$1 Billion Contract Gives AT&T Key Role In GM's Globalization Effort

General Motors on Wednesday said it has handed a $1 billion contract to AT&T to standardize and manage its global data network -- a critical component supporting the automaker's goal of manufacturing vehicles anywhere in the world as cost effectively as possible by using a common set of technologies and processes.

Under the five-year deal, AT&T will help GM deploy and manage a standard set of cross-compatible voice, video, and data applications that will run worldwide atop GM's AT&T-built global data network and that will be available for use by all GM employees regardless of location. "I want our employees to be able to wake up anywhere in the world and not need to know where they are," says GM CIO Ralph Szygenda.

The deal extends an existing relationship between AT&T and GM. In 2002, AT&T started work on the construction of a global network for GM based on multiprotocol label switching technology, which supports multiple data standards and is designed to allow more efficient network traffic routing. "We made an early bet on this technology, and now it's paying off," says Ron Spears, executive VP for global business sales at AT&T.

With the network now in place, the new contract calls for AT&T to assume a larger management role over GM's telecommunications and network assets. AT&T will not only manage the network itself but also the performance of more than 150 local or regional telecom providers that connect to the network and provide services to GM around the world. "We've given them much broader management responsibilities," says Szygenda.

GM is counting on AT&T's telephony expertise to ease its expansion into emerging geographies where telecom standards may differ from those used in the United States and Europe. "China will be the largest challenge," says Spears. AT&T has created network interconnections with China Telecom and China Netcom in order to extend GM's network into those parts of China where the automaker conducts business.

GM's larger goal is to give workers access to a standard set of business and manufacturing software applications and collaboration and messaging tools regardless of which location they operate from. Szygenda says that will give the automaker the ability to build cars in whatever location is best suited for the production of a particular model. "It takes away the fragmentation," he says. The plan is already impacting GM's North American operations. In the fall, the company expects to introduce the Saturn Astra, a rebranded Opal subcompact that will be sold in the United States but built in Europe at GM's Opal plant in Antwerp, Belgium. GM has said the move will result in the temporary layoff of about 350 workers at an assembly plant in Windsor, Ontario.

Szygenda says he weighed a number of contractors, including IT outsourcers, before tapping AT&T to standardize and manage GM's global data network. "We wanted someone to manage the core network environment that knows the area," says Szygenda. "The systems integrators aren't network experts."

Still, AT&T will need to work closely with the handful of IT contractors that GM last year selected to build its next generation of business applications and to manage its computer hardware under a $15 billion, five-year outsourcing initiative. The group includes Cap Gemini, EDS, Hewlett-Packard, IBM, and India's Wipro Technologies. "We've met with over 200 folks from those companies to determine how the piece parts will fit together," says Spears. Spears says GM's insistence that its technology vendors adhere to a broad set of standards that govern the way the company implements and uses IT will make it easier for AT&T to ensure that its network is compatible with projects implemented by the other suppliers. "There's a governance process at GM that ensures that we can function well together and that they get a seamless customer experience," says Spears.

GM, which has posted more than $13 billion in losses over the past eight quarters, is looking to find efficiencies wherever it can -- not only in its technology operations but in the way it staffs those operations. Last week, the company said it would reduce from 200 to 105 the number of staffing agencies that supply GM with workers ranging from accountants to programmers and network engineers.