Oh, and cut IT costs in the process.

The magnitude of the job isn't lost on Ralph Szygenda, GM's 48-year-old VP and CIO, who was lured away from Bell Atlantic just over a year ago to create an IS management team and strategy for GM's post-EDS era. The hiring last week of J. Carlos Eiras as information officer for GM's Latin American operations marks the 14th information officer Szygenda has brought in from the outside over the past nine months to put that strategy in motion.

But what looked big from the outside to Eiras and other new GM IT executives looks even bigger from the inside. For example, GM's Delphi automotive parts business, a Fortune 50 company in its own right with $26 billion in 1996 revenue, has 190 different locations for operations and manufacturing. "How do you try to change it and install new processes or even assist them across 190 different manufacturing facilities in your lifetime?" Szygenda asks.

Still, big has its benefits, particularly in leveraging deals out of suppliers. "We're Fortune 1," says chief technology information officer Dennis Walsh, "and we want to be treated that way."

First Big Step
This week, Walsh-hired in April and still unpack ing-will disclose IS&S's first big step toward common systems: the choice of a dozen vendors of hardware, software, and services for a brand-new IT architecture, from the desktop to the wide area network. The vendors will support more than 175,000 end users among GM's 647,000 employees.

"The current release of the desktop is old," says Walsh. "We can't do software distribution, we can't do global network management. We want an operating system environment that will let us do as much as possible with the network."

In addition to delivering global network-management and -administration capabilities, Walsh says, the new IT architecture addresses everything from desktop connections to servers, switches, PBXs, storage, backup, and security.

Although GM is engaged in alpha technology tests with many vendors, Walsh says implementing leading-edge technology across 175,000 desktops would be "suicidal." For now, current technology is what he wants. Implementation will begin later this year and, he hopes, fi nish early next year.

Windows NT servers are expected to displace much of the Novell NetWare and Windows 3.1 now supporting 65,000 GM desktops, and to penetrate GM's plant floor, as the operating system has done at the company's Saturn division, which serves as a test bed and model for all of GM.

At the same time, other IS executives at GM are developing common business processes and systems, with human resource management and financial systems among their top priorities. Here, SAP's R/3 suite of enterprise applications is expected to dominate, having already penetrated GM's Delphi and Opel divisions. But Baan, an enterprise resource planning software vendor best known for its manufacturing applications, and PeopleSoft, best known for its HR apps, may well share a role within GM.

A common contracting system to replace more than 50 such systems scattered throughout GM is under development. Packaged software will be purchased for payroll, personnel administration and development, and indirect materi al management (where materials bought by GM suppliers are brought in-house to GM inventory), says Cherri Musser, information officer for GM's business services.

Lotus Notes, installed at 100,000 seats throughout GM, is likely to be expanded. Notes, which is now used mainly for E-mail, is being considered as a base for an expense-reporting application, Musser says.

GM believes packaged software is now robust enough to meet many requirements, says Musser. The major software vendors are investing to keep these products in line with legal and other requirements in various countries. "So why would we want to do that in-house?" she says. "Let's use our dollars somewhere else where it really makes a difference from a competitive standpoint."

Meanwhile, GM's year 2000 project aims to replace 20% of 7,000 business systems by the end of next year, says Ray Khan, GM's year 2000 manager.

Loose Integration
GM will not build any tightly integrated systems across the corporation. Szygenda knows the dangers of such efforts from his experience at Bell Atlantic and Texas Instruments. Tightly integrated systems can make it difficult to share systems, as Bell Atlantic must now do because of deregulation, or to sell businesses, as TI is doing. GM is also splitting off businesses. In addition to spinning off EDS, GM is selling Hughes' defense business to Raytheon. GM's systems goal is what Szygenda calls "loose integration."

Although work on common processes and systems was in progress before Szygenda arrived, it must be accomplished quickly, he says. "You cannot spend five years doing a process analysis and then start making the changes when the business is in movement," Szygenda explains. "The auto industry might not be as fast as the telecommunications industry, but this business has really lighted up. It's moving qui ckly because of international competition."

But the auto industry may be moving too quickly for its own good. GM and other automakers can grow only by grabbing market share from one another, and to sell in fast-growing emerging markets they must produce locally because of strict local-content and other regulations, explains Glenn Mercer, Cleveland-based director of automotive services at management consulting firm McKinsey & Co.

The result, Mercer says, is an industry that's churning out a glut of cars at the same time production capacity must be ramped up in new markets. GM's international operations will increase production capacity by 25% this year through new plants in emerging markets. Compounding the overcapacity problem is the "inexorable pressure to expand a product line within a brand name," Mercer says. For example, a Saturn dealership watching customers leave the showroom because Saturn doesn't make minivans is going to pressure the company for minivans.

"Massive Cost Pressures"
One result of these and other problems are "massive cost pressures, because prices are not going anywhere," says Mercer. Cutting costs by 5% is every automaker's goal, he says, adding: "It's a tough time for a tough industry."

That cost pressure bears down directly on Szygenda's team. Overall IT spending at GM is more than $4.5 billion, a little below 3% of total revenue. Szygenda and Harry Pearce, a GM vice chairman and board member, agree that's too much. Ford and Chrysler spend only 1% to 2% of revenue on IT. To keep pace, Szygenda says, GM must trim its costs as a percentage of revenue by about seven-tenths of a percentage point.

To aid in the cost-cutting, GM is moving from local decision-making to a top-down approach. "In organizational philosophy, there is always a debate about centralization vs. decentralization, cost-effectiveness vs. creativity," says one management consultant who has done work for GM. "But at GM today, the pendulum has swung all the way to centralization, even if it je opardizes some entrepreneurialism, because of the efficiency gains that can be gotten."

Adds Doug Aldrich, VP of the strategic IT practice at management consulting firm A.T. Kearney, "GM's decision to put commonality above local independent achievement is a huge change in direction. We have done similar projects, but not on this magnitude." A.T. Kearney, a unit of EDS, is helping reshape EDS's operations in support of GM to drive down costs and align it with GM's new IS organization.

Business Priorities
Aside from costs, much of Szygenda's focus is on GM's business priorities: Reduce vehicle-development cycle time, "delight" lifelong customers, and expand emerging markets.

A number of key technology initiatives already in the works support those priorities. Among the most important are "math-based" vehicle-development systems, including CAD/CAM (computer-aided design/manufacturing), virtual reality, and other simulation tools. These computer-based systems can eliminate the time require d to make car models, now done in clay and wood, and reduce the need to conduct car crash tests, cutting costs and time from the vehicle-development process.

Last fall, GM standardized on EDS's Unigraphics system for solid-modeling CAD/CAM, ending a five-year effort to reduce 26 separate systems to one. GM is now rolling out standard engineering-release software in Europe, simplifying the electronic exchange of product data and changes in design. Kenneth Baker, VP of research and development for GM's North American operations, says the company's math-based capability has already led to a number of breakthrough features. These include electronically enhanced steering, continuously variable suspensions, more-precise engine control, and a host of processing advances.

Math-based systems will play a role in further reducing GM's time from final vehicle design to full production. Between 1992 and 1997, GM shortened its cycle time to 31 months from 42; its sights are set on 18 months by 2002. Whether it can catch up to competitors is unclear. Between 1992 and 1997, for example, Toyota shortened its cycle time to 26 months from 31.

GM's productivity, measured by the number of assembly workers needed to build a car, improved 5% last year, to 3.47. That's still behind Chrysler, at 3.29, and Ford, at 3.09, says Ron Harbour, president of Harbour & Associates, an auto industry consulting firm in Troy, Mich. "GM is doing a better job from the design and manufacturing standpoints, designing for easier assembly with less parts," he says. GM is improving its productivity faster than the other automakers, says Harbour, but then GM also has the most room for improvement. But as a whole, Harbour says, the Japanese automakers are still leading in terms of productivity.

Industry Cooperation
At least the Big Three automakers know how to cooperate on basic technologies through their Automotive Industry Action Group, which has fostered the growth of electronic data interchange between automakers and their sup pliers for years. That cooperative effort takes a leap ahead this month as it begins pilot tests of an industry extranet, the Automotive Network Exchange, that will tie the Big Three more closely to thousands of suppliers.

The need for suppliers to match the proprietary systems of their customers will be greatly reduced when, via the ANX extranet, they can use Web browsers to send and receive product data, conduct business transactions, and communicate via E-mail. General availability of ANX is set for the end of this year.

While Szygenda found that GM had done well networking with its dealerships and suppliers, the company fell short when it came to its own employees. "We really don't have the intranet environment that we need to have in this company for knowledge sharing," he says. "That's a big priority for me."

Customers are another IT priority at GM, which has pushed new car models to consumers believing it knows best what consumers want and need. Automakers really couldn't respond quickly to changing consumer demands before anyway, not with five-year development cycles. But now that math-based systems are shortening the time to market, GM is eyeing the 90 terabytes of data on its mainframe and distributed computing systems as the raw material for developing powerful marketing relationship data warehouses.

Data warehouses already exist piecemeal throughout GM's car divisions and financial services unit, says Chuck Kirk, an information officer responsible for what GM calls "customer experience." Projects to integrate those data warehouses began earlier this year. The goal: Model the behavior characteristics of customers. The first corporatewide releases of the data warehouse are taking place now.

These and other systems, says Kirk, can help make mass customization of GM vehicles possible. The company has already rolled out systems that help customers configure the car of their dreams at a dealership, and then, if the car exists in inventory, locate it for rapid delivery. "Cars are more of an impulse buy than we'd like to think," says Kirk. "If you get things right, you hit somebody's emotional high point, and when you get that big strike with the customers, they'll pay for what they want."

GM is also working to increase the value of its vehicles through services such as OnStar, made possible through IS. Begun last year with Cadillacs, OnStar uses onboard electronics, including a cellular phone, satellite technology, and call centers, to provide customers with such services as emergency roadside support and directions to the nearest service station, hotel, or restaurant. The system, priced at under $1,000 at installation, fetches an additional $22 in monthly fees-a new revenue stream for GM. The program is being extended this month to 24 GM models, including Buicks and minivans.

But critics warn that Szygenda's broad goals cannot be achieved quickly. And some say Szygenda may be building a bloated bureaucracy to manage IT within an even more bloated corporate bureaucracy.

"The IT ma nagement challenge for GM is greater than the IT issues," says a management consultant who has worked with GM. "This is going to be a larger HR issue than Szygenda thinks." Szygenda's management hires, the consultant notes, have varied backgrounds and bring strong personalities, having run IS organizations themselves.

GM's technology organization is designed as a matrix, with information officers given responsibilities according to business units, processes, geographic regions, and functions. Szygenda has 24 executives reporting directly to him; many of them also report to business-unit executives.

Some toes are bound to be stepped on until people become familiar with the organization. And overlap is inevitable in any matrix organization. For instance, both Dan McNicholl, information officer for North American operations, and process information officer Kirk have responsibility for the company's data warehousing strategy.

On The Move
To further complicate matters for the newly arrived IS execs, GM is physically on the move. Szygenda and his staff relocated from various sites in the Detroit area to the company's Brewery Park offices in July, and they will move once again in three years to Detroit's downtown Renaissance Center, GM's new headquarters. Similarly, IS&S offices in Zurich, Switzerland, are being relocated to London.

Szygenda, analysts say, will be under constant scrutiny by a company not known for its patience. GM's board of directors, for example, fired the company's former chairman, Robert Stempel, after 18 months because cost reductions weren't coming fast enough.

Victor Janulaitis, president of Positive Support Review Inc., an IT management consulting firm in Santa Monica, Calif., believes Szygenda will need at least four years to make demonstrable progress. His chance of success, according to Janulaitis: less than 50%.

Szygenda is the first to admit that the transition away from EDS will be a difficult one. He says he may have made some hiring mistakes in the ra pid build-up of GM's technology organization. Nevertheless, Szygenda has filled most of the positions on his organizational chart. And all of the recruits, he says, are people who were on "the inner-circle management track."

While all the combined brainpower of the new IS&S is aimed at reinventing the largest corporation in the world, Szygenda will first have to build an effective IS organization. It's one in which nearly all of the implementation, operations, and administration are still carried out by third parties under contract. In both respects, Szygenda is staring at uncharted territory.

Why would anyone want this job? "Nothing changes quickly at the biggest company in the world," says Peter Bilello, a former EDS employee at GM and now a senior consultant at CIMdata Inc., a consulting firm in Ann Arbor, Mich. "But you also have a chance to do something really incredible."

-with additional reporting by Jeff Angus and Tom Stein

See related story " GM-EDS Relationship: The Devil's In The Details "

See related story " Disciplined Approach "

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