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6/28/2012
10:15 AM
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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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CBess
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CBess,
User Rank: Apprentice
7/9/2012 | 2:19:29 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
One of the things that is a bit humorous about the statements in this article is that many of them are the exact same as what was said back when GM bought EDS. I was part of GM back then.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
7/9/2012 | 2:42:15 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
That's an interesting long-term perspective. Any examples?
MyW0r1d
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MyW0r1d,
User Rank: Strategist
7/9/2012 | 3:32:49 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Agree with CBess in that non of the initiatives are truly innovative (that haven't been a part of most firms plans the past 5 years) and that is not to say 2-3 years isn't aggressive to bring it all back in house. It is another high level contradiction to those which continue and support sending US IT jobs to overseas out sourced markets because local talent is inadequate.

I would have recommended further geographic separation among the DCs maybe one colocated with one of the SDCs (nuclear conflict is a remote possibility but as we have seen with Amazon's clouds and current heat waves, electrical outages can still impact a large geo area).
Wakjob2
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Wakjob2,
User Rank: Apprentice
7/9/2012 | 6:20:26 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Well, what do you know - some American business execs finally get it. Everyone here does know GM was booming in 2006 - until it signed a $300 MILLION outsourcing deal with India's WIPRO. Guess that didn't work out too well for GM because they went bankrupt 2 years later due to Wipro's incompetence. Now American execs are waking up to the India, Inc. con.
Leo Regulus
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Leo Regulus,
User Rank: Apprentice
7/9/2012 | 7:25:36 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
(Showing my age here) There used to be a 'Union' label on purchased goods that were 'Union Made'. Now we seldom know what percentage of a purchase price goes off-Shore. GM & other companies keeping jobs on-shore need to be supported. Let's stay with them!
joelapp
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joelapp,
User Rank: Apprentice
7/9/2012 | 7:31:44 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
while it is easy to agree with your sentiment, it is entirely unrealistic when it comes to IT.
joelapp
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joelapp,
User Rank: Apprentice
7/9/2012 | 7:38:55 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
GM has yanked the HP/EDS chain ever since they sold their IT off. Each contract they tend to contradict the requirements from the previous one. This "new idea" is another example of GM's continuing IT services pullback since around '04. A lot of those thousands of applications mentioned in the story were a result of the decentralization effort they made in the early 2000's - letting the plants do more development. They then cut back a huge number in an effort to "commonize" their apps prior to the '06 contract and now they are just continuing to move in that direction and that led to HP job cuts. So, in reality, this is really nothing new.
SRV
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SRV,
User Rank: Apprentice
7/9/2012 | 8:14:30 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
To Wakjob2:

You are the same troll who visits multiple web sites and blogs, bashing all Outsourcing/IT services companies, especially Indian outfits. Your reasoning for GM's bankruptcy being the signing of a piddly $300MM outsourcing deal with WIPRO shows your utter ignorance and pathetic racism. There's a good proverb that's applicable to you: "It's better to remain silent and be thought a fool than speak and remove all doubts". Just apply that to posting on all blog sites, you moron.
Sam Iam
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Sam Iam,
User Rank: Apprentice
7/10/2012 | 12:19:42 AM
re: General Motors Will Slash Outsourcing In IT Overhaul
I agree that these are not new ideas. "Revenue of IT", "business value driven IT", "business aligned IT" and other popular phrases for tying IT spend to ROI have been around for decades. The problem is that the juice, generally, isn't worth the squeeze. Yes, you can probably hammer down a fairly comprehensive ROI for projects if you have a dozen analysts working on the numbers, DCFs, NPVs, etc, but, except for very large projects, the cost of the analysis and the bureaucracy consumes the gains. All of this analysis on ROI also makes it really complex to do anything as building the business case is such a hassle. Also, many IT projects don't have a clear cut ROI even though there is a clear cut need. What is the ROI on a collaboration application or an intranet portal? There may be some productivity gains, but it is a far stretch to say those productivity gains will hit the bottom line. Likewise with social media development, mobile consumer apps, etc. It is pretty difficult to determine that for every dollar spent you will receive $x in ROI. It is generally more cost effective and faster to just let managers make some judgement calls under a certain dollar amount.

On the age old application rationalization and data center consolidation topics, no one created 4,000 applications because they thought it would be more cost efficient than 40. They did it because they needed to get things done without going through the months long change management process of adding a field in SAP or some other enterprise wide application to ensure their change does not have an unforeseen impact on some other user group. By the time changes are made in centralized organizations, the requester usually has moved on or found a manual work around. Everyone has a slightly different task they are trying to perform and everyone needs their change requests processed now. Consolidation equals cost efficiencies, but they generally do not equal agility or speed to market efficiencies. You end up with a really cost effective IT organization that does not meet any group's needs particularly well. The same reason that local fire departments are not managed at the Federal level.
Marrach
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Marrach,
User Rank: Apprentice
7/10/2012 | 2:22:20 AM
re: General Motors Will Slash Outsourcing In IT Overhaul
Let me put another spin on this--

Consultants and Outsourcers came into the picture because, frankly, a lot of Internal IT Dept's were all about inertia and maintaining the 'Sacred Mainframes'

Back then, the Consultants and the outsourcers WERE the Breath of Fresh air-- introducing the new technologies and new ways of thinking.

But that was years and years ago. NOW-- the Consultants and the Outsourcers are suffering the same poison of Inertia, Inability to Change and Lack of Nimbleness to adapt to new circumstances. The Article is right-- if you need a change, you need to re-negotiate the Contract-- and then the outsourcer/consultant ONLY gives you what they see outlined in the contract and not ONE line of code more.

People, that's the attitude that's KILLING Business.

Add to it the unspoken truth that a Lot of current CIO's are CIO's in Title Only. Many of them just dressed up Executives who rotated out of the CFO's staff. They can rotate an Excel Sheet and open a PowerPoint...and BadaBoom!.. they're Instantly qualified to say what is and Is Not crucial to a company's IT force.

The Consultants LOVE these overdressed Executives. They ask no Hard Questions. They NEVER KNOW ENOUGH to understand when they are being sold a bill of worthless goods. And even when they have Competent IT staff to ask the relevant questions, they willfully ignore the Opinions of the 'Drones' below the Executive Suites as too troublesome. So the Consultants come in, they complement each other on how sharp their suits look, they do a 'Business Lunch' where NO HARD QUESTIONS are asked, and then the bubbly is popped when the contracts are signed..Here, here...and here, thankyou!

Mr. Mott needs to clean out the upstairs IT Executive ghettos. So do a lot of other American Companies. I say, it's about time!
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