Dutch husiness' value-chain, moving them ever closer to the heart of the corporation. BUT, with this increased integration and reliance cn the supply base, how do business lcaders ensure that supplicrs are ruly aligned to corporate aims? WHAT ARE THE OPPORTUNITIES? If all Dutch AEX25 companies reduced labor costs by 1%, they could improve EBITDA by 0.7%. That's impressive. But, if the same companies reduced non-labor costs by 1%, they could improve EBITDA by a whopping 5.4% - which would be news to shareholders' ears, Improves Reduce labor costs by Reduce nor-labor costs by EBITDA by Improves EBI DA by 1% 0.7% 1% 5.4% Other opportunities include: In short: External costs and A! ARL internal behaviors Enhanced Imprcved Increased Increased Reduced risk that are truly aligned to corporate aims. in the supply visibility and greater cortrol over the total cost base cmɔloyce productivity corporate levels of supplier-led innovation govemance base About Proxima Proxima is an alternative sourcing partner, specializing in aligning our clients' spend with their corporate objectives. For more information visit www.proximagroup.com © Proxima 2013. All rights reserved.