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6/28/2012
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General Motors Will Slash Outsourcing In IT Overhaul

GM's new CIO Randy Mott plans to bring nearly all IT work in-house as one piece of a sweeping IT overhaul. It's a high-risk strategy that's similar to what Mott drove at Hewlett-Packard.

As Randy Mott, the new CIO of General Motors, goes about his workday, he carries with him a well-worn calculator. It sits in front of him in the place of prominence that most people reserve for a smartphone.

Mott, who has been CIO at Wal-Mart, Dell, and Hewlett-Packard and joined GM in February, believes in numbers. And as he tries to transform GM's IT operations, he plans to flip one set of numbers on a scale that no CIO has ever done before.

Today, about 90% of GM's IT services, from running data centers to writing applications, are provided by outsourcing companies such as HP/EDS, IBM, Capgemini, and Wipro, and only 10% are done by GM employees. Mott plans to flip those percentages in about three years--to 90% GM staff, 10% outsourcers.

Insourcing IT on that scale will require GM to go on a hiring binge for software developers, project managers, database experts, business analysts, and other IT pros over the next three years. As part of that effort, it plans to create three new software development centers, all of them in the U.S. IT outsourcers, including GM's one-time captive provider, EDS, face the loss of contracts once valued at up to $3 billion a year.

This dramatic move away from outsourcing is just one piece of the "IT transformation" Mott is leading, which includes consolidating data centers and applications, centralizing IT planning and execution, and getting a better grip on GM's customer and production data. GM's IT transformation doesn't emphasize budget cuts but instead centers on delivering more value from IT, much faster. In many ways, the foundation Mott is laying is similar to the one Ford started laying four or five years ago as part of its One Ford/One IT initiative.

The overhaul Mott envisions puts the everyday operations of GM at risk during a time when the world's No. 2 automaker (Toyota is now No. 1) is still climbing out of bankruptcy protection and a $50 billion government bailout. GM's factories, supply chains, and financial reporting rely on the IT organization to keep information flowing in near real time on a global scale. The fact that Mott's boss, CEO Dan Akerson, would bless this level of IT change and accept this level of risk at a still-fragile stage of GM's recovery shows how essential the best data and technology are to the company's future.

GM CIO Randy Mott
GM CIO Randy Mott: How GM's IT pros spend their time is "upside down"

Akerson "was looking to make changes in the speed and cadence of the company," Mott says. "Whether it was with me or someone else, Dan Akerson was going to do an IT transformation here."

Mott's philosophy on outsourcing at GM, as it was at HP, Dell, and Wal-Mart, is that the company needs more creative, business-changing ideas from IT, and IT teams need to deliver those innovative projects faster. Mott doesn't think GM can be creative or fast enough with outsourced IT. "When the business says 'go,' then that means we start working on a contract, we don't start working on a project," Mott says of the current outsourced model. (Mott is on InformationWeek's editorial advisory board and was named our Chief of the Year in 1997, when he was at Wal-Mart.)

The shift away from outsourcing is only the most dramatic element of Mott's IT "transformation." The plan, approved by Akerson and the rest of the executive operating committee, comes straight out of the playbook Mott has developed over a three-decade career in the retail, high-tech, and now automotive industries. Mott's plan for GM is nearly identical to the one he led at HP between 2005 and 2008 under CEO Mark Hurd, before Hurd and then Mott got bounced in an executive shake-up.

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jsonice741
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jsonice741,
User Rank: Apprentice
7/11/2012 | 9:22:37 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
HP's problem is not Randy Mott but its board of ineffective idiots who appointed the likes of Carly Fiorina, the moron from SAP and then fired he smart guy and hired an idiot.
jsonice741
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jsonice741,
User Rank: Apprentice
7/11/2012 | 9:21:02 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Maybe but his sentiment is correct. Outsourcing is stupid.
jsonice741
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jsonice741,
User Rank: Apprentice
7/11/2012 | 9:19:46 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
This is a smart move on Mr. Mott's part. Outsourcing is a stupid strategy and only companies in trouble and with weak and ineffective management outsource.

IT is not a luxury but a necessity for any company to run effectively. Handing over the company's data to an outsourcer is plain unadulterated stupidity.

GM has made some bad decision's. They are finally doing something smart.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
7/11/2012 | 6:55:02 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
It's one of the pivotal questions -- do the controls Mr. Mott brings in feel like efficient allocation of scarce IT inside GM, or needless bureaucracy for a company trying to move faster? I've asked him about this topic more than once. He says the process scales with the task -- small project, small cost-benefit analysis. He acknowledges there's a learning curve until the planning process doesn't feel like extra work. But he says you need the data to make good decisions and show what IT's delivering.

One critical distinction in this effort -- GM isn't pushing for huge cost cuts from IT ops, the way HP was.

HP Survivor
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HP Survivor,
User Rank: Apprentice
7/11/2012 | 3:47:09 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
HP is still cleaning up the mess left by Mr. Mott's last "IT Transformation". The bloated and inefficient bureaucracy created by that 'transformation' hampered development tasks and crippled R&D teams with endless rounds of "requests for changes" or filing exceptions on the most ridiculous minutiae. It held development teams responsible for downtime on systems/servers they were not allowed access to. It was often the case where mission critical applications were mysteriously altered or brought down by Gǣrequired patchingGǥ then left in dysfunctional states G which were then blamed on the application teams who had no knowledge that the patching was being done. It created an environment where it was nearly impossible to get competent DBA assistance to do the most routine of tasks, and even that level of GhelpG required the filing of endless exceptions or spending valuable development time trying to figure out how to engage a DBA team to assist in troubleshooting an issue they created. This disaster was wrought by the brutal insistence that IT spend should be at or less than 1% of total revenue. As a result, critical domain knowledge and experience was lost in wave after wave of layoffs and IT GǣsupportGǥ was offshored.

Adding insult to injury, many of the people who helped hone The Train Wreck That Randy Built were toadies who followed him from Dell or Walmart. Upon arrival, these people were promoted above their competence level over long time HP folks who actually knew something about the business and how to work in distributed, global teams (the Peter Principle is very much alive, well and thriving at HP as a result). The GǣDell-MartGǥ crowd, as theyGre still disparagingly referred to, proceeded to make a royal mess of things and run roughshod over everyone and everything that got in their way. Not surprisingly, many of the Dell-Mart crowd is now tendering their resignations G many of whom will undoubtedly land at GM to repeat the destruction they brought down on HP. Killing Saturn was one of GMGs more boneheaded moves, bringing in Mr. Mott to GǣtransformGǥ their IT house will likely prove to be yet another.

During Mr. MottGs HP tenure, warehouse consolidation, new development centers G two of which were GǣconsolidatedGǥ in Texas (Houston and Austin) because Randy lives in the state, with a third being located in Atlanta G left critical data centers vulnerable due to natural weather problems frequently encountered in that part of the country. It wasnGt just a case of grumbling amongst the rank and file, the Gǣnew and improvedGǥ IT infrastructure was universally reviled by everyone who wound up being crippled by it. So much so, that HPGs new CEO and CIO ushered in a program known as Bureaucracy Busters to solicit feedback from employees in all levels of the company about how the vestiges of process paralysis created by the glorious IT Transformation could be improved. In the first two weeks of BBGs existence, the program received thousands of requests from employees all over the company and is well underway in an effort to clean up the damage created by the previous CIO and his cronies.

The IT press seems to have almost universally loved Randy and his time at HP. HP insiders who managed to survive the Mott and Hurd reign of destruction will tell you a very different story indeed.
KCannon
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KCannon,
User Rank: Apprentice
7/10/2012 | 9:09:39 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
GM was booming in 2006? And it only took 2 years for Wipro to drive them to bankruptcy? REALLY!!!
2sense
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2sense,
User Rank: Apprentice
7/10/2012 | 4:40:36 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
I wonder if Randy's compensation is tied directly to the success or failure of this undertaking. My guess is that he'll get paid handsomely no matter what happens. And if things really get bad, he can always strap on his golden parachute.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
7/10/2012 | 1:29:17 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Moves like commonizing and consolidating apps aren't new tactics for GM. But I think moving from hugely outsourced to hugely insourced is a very big and new shift, and one that comes with a lot of risk. Hiring that many people while building the culture GM needs will be a major leadership challenge.
spectrum
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spectrum,
User Rank: Apprentice
7/10/2012 | 7:26:41 AM
re: General Motors Will Slash Outsourcing In IT Overhaul
Finally Someone who gets it, software architecture is moving from fairly static workflow model to real time event driven workflow. Unfortunately the delegated bureaucracy model of the mainframe era can no longer function well in the real time event drive future into which all software systems are headed. The budget manipulators cannot no longer be at the top trying to cut costs by delegated bureaucracy to low cost disinterested parties continually finding ways to bleed the host corporation. Put 10 top level working architects who can deep dive into any new technology at the top of the organization and you will be able get consensus and propel any large enterprise effectively into this brave new world. Engineers got the united states to the moon.
Sam Iam
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Sam Iam,
User Rank: Apprentice
7/10/2012 | 4:24:15 AM
re: General Motors Will Slash Outsourcing In IT Overhaul
Why would HP win big on this strategy? They are the primary outsourcer, through EDS, of these contracts which will be cancelled. HP will likely lose the most. Also, I doubt Mott has a soft spot for the company that just pushed him out.
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