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GM's Massive Outsourcing Deal Up And Running
At the <I>InformationWeek</i> 500 conference, General Motors CIO Ralph Szygenda delivers a progress report about the largest IT outsourcing deal in history.
J. Nicholas Hoover
September 11, 2006
3 Min Read
Gentleman, start your engines. The largest private-sector information technology outsourcing deal in history is off and running in a big way. Starting in June, General Motors began the first phase of a $15 billion deal to create a single global IT organization for the company.
To that end, in the first two months alone GM and its six main outsourcing partners have performed 160,000 transition tasks, trained 8,100 people on 29 standardized work processes, redeployed 2,800 personnel, remapped 1.2 million assets to new contracts, and aligned 15,000 additional supplier personnel to support requirements. Two weeks from now, GM's partners will get together to figure out how they can collaborate not only on business processes, but also from an architectural point of view.
GM announced in February the goal to create a single worldwide IT organization instead of having disparate regional processes. It tapped EDS, Hewlett-Packard, IBM, Capgemini, IBM, Compuware Covisint, and WiPro for a combined $7.5 billion over five years to improve IT operations and integration, with another $7.5 billion set aside for other contracts. Other major IT companies, including SAP, Cisco, and Microsoft, each bring an additional presence by helping over a two-year period to create a set of standard processes to which GM's outsourcing partners will have to adhere.
"The issue is now no regional boundaries," GM CIO Ralph Szygenda said Monday at the InformationWeek 500 conference in Palm Springs, Calif. "How do you do that, and how do you drive that? You have to have global strategy, organizations, processes, and systems." Not only do global processes and systems make for a unified IT organization, Szygenda said, but they also bring about flexibility in terms of the vendor partners GM can choose.
Despite the breadth of GM's outsourcing deals, there are limitations. "You can never outsource strategy, you can never outsource architecting systems, you can never outsource accountability in information technology," Szygenda said. There have also been a few challenges, such as getting all the vendors to actually work together to co-develop standard business processes and then correctly designing the routing infrastructure so that communications with help centers go to the right person among GM's set of partners.
While the focus of the day was GM's blockbuster outsourcing deal, Szygenda also said his greatest failure as CIO thus far has been the IT relationship with dealerships. Szygenda has taken steps recently to rectify that situation by working with GM dealers and automotive information management vendors to closely integrate GM's systems with the disparate dealerships' financial, parts, advertising and ordering systems that touch GM's systems in one way or another. "The assumption was dealers were independent and the automotive world shouldn't have anything to do with them," Szygenda said. "The dealers came to me and said, you've got to help us, we can't do it ourselves as individual dealers."
When GM announced its plan in February, the company was in the doldrums. Last year saw GM post an $8.6 billion loss, second-worst in the company's history. GM is saddled with $5 billion annually in retiree pensions, fierce competition from manufacturers worldwide, a legacy of poor reliability and bad gas mileage in GM vehicles, and slow sales in North America. Those aren't necessarily IT problems, but a secondary source of cost for GM is technology, and that's one area where the CIO does have control. Since becoming CIO in 1996, Szygenda has cut IT costs by $12 billion, $5 billion of which were fed back into operations and building better vehicles, consolidating or cutting 4,500 systems along the way. But he admits GM has a long way to go.
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