InformationWeek
Defining The Business Value Of Technology
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September 18, 2000 |
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Wake-Up Call
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"The retailer, the dealer, will always--at least in my lifetime--be an integral part of the overall supply chain, the value chain" of automotive sales, says Szygenda. "People will not go around franchise laws," which regulate that dealers must be involved with automotive sales. Consumers will eventually favor a hybrid shopping experience combining the Web and the dealer's showroom, he says.
It's easy to proceed with the benefit of hindsight. But in late 1998 when GM first identified six types of challengers--portals, information providers, transactional companies, dealers, manufacturers, and services companies--the company thought it would "have to concede, collaborate, or compete," with each one. To date, "no one has taken away pieces of our business," Szygenda says.
Cherri Musser, recently named CIO of eGM and supply chain, is responsible for tracking the services that link GM's supply-chain and logistics systems to customer and retailers. Musser has been Szygenda's right-hand person since joining GM in 1996 when she was hired to oversee corporate business systems and processes such as HR and ERP.
The foundation for GM's E-transformation was a drastic overhaul of the IT infrastructure and a business reengineering. When Szygenda joined in 1996 as the company's first CIO, "There was a lack of commonality," he says. "We knew we had to reengineer the company to be an aggressive, fast company going forward."
Among his obstacles were GM's mishmash of legacy systems and thousands of applications and hardware platforms that precluded data sharing among various GM units. Before the overhaul, "We wouldn't know anything about you as a customer, such as whether you bought a new car every year, plus had a GMAC mortgage," says GM chief technology officer Tony Scott. But that's changing, he says
Another obstacle was GM's dependence on EDS. GM spun out the business as an independent company, but it had an ongoing outsourcing contract for EDS to provide GM with the bulk of its IT services. As part of the overhaul, GM got rid of 1,500 servers, 2,500 legacy systems, 14 customer contact warehouses, and 60% of systems outages. Meanwhile, the standardization--as well as the 1996 spin-off of GM's Delphi auto-parts business--has helped GM slash IT spending from $4 billion four years ago to $3.2 billion this year. About $400 million annually goes to new ventures and new developments. Prior to the standardization effort, GM vehicle designs proceeded in tortoiselike, 48-month cycles. That's been cut to about 18 months, thanks in part to a move to a single CAD platform, Unigraphics, and a 1,200% improvement in supercomputer capacity from HP and Silicon Graphics. Among other key activities is GM's 2-year-old alliance with Commerce One Inc., which created an online exchange for GM to interact with its suppliers.
Meanwhile, the move to PeopleSoft Inc. has cut GM's HR operating costs in half, in part through the elimination of redundancies that come with disparate legacy systems, says Mark Hillman, HR IT director. The company is also beginning to give 120,000-plus employees access to their benefits and other HR-related info online.
While GM knowledge workers and executives will have easy access to PCs and HR data, the company is still haggling over ways to give its factory workers--who don't work with PCs--access to the same perks. The company is debating whether plant workers should have access to kiosks to tap into their HR data. A spokesman says the company is consulting with unions to hammer out a policy. Just the fact that GM is debating such issues for factory workers represents a dramatic cultural change. As recently as two years ago, GM's previous HR president didn't even have a PC.
Overall, GM's IT standardization has helped bring about $800 million in IT cost savings since 1996. Szygenda now spends 80% of his time involved with new business initiatives. GM has at least nine new Internet programs under way and could take more equity stakes in partners, says Richard Vanzura, chief strategy officer.
Ford recently created FordDirect.com, an independent enterprise owned by Ford and its participating dealers, in which consumers can configure, price, finance, and schedule delivery of Ford vehicles online. The site is expected to launch this month in California, and roll out elsewhere during 2001. FordDirect.com may lure Internet talent more easily, but eGM has GM's deep pockets behind it, says Gartner's Desisto.
Fear of competitors was precisely what GE's Welch tried to instill in his managers in January 1999. At a now-famous manager's meeting, he ordered them to "destroy" their businesses and rebuild them for the Internet--before startup dot-coms got the chance to destroy them for good. At that point, GE was well on its way to Web savviness, deploying several successful Internet initiatives. However, from then on, the E-mandate at GE has been an all-consuming focus, with all GE businesses looking for ways to boost productivity, cut costs, improve customer services, and fuel revenue.
GE's Internet attack is three-pronged: using the Web to buy, sell, and make products, GE's Reiner says. On the sales side, half of the company's volume this year will be conducted on the Internet, he says. Some parts of GE's business are selling the bulk of their products online, including GE's plastics business, Polymerland, which sells raw plastics to manufacturers. In January 1999, Polymerland's customer purchasing site had fewer than 50 regular customers and sold less than $50,000 in merchandise per week. By the end of this year, as much as 70% of its revenue is expected to be from online sales. While GE says it isn't eliminating traditional sales channels, executives admit that more customers are choosing to buy online because of the speed and 24-by-7 convenience.
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Photograph of Szygenda by Dwight Cendrowski
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