With General Motors Corp. less than two years from the end of its mammoth 10-year outsourcing contract with EDS, chief technology officer Tony Scott told a gathering of software executives last week that the automaker's next-generation outsourcing model will have a more modular contract structure and will be built around fast-evolving IT requirements as more software code is pumped into new GM vehicles.
GM needs software to move data across the globe, CTO Scott said.
At the top of GM's software requirements is the need to support an increasingly global business that's growing more dependent on sharing data during the design process. Examples include an ongoing effort to use more standardized parts across brands and makes throughout the world, and the collection of vehicle-performance information from its OnStar in-car communications system. "What we need is software that's going to move information about product across this whole ecosystem," Scott said.
During GM's current contract with EDS--a company GM owned for 12 years before spinning it off in 1996--the automaker has reduced its IT budget by about $1 billion a year, to $3 billion. EDS captures about three-quarters of that budget, since GM's IT operation is nearly 100% outsourced, with oversight by an internal IT staff of 1,700. The new outsourcing model, Scott said, will break the contract up into numerous contracts--the exact number hasn't been disclosed--covering individual areas such as desktop services, manufacturing systems, and financial systems. The total value is expected to be $15 billion, with most of the agreements lasting five years. GM isn't setting rules about how much of the business can be awarded to a single vendor. Accenture, EDS, Hewlett-Packard, and IBM are the leading contenders for the bulk of the service contracts; software vendors will work directly with the firm responsible for each area.
Software has for years been an increasing part of the vehicle design process. Now, software and electronics are the biggest single expense in the production of a vehicle, accounting for a third of the cost, Scott said, and that trend will accelerate. The lines of software code in a GM car, which grew from 100,000 to 1 million lines between 1970 and 1990, will reach a staggering 100 million by 2010, Scott predicted. "What that tells me is that GM's going to have a major software problem between now and 2010, and we're going to need your help," he said. For example, software vendors will be required to include their products in the bumper-to-bumper warranties.
The growth of in-car software is powered by demands such as better navigation systems, more interaction with mobile devices such as cell phones and MP3 players, and emerging technology such as adaptive cruise control that slows a car if the vehicle in front slows. Already, more than 20,000 remote diagnostic reports, which GM needs to assess for possible problems in manufacturing or design, come in monthly via OnStar.
With software looming large in GM's plans, Scott has advice for vendors: Make maintenance programs and upgrade paths less complex and more affordable. When vendors tinker with long-term licensing fees, it creates a burden for GM, which often has to revisit outsourcing contracts that were based on existing licensing agreements. Said Scott: "None of that has any benefit for GM. It's just a cost." When it comes to suppliers that add cost without benefit, GM has never been known for its patience.