Can General Motors Change How Companies Think About IT Outsourcing? - InformationWeek

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Can General Motors Change How Companies Think About IT Outsourcing?

A new CMMI model for acquisitions coming out this fall could make it easier for companies to mirror its standardized approach to dealing with IT outsourcing vendors.

THE GM PETRI DISH

For 10 years, from 1996 to 2006, GM outsourced nearly all its IT support and development to EDS, a remnant of when GM owned the company. Szygenda embraced the CMMI, standards-driven approach when that contract was coming to an end last year, and he decided to break up the outsourcing business among multiple vendors. His challenge was to get them working together.

Early last year, GM began dishing out the contracts: EDS got more than $1 billion to manage supply chains and product development: Capgemini, HP, and IBM each got more than $500 million for application support and IT infrastructure; Wipro and Covisint got sizable but unspecified chunks of business. To win, all vendors had to commit to using 44 standard processes GM developed for various IT tasks. For months after that, the service providers had to figure out how to work together to do things the GM way, whether in the United States, India, Brazil, or Ireland. "I'd say they all struggled," Szygenda says.

Mike O'Hair sees the difference from when he worked for EDS and GM 15 years ago, when every business group was run differently by geography and brand. Now, as the head of EDS's team for GM, O'Hair's in charge of the command centers that EDS runs for the automaker at several locations around the world to monitor manufacturing operations. Each uses common tools to monitor all factory systems, from network connections to application availability to robotic devices.

Standard, global processes: It's a mantra from Szygenda and his team, and from the vendors that work for him. But getting there isn't neat and tidy. IBM is expected to use the same process to support GM dealers as they order spare parts, even though dealers use multiple ordering systems. "We support the process, and all the flavors of technology," says Steve Portik, the VP responsible for IBM services to GM.

Szygenda says the cost savings from getting suppliers to follow common processes is significant. He declined to put a number on it but said it's letting GM increase the funding for developing new systems by 30%, all while the company reduces its IT budget. Vendors already are vying for new development work that Szygenda has said could reach $7 billion. Projects include new systems for areas such as order fulfillment and management, human resources, and logistics that can scale to serve all of GM. "We're reinvesting to digitize this company from a global perspective," Szygenda says.

Most companies, of course, don't command their IT vendors' attention the way a $192 billion-a-year company does. Last week, 400 IT architects from EDS, HP, IBM, and elsewhere, all of whom work full time at the Detroit headquarters, gathered for a tech conference to discuss the various projects they have going. "Oracle and SAP architects leave their badges at the door," Szygenda says. "You'll go down the elevator and ride with people from both Wipro and IBM."

In March, at a conference GM held for top suppliers, rival execs did a skit onstage in which they all used one toolkit to do GM work. At a meeting later this month at a suburban Detroit resort, representatives from all those suppliers and product companies--including Cisco Systems, Microsoft, and Oracle--will give 20-minute views on how the world will run in 2012. "They want more time," Szygenda says. "I sit up and critique them. What this shows is the IT industry and other companies want to work with each other if they believe it will solve business problems."

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