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GM's Global Gamble

General Motors put the pedal down on its plan to spend about billion on IT services. Can it take GM in a new direction?
EDS Survives
For EDS, it's a bittersweet win. GM made no bones about the fact that it was throwing the EDS business open to competition, but EDS remains GM's leading IT supplier. It expects annual revenue from GM of $1.2 billion to $1.4 billion, down from $1.8 billion last year and that could mean layoffs. Szygenda says he was ready to give all of the business or none of it to EDS. "They have a plan to redo the organization--how they manage their people, how to manage common processes," he says.

EDS retains management and integration responsibility for many of GM's operations, including CAD/CAM systems for product development, supply chain and purchasing systems, and manufacturing systems. As GM cuts back on North American manufacturing, where sales are declining, it continues to build plants in other countries where business is growing. That fits into EDS's ability to shift to where it's most needed. "In real-time manufacturing, we're typically providing support within the plant," Kelly says. "In other parts of the business, like the supply chain, we'll run a process that's more best-shored," meaning the EDS location that provides the best overall value for the job.

How HP Fits In


Who Got What
EDS
$1.2 to $1.4 billion a year to manage key systems such as supply chain and product development



Hewlett-Packard
$700 million for app support and IT infrastructure management



Capgemini
$500 million for app support and integration management



IBM
$500 million for app support and IT infrastructure management



Wipro
Undisclosed, but total GM business goes to $300 million; will handle middleware development



Covisint
Undisclosed, for messaging infrastructure

HP was another big winner, bringing in about $700 million in new revenue over the next five years. GM represents one of the company's highest-profile outsourcing wins since it landed one to manage Procter & Gamble's IT infrastructure in 2003. HP will provide server management, application maintenance, and systems integration in a number of areas. It will manage GM's engineering workstations and host ERP applications. And for the first time, HP, which has been doing some of that work regionally, will be assigned these jobs across GM operations around the world. It's also working on technology product development in GM's Brazil operations and engineering IT operations in Michigan and India.

HP emphasized controls such as its adherence to the Information Technology Infrastructure Library, a repository for common infrastructure processes. Those common processes are needed to achieve the speed GM expects. "When we do a software update globally [for GM], the time frame is about 10 days," Angers says. That means an update to a CAD program has to be completed worldwide for every engineer within that time frame.

GM's contracts with Wipro seem to have less to do with cheap Indian labor--all the vendors bring that to the table, to some extent--and are more about quality processes. Wipro didn't say how much the new contracts were worth, only that this latest win will bring its total GM services revenue over the next five years to about $300 million. GM tapped it for software design and integration work. A key task for Wipro will be to build a common service-oriented architecture that will let GM efficiently share information across its various regional groups, such providing a global inventory of cars or view of sales, says Wipro VP N.S. Bala.

Cookie-Cutter Approach
About two years ago, Wipro built what it calls a "factory model" for GM that has templates for application development that can be reused to build other types of apps and draws on Wipro's use of quality processes, such as Capability Maturity Model Level 5. It's similar to automotive design, Bala says. "There are many models of cars built on a common chassis. The models work differently, but the components are the same," he explains.

The company that looks like the biggest loser, at least in this first half of contracts, is IBM. The global leader in IT services was thought to have the best chance of beating EDS for the lion's share of the business. IBM estimates its take could be up to $500 million over three years. It may still score in the next round of contracts, but last week had to be a letdown after the company built a 500-person team of strategists and technicians to pursue the GM business. IBM will support applications used by GM's service and parts operations as well as its manufacturing quality-assurance systems; it also will play a part in GM's integration-management efforts. IBM declined to provide details.

Will these contracts make GM a better company? Szygenda is betting that a more global approach to business, starting with the IT that supports it, is the only way forward for the automaker, and he's reshaping the IT organization to do that. The company left open the possibility that it might spend slightly less than the $15 billion it's targeted, depending on the cost savings. Szygenda maintains that his main goal isn't trimming costs but changing what the IT organization can do globally. The proof will be measured by whether his efforts can help sell Suburbans in Seattle and Buicks in Beijing.