General Motors Awards $15 Billion In IT Services - InformationWeek

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Software // Enterprise Applications

General Motors Awards $15 Billion In IT Services

EDS will lose more than $500 million a year in GM business, while Hewlett-Packard and Capgemini will gain business.

While EDS remains General Motors' biggest IT supplier, it will lose more than $500 million a year under new outsourcing contracts announced today worth $15 billion over five years.

In addition to EDS, GM named Hewlett-Packard, Capgemini, IBM, Compuware Covisint, and Wipro as its top IT suppliers. EDS's share of the business, however, will drop from $1.96 billion in annual revenue to between $1.2 billion and $1.4 billion a year.

The decrease in contracts probably didn't come as a surprise to EDS—for months GM CIO Ralph Szygenda has hinted that he would move more business away from EDS and to other suppliers. "This is a big win," said Jeff Kelly, EDS's VP for GM business, in a prepared statement. "We’re very pleased to be a major part of GM’s third-generation outsourcing model." EDS's operation for GM—and Kelly's office—is located in a building right next to GM's headquarters in a cluster of towers in downtown Detroit called Renaissance Center.

Hewlett-Packard and Capgemini, meanwhile, gained a greater part of the GM business in the latest contract. HP says it won $700 million over five years, considerably less than what EDS will earn. IBM, Compuware Covisint, and Wipro are also existing suppliers for GM.

With the award of the new contracts, GM is asking all its suppliers to adhere to 44 standard process for various IT tasks, a move that GM says could broadly change the IT-services business. "This not only benefits GM, which I'm most interested in, but it benefits the suppliers and maybe the IT industry, too," Szygenda said in a press-conference call Thursday morning.

Yet the new contracts come at a risky time for GM, a company that—with falling market share and massive restructuring under way—can't afford factory delays or design problems caused by glitches as one IT vendor hands off to another.

In fact, risk mitigation was the No. 1 priority in the contract selection process, which has taken two years to develop. Cost was a lower priority in contract decisions. "We didn't let the lowest cost drive us or payment terms drive us," Szygenda said. "Realize how critical this is to GM; this is the heart and soul of running the company. You do not drive this by the lowest cost or payment terms."

What's more, Szygenda refused to characterize the decision to name India-based Wipro as a top-tier supplier as a means to cut costs through lower-cost foreign labor. As a company focused on global sourcing and operations, it's natural to have some suppliers based in other countries. "So whether it's in Brazil or Poland or Shanghai, we need the presence there to support our business," he said. In fact, GM is growing its business in many other countries, including India, while business has dropped in the United States.

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