GM globalisation makes vendors work together

Carmaker's plan means outsourcers must collaborate

In 2003, General Motors CIO Ralph Szygenda saw the company's future through a global lens. At the time, GM's business leaders were getting serious about globalisation, and they recognised the need to seamlessly manufacture and distribute products across geographies. The notion of creating a complementary set of common IT business processes worldwide was already a gleam in Szygenda's eye, says Dan McNicholl, chief strategy officer for GM's IT organisation.

Although GM had a global presence, the company was moving away from a heavily decentralised business model where many divisions had been accustomed to running their operations autonomously.

Szygenda and his top executives realised that to support GM's emerging cross-border business philosophy, they'd have to change the way they approached IT. That meant shifting from using a highly fragmented support structure to standardising on a set of 44 common IT business processes, a transition facilitated through the use of ITIL, Capability Maturity Model and Six Sigma quality management techniques, says Szygenda.

The trickiest part: As global planning continued, GM re-outsourced its IT operations to EDS and six other primary IT providers in June 2006, placing 29 of those 44 processes in the hands of outside vendors.

The outsourced processes cover critical areas such as how GM goes about gathering requirements definitions for its 500 annual development projects and how it determines the cause of a system disruption, says McNicholl.

The business process overhaul has included the consolidation of hundreds of existing individual contracts into a more manageable set of 40-plus agreements, mostly organised by business process area, Szygenda says. And since the outsourcing began, GM's information systems and services group has managed more than 160,000 IT transition tasks with no significant business disruption, he adds.

It's a heady challenge for GM's seven core IT outsourcers to carry out this plan on a global scale. GM is "trying to push the [outsourcing] services sector harder and faster than that sector [would] move by itself", says Bobby Cameron, an analyst at Forrester Research, who recently met with Szygenda and his top IT executives.

GM's core IT vendors — EDS, IBM, Hewlett Packard, Capgemini, Wipro, Covisint and Compuware — didn't really have much of a choice about complying with GM's vision. GM is a huge customer, and they had their marching orders.

But to help ensure a smooth transition (and because the processes require close interaction and even dependency among GM's IT organisation and its suppliers), GM enlisted them to help design the standardised work processes, says McNicholl. GM then provided formal classroom and web-based training to thousands of IT workers scattered across its providers, and it plans to conduct additional training beginning early next year.

Even for GM suppliers such as HP, which has extensive ITIL experience, the transition to a common set of IT business processes across a company as big as GM hasn't been easy. "The big difference to GM's approach is the whole focus on collaborating with other suppliers," says Jim Angers, an HP vice president and general manager of the GM account.

"We don't know of too many clients, if any, on the size and scale of GM that are pushing to be global," says Mark West, IBM's global sales and service marketing process executive in Detroit. The bulk of IBM's services support teams for other clients continue to be organised on a country or regional basis, he says.

Collaboration between technology services companies such as HP and IBM "was not natural at first", since these vendors are so accustomed to competing against one another, says Angers. "At first, people behaved like it was an intellectual property issue, and really, it's not," he says.

Angers says he and his peers at other companies on the GM account have since learned to work closely with one another, and HP's relationship with those companies "gets better on a day-to-day basis".

For example, as part of its agreement to provide hosting services to GM, HP recently had to relocate 300 servers from EDS sites in Plano, Texas, and other places to HP sites in Asia and Toronto. To ensure a smooth transition that didn't affect operations, HP worked closely with IBM and EDS, the key application providers, says Angers. "We have been joined at the hip for the past several months," he adds. "I've learned more about my competition in this project than I have in the last 27 years of my career."

The consistency of the training programme for 8,100 workers both inside the company and among outsourcing suppliers has been crucial in driving the adoption of standardised IT work processes. Multiple Tier 2 and Tier 3 subcontractors that help support GM also required training, which was delivered by Tier 1 vendors.

For instance, Capgemini, which handles application development and maintenance for three of GM's businesses, provided training on the standardised business processes for 200 application developers at Satyam.

This is not to say there were no bumps in the road. "There are always problems when you put together individuals who haven't worked together before," says Paul Spence, CEO of global outsourcing services at Capgemini and the vendor's top executive on the GM account. "It was a matter of determining where the [common] work processes weren't being followed and then resolving them."

Szygenda says the IT business process effort is coming along better than he would have expected at this point, driven mostly by consistent communication between GM's IT executives and supplier teams. To date, he says, the common IT business processes are being executed effectively about 75% of the time. And though he says it will take more time for GM's IT partners to fully adapt to the global support model, others, like EDS' Mike O'Hair, say they're heartened by the level of cooperation and interaction that has occurred among age-old rivals. "You can't tell what company a person works for," says O'Hair, the vendor's regional general manager on the GM account.

Financial incentives help entice the vendors to play nicely with each another. When GM announced the multi­supplier outsourcing deal in 2006, half of the anticipated US$15 billion (NZ$19.8 billion) in planned spending over the five-year agreement was earmarked for new system development and deployment — opportunities for which the seven outsourcers are the primary pool of bidders. (GM reserves the right to cast its net wider to include other vendors if there's a compelling reason to do so).

GM also puts together biannual report cards on each of the seven vendors and other key suppliers. Their performance affects their eligibility to bid on new application development or deployment.

In addition, GM periodically audits its IT suppliers, McNicholl says. The audits enable its IT executives to determine whether the standardised business processes are meeting the needs of business users.

GM's approach appears to be catching on. Forrester's Cameron says he's starting to see a few other multinational companies apply global, multisupplier IT outsourcing models that are similar to what GM has constructed. Among them is a large consumer goods company he's not at liberty to name.

Although Szygenda says it's tough to quantify the effect that the process standardisation effort has had on the business, GM is now spending US$3 billion annually on IT. That's US$1 billion less than in 1996, and Szygenda attributes that to IT efficiencies the company has achieved. He adds that GM has cut US$12 billion in IT costs since 1996 and has reinvested US$7 billion back into IT.

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