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Division Of Labor

ABN Amro's move to tap five outsourcers to handle its IT needs may lead to lower costs and reduced risk, since it won't depend on a single vendor. Just add good managers.
Yet IT executives trying to work with multiple IT-services vendors quickly learn a hard lesson: The vendors all have different ways of working. At GM, Szygenda has spent the last year bringing competing services firms, including Accenture, EDS, and IBM, to GM's Detroit headquarters to find ways to standardize common IT processes such as network provisioning and configuration management. Doing so creates an environment in which GM can tap a consortium of vendors to handle its outsourcing needs when its current 10-year contract with EDS expires next year. Szygenda won't say who's got an inside track but says he expects to announce winners by the end of the year. "Then we'll have a half-year transition, if there is any transition," Szygenda says.

GM spends around $3 billion a year on outsourced IT services, with EDS getting about two-thirds of the work. But $1 billion in IT-services contracts is held by other heavyweights, and a lot of the carmaker's development work is spread over a number of vendors, including Hewlett-Packard and IBM, Szygenda says. "It's not just picking new vendors. We're moving to a global model, so we're changing the way we run IT at General Motors," Szygenda says.

ABN Amro certainly is changing how it runs IT and what the remaining staff will do. Of the 1,800 or so IT workers who will be left inside ABN Amro after it completes its outsourcing transition, many will devote much of their time to managing the company's growing list of vendors, Gustavsson said.

How The Deal Divvies Up Infrastructure Management
IBM gets $1.9 billion

App support

TCS gets $250 million

Infosys gets $125 million

App development

Accenture, IBM, Infosys, Patni, TCS

Data: ABN Amro

Getting all those service providers to work together can prove challenging. But IBM's Patterson notes that the emergence of standards that create common ways of implementing basic IT operations is making it easier for vendors to team on behalf of a client. "We're getting better at partnering," Patterson says.

Among the more significant standards gaining wider adoption is the Information Technology Infrastructure Library, published by the United Kingdom's Office of Government Commerce, which specifies best practices for a number of IT functions, including change management, incident management, and security. ITIL compliance was a basic requirement for vendors bidding on the ABN Amro contracts.

GM uses ITIL as the basis for standards governing operations monitoring, service-desk management, capacity management, managing systems requirements, and other IT processes. Despite that, Szygenda says he believes his 2,000 GM IT employees have to spend too much time managing and pushing suppliers together to get "one GM." So any IT-services vendor that hopes to win outsourcing contracts from GM will have to live and breathe such standards. "The model I have now won't work in two or three years," he says. "We're getting too big, too global, too digital."

There's no single strategy that companies are embracing when it comes to global IT sourcing. Some companies remain wary of outsourcing, convinced they gain more advantage keeping IT staff in-house. Others hold to the "one throat to choke" approach of a single outsourcing vendor assuming all the responsibility. For example, the University of Pittsburgh Medical Center inked a $400 million infrastructure deal entirely with IBM that also includes an agreement to do joint development of medical-systems software, aiming to develop systems the two companies could sell to other health-care providers.

Yet TCS's Ramadorai predicts more customers will pursue multiple service providers. "It's a good governance model, in terms of spreading the risk, in terms of the competitive nature of the market," he says. "And you want to be able to access various resources in a global environment."

A lot is riding on the ABN Amro deal. Financial-services companies haven't been shy about moving IT and processing work offshore. Ramadorai predicts this will speed the trend. "This is a bold step from a major European financial institution," he says. "This is going to set the stage for a lot of other global corporations looking at this model very seriously."