General Motors Will Slash Outsourcing In IT Overhaul - InformationWeek

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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.

As Randy Mott, the new CIO of General Motors, goes about his workday, he carries with him a well-worn calculator. It sits in front of him in the place of prominence that most people reserve for a smartphone.

Mott, who has been CIO at Wal-Mart, Dell, and Hewlett-Packard and joined GM in February, believes in numbers. And as he tries to transform GM's IT operations, he plans to flip one set of numbers on a scale that no CIO has ever done before.

Today, about 90% of GM's IT services, from running data centers to writing applications, are provided by outsourcing companies such as HP/EDS, IBM, Capgemini, and Wipro, and only 10% are done by GM employees. Mott plans to flip those percentages in about three years--to 90% GM staff, 10% outsourcers.

Insourcing IT on that scale will require GM to go on a hiring binge for software developers, project managers, database experts, business analysts, and other IT pros over the next three years. As part of that effort, it plans to create three new software development centers, all of them in the U.S. IT outsourcers, including GM's one-time captive provider, EDS, face the loss of contracts once valued at up to $3 billion a year.

This dramatic move away from outsourcing is just one piece of the "IT transformation" Mott is leading, which includes consolidating data centers and applications, centralizing IT planning and execution, and getting a better grip on GM's customer and production data. GM's IT transformation doesn't emphasize budget cuts but instead centers on delivering more value from IT, much faster. In many ways, the foundation Mott is laying is similar to the one Ford started laying four or five years ago as part of its One Ford/One IT initiative.

The overhaul Mott envisions puts the everyday operations of GM at risk during a time when the world's No. 2 automaker (Toyota is now No. 1) is still climbing out of bankruptcy protection and a $50 billion government bailout. GM's factories, supply chains, and financial reporting rely on the IT organization to keep information flowing in near real time on a global scale. The fact that Mott's boss, CEO Dan Akerson, would bless this level of IT change and accept this level of risk at a still-fragile stage of GM's recovery shows how essential the best data and technology are to the company's future.

GM CIO Randy Mott
GM CIO Randy Mott: How GM's IT pros spend their time is "upside down"

Akerson "was looking to make changes in the speed and cadence of the company," Mott says. "Whether it was with me or someone else, Dan Akerson was going to do an IT transformation here."

Mott's philosophy on outsourcing at GM, as it was at HP, Dell, and Wal-Mart, is that the company needs more creative, business-changing ideas from IT, and IT teams need to deliver those innovative projects faster. Mott doesn't think GM can be creative or fast enough with outsourced IT. "When the business says 'go,' then that means we start working on a contract, we don't start working on a project," Mott says of the current outsourced model. (Mott is on InformationWeek's editorial advisory board and was named our Chief of the Year in 1997, when he was at Wal-Mart.)

The shift away from outsourcing is only the most dramatic element of Mott's IT "transformation." The plan, approved by Akerson and the rest of the executive operating committee, comes straight out of the playbook Mott has developed over a three-decade career in the retail, high-tech, and now automotive industries. Mott's plan for GM is nearly identical to the one he led at HP between 2005 and 2008 under CEO Mark Hurd, before Hurd and then Mott got bounced in an executive shake-up.

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User Rank: Apprentice
7/9/2012 | 6:20:26 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Well, what do you know - some American business execs finally get it. Everyone here does know GM was booming in 2006 - until it signed a $300 MILLION outsourcing deal with India's WIPRO. Guess that didn't work out too well for GM because they went bankrupt 2 years later due to Wipro's incompetence. Now American execs are waking up to the India, Inc. con.
User Rank: Strategist
7/9/2012 | 3:32:49 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
Agree with CBess in that non of the initiatives are truly innovative (that haven't been a part of most firms plans the past 5 years) and that is not to say 2-3 years isn't aggressive to bring it all back in house. It is another high level contradiction to those which continue and support sending US IT jobs to overseas out sourced markets because local talent is inadequate.

I would have recommended further geographic separation among the DCs maybe one colocated with one of the SDCs (nuclear conflict is a remote possibility but as we have seen with Amazon's clouds and current heat waves, electrical outages can still impact a large geo area).
User Rank: Author
7/9/2012 | 2:42:15 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
That's an interesting long-term perspective. Any examples?
User Rank: Apprentice
7/9/2012 | 2:19:29 PM
re: General Motors Will Slash Outsourcing In IT Overhaul
One of the things that is a bit humorous about the statements in this article is that many of them are the exact same as what was said back when GM bought EDS. I was part of GM back then.
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