General Motors Will Slash Outsourcing In IT Overhaul - InformationWeek

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6/28/2012
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General Motors Will Slash Outsourcing In IT Overhaul

GM's new CIO Randy Mott plans to bring nearly all IT work in-house as one piece of a sweeping IT overhaul. It's a high-risk strategy that's similar to what Mott drove at Hewlett-Packard.

Sweeping Transformation

Besides the move away from IT outsourcing, the key elements of Mott's plan include:

>> Data center consolidation: GM plans to go from 23 sizable data centers worldwide to just two, both in Michigan. In the process, GM will replace servers, storage, and networking with today's more efficient gear, in hopes of reducing costs and using more automation so that fewer of GM's IT pros are involved in "run the business" kinds of IT operations and more are involved in new development and innovation.

>> Application consolidation: Mott estimates that GM can cut 40% or more of the company's 4,000-plus applications that have sprung up in various regions and divisions by moving to standardized, global applications for everything from financials to factory-level processes.

>> Hiring: Mott plans to dramatically increase the IT organization's hiring of new college grads and will look to top computer science schools beyond the universities with which it now has recruiting ties. Most of GM's development will be done in the U.S., even though the company's growth is very much tied to China, Brazil, and other countries. Mott does plan to hire internationally to bulk up an "IT planning community" that can gather the requirements needed for GM to build global apps.

>> Three new software development centers: One will be in the Detroit area, with the other two in U.S. locations still to be determined. They'll be chosen based on the kind of development talent the company can attract there, including their proximity to key universities. (Silicon Valley, anyone?) Dispersing IT development will be a cultural change for the still Detroit-centric GM.

6 Steps For GM
1. Insourcing Flipping from 90% outsourced IT to 90% of work done by internal staff. Lots of hiring ahead.
2. Data center consolidation From 23 data centers to two new ones, with the latest hardware and more automation.
3. Application consolidation 40% or more of GM's apps could go, by moving to standardized, global applications.
4. Software development centers Likely three in U.S. sites to be determined, based on the local development talent.
5. Portfolio management Every IT project will require a cost-benefit analysis and a priority set by business units.
6. Data warehouse consolidation GM has about 200 data marts today and plans to move to one data architecture, so data's easier to access and use.
>> Portfolio management: As he did at HP, Mott will require that a cost-benefit analysis be done on every IT project, spelling out the project's benefits in ways that the business unit, finance team, and IT agree to. The results of those CBAs produce a metric Mott calls the "revenue of IT," measuring the value IT projects generate, not just how much they cost. Likewise, Mott will insist that business managers prioritize the various projects they have planned.

>> Data warehouse consolidation: GM has about 200 data marts today, and Mott wants to move all of them to one architecture. The goal is to make data easier to access and use, and to integrate it better across groups and divisions to reveal more insights. CEO Akerson told Fortune in a May interview, "We're looking at our IT systems real hard. Data warehousing of customer information was not a strength in the company. Maybe it wasn't even existent, but it will be in the future."

Mott's ambitious transformation plan won't be universally popular. End users will complain: You're taking away the application that I love for the greater good of cost savings? Business unit managers will complain: You're making me do a cost-benefit analysis for my little upgrade? Isn't this the kind of bureaucracy a nimble GM needs to avoid? Even Mott's IT team will grumble: You're messing with the fiefdom of IT contractors I manage?

Mott's critics at HP complained that he cut too fast and deep, leaving business units vulnerable, or that he spent precious resources on internal bean counting.

There's one additional, controversial piece of Mott's plan: It all happens at once, over the next three years. Mott described it in the past as "choosing is losing." For example, if you move to an insourced IT staff and away from outsourcers, but you don't modernize the data center to increase IT automation, then you won't get the benefit from those new staffers working on new projects instead of maintenance and support work.

It fits Mott's general philosophy that many IT projects fail because they just take too long. It's why he favors putting more staff on a project for a shorter period--doing fewer projects at a time, but faster. "Every month that goes by, every quarter that goes by, the ROI goes down," he says.

The clock has started ticking. Mott launched this IT transformation plan internally in late June on a town hall webcast with GM's 1,500 IT employees worldwide. The world will be watching: If Mott and his team botch any of this IT transformation, it could put the company's historic turnaround in jeopardy.

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PostCent
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PostCent,
User Rank: Apprentice
7/12/2012 | 4:57:49 AM
re: General Motors Will Slash Outsourcing In IT Overhaul
Mott has never stayed long enough to be truly an insider who knows the business. It is probably because he made too many enemies while carried out the changes. An helicopter executive who does not have enough domain knowledge. Maybe a train wrecker / party crasher who leave before someone else realizes so.

What is HP doing now that the infamous NeoView is no longer in development? Do you call that a good decision by the CIO? Remember that Walmart was the poster show case trial customer? What happened?

HP IT support basically became IT no support, as it was how it was referring to by many insiders. It was a joke. Email problem? Good luck to having someone to help you. It works when it is working. When it doesn't, good luck. How is that lost productivity being measured? No one did. Cost cutting to beyond the bone is not a way to run your business and sustain it. Mark and Mott knew it and they bailed.
HP Survivor
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HP Survivor,
User Rank: Apprentice
7/11/2012 | 10:46:02 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
HP's board has certainly been complicit in most of the maladies that have befallen the company over the past decade. Mott was simply a symptom of that dysfunctional collection of overpaid board members - as was Carly Fiorina, Mark Hurd and Leo Apoteker. Meg Whitman was part of that Board for a time, and it remains to be seen how she'll deal with the fallout of what she helped to sow.

However, more to the point of this article, Mott was often hailed by the IT press as the savior of HP's IT infrastructure. My point was that nothing could be further from the truth. When you strip away the puffery and executive speak, the mess he created, then left behind, at HP will take years to clean up. The ROI and/or money saved by his so called transformation looked good up front on whatever spread sheet was passed around in executive meetings. However, like most such spreadsheets, it failed to calculate the backend costs of productivity losses in R&D groups who spent more time filling out ridiculous forms and getting run around in circles than they did coding.

There are very good reasons why the current CIO is working hard to dismantle much of Mr. Mott's handywork. The hope is that the rest of the Dell-Mart cronies will find greener pastures elsewhere. Good luck with that GM.
HP Survivor
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HP Survivor,
User Rank: Apprentice
7/11/2012 | 9:26:08 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
As always, the trick is to separate the curriculum vitae-speak from the reality in the trenches. There was, and still is, a very real and measurable detrimental impact to development teams across HP because of this "transformation". Those of us who are still here are living this nightmare day in and day out. The bureaucracy, and the process paralysis it spawned, are very real - the current CEO and CIO wouldn't be spending a significant portion of their time figuring out how to reverse that damage if it weren't.
jsonice741
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jsonice741,
User Rank: Apprentice
7/11/2012 | 9:22:37 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
HP's problem is not Randy Mott but its board of ineffective idiots who appointed the likes of Carly Fiorina, the moron from SAP and then fired he smart guy and hired an idiot.
jsonice741
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jsonice741,
User Rank: Apprentice
7/11/2012 | 9:21:02 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Maybe but his sentiment is correct. Outsourcing is stupid.
jsonice741
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jsonice741,
User Rank: Apprentice
7/11/2012 | 9:19:46 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
This is a smart move on Mr. Mott's part. Outsourcing is a stupid strategy and only companies in trouble and with weak and ineffective management outsource.

IT is not a luxury but a necessity for any company to run effectively. Handing over the company's data to an outsourcer is plain unadulterated stupidity.

GM has made some bad decision's. They are finally doing something smart.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
7/11/2012 | 6:55:02 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
It's one of the pivotal questions -- do the controls Mr. Mott brings in feel like efficient allocation of scarce IT inside GM, or needless bureaucracy for a company trying to move faster? I've asked him about this topic more than once. He says the process scales with the task -- small project, small cost-benefit analysis. He acknowledges there's a learning curve until the planning process doesn't feel like extra work. But he says you need the data to make good decisions and show what IT's delivering.

One critical distinction in this effort -- GM isn't pushing for huge cost cuts from IT ops, the way HP was.

HP Survivor
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HP Survivor,
User Rank: Apprentice
7/11/2012 | 3:47:09 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
HP is still cleaning up the mess left by Mr. Mott's last "IT Transformation". The bloated and inefficient bureaucracy created by that 'transformation' hampered development tasks and crippled R&D teams with endless rounds of "requests for changes" or filing exceptions on the most ridiculous minutiae. It held development teams responsible for downtime on systems/servers they were not allowed access to. It was often the case where mission critical applications were mysteriously altered or brought down by Gǣrequired patchingGǥ then left in dysfunctional states G which were then blamed on the application teams who had no knowledge that the patching was being done. It created an environment where it was nearly impossible to get competent DBA assistance to do the most routine of tasks, and even that level of GhelpG required the filing of endless exceptions or spending valuable development time trying to figure out how to engage a DBA team to assist in troubleshooting an issue they created. This disaster was wrought by the brutal insistence that IT spend should be at or less than 1% of total revenue. As a result, critical domain knowledge and experience was lost in wave after wave of layoffs and IT GǣsupportGǥ was offshored.

Adding insult to injury, many of the people who helped hone The Train Wreck That Randy Built were toadies who followed him from Dell or Walmart. Upon arrival, these people were promoted above their competence level over long time HP folks who actually knew something about the business and how to work in distributed, global teams (the Peter Principle is very much alive, well and thriving at HP as a result). The GǣDell-MartGǥ crowd, as theyGre still disparagingly referred to, proceeded to make a royal mess of things and run roughshod over everyone and everything that got in their way. Not surprisingly, many of the Dell-Mart crowd is now tendering their resignations G many of whom will undoubtedly land at GM to repeat the destruction they brought down on HP. Killing Saturn was one of GMGs more boneheaded moves, bringing in Mr. Mott to GǣtransformGǥ their IT house will likely prove to be yet another.

During Mr. MottGs HP tenure, warehouse consolidation, new development centers G two of which were GǣconsolidatedGǥ in Texas (Houston and Austin) because Randy lives in the state, with a third being located in Atlanta G left critical data centers vulnerable due to natural weather problems frequently encountered in that part of the country. It wasnGt just a case of grumbling amongst the rank and file, the Gǣnew and improvedGǥ IT infrastructure was universally reviled by everyone who wound up being crippled by it. So much so, that HPGs new CEO and CIO ushered in a program known as Bureaucracy Busters to solicit feedback from employees in all levels of the company about how the vestiges of process paralysis created by the glorious IT Transformation could be improved. In the first two weeks of BBGs existence, the program received thousands of requests from employees all over the company and is well underway in an effort to clean up the damage created by the previous CIO and his cronies.

The IT press seems to have almost universally loved Randy and his time at HP. HP insiders who managed to survive the Mott and Hurd reign of destruction will tell you a very different story indeed.
KCannon
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KCannon,
User Rank: Apprentice
7/10/2012 | 9:09:39 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
GM was booming in 2006? And it only took 2 years for Wipro to drive them to bankruptcy? REALLY!!!
2sense
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2sense,
User Rank: Apprentice
7/10/2012 | 4:40:36 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
I wonder if Randy's compensation is tied directly to the success or failure of this undertaking. My guess is that he'll get paid handsomely no matter what happens. And if things really get bad, he can always strap on his golden parachute.
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