Automaker adopts precision strategy for outsourcing.
Technology vendors have been elbowing one another out of the way to proclaim greater allegiance to the XML standard as the fulcrum to bring harmony to all parts of the computing infrastructure. Will they be as willing to agree to a business interface to achieve contractual harmony? They will when doing business with General Motors, or theyll find themselves left alone in the parking lot.
In this era of ultimatums (Oracle will buy PeopleSoft regardless of the outcome! Everybody better stop using Linux until they appease SCO!), a customer decree that vendors need to find a way to work together may be the only ultimatum that makes sense. When that demand comes from someone wielding a multibillion-dollar IT budget, the decree cant be ignored.
The introduction of Universal Serial Bus enabled vendors to create true product differentiation but still easily interoperate on the customers computer. If Ralph Szygenda, GMs group vice president and CIO, is successful, his company will be in the forefront of developing the next level of vendor contracting: a kind of USB of technology business methods.
"The next generation, the third generation, is even more complicated than the debate I had in 1996," Szygenda said during an interview recently at his office in Detroits Renaissance Center. "When youre trying to get multiple companies to do the same thing, who are violent competitors, but make them look like an extension of General Motors business, its a challenge. If GM pulls it off, it will dictate outsourcing methodology for the IT industry."
For a more detailed explanation of GMs plans, see coverage starting on Page 21, but if you think about how the aerospace industry works with prime contractors and subcontractors to create aircraft, youll be thinking in the right direction. Among the pieces currently missing from the equation is an equivalent standards-setting board and a software application both specific and robust enough to administer and manage hundreds or thousands of IT projects in a company with the global reach of GM. "Where is our [ITs] ERP system?" asked Dan McNicholl, CIO of GM North America, when I spoke with him about the outsourcing program.
Of equal interest to me is that while vendor reaction to the tech slowdown has been to turn on one another, the reaction from arguably the largest business technology customer in the United States has been to come up with a proposal to make them all work together.
GM has outsourced nearly all its IT operations. For many companies, the idea of outsourcing brings with it the fear of saving dollars at the expense of giving up the leverage of using technology for a strategic advantage. Vendor-driven outsourcing is seen as a wedge with which the vendor restructures the technology architecture with its products. GM under Szygenda has tried to come up with an outsourcing philosophy that is both budget-friendly and capable of bringing the right technology to bear on a business problem. GM execs call it "precision information technology."
According to Kirk Gutmann, information officer for global product development and global service delivery, the precision strategy brings results. Over breakfast at the Ren Cen (Detroit area shorthand), Gutmann said GM recently completed a huge engineering design update to 18 engineering centers and more than 18,000 users in eight days. "It used to take nine months to roll out software," Gutmann said.
The next step in the strategy is to get vendors to learn to work together so their common product is better, more capable and less expensive than what could be developed by any single vendor. The most successful automobiles the company produces are those driven by a design and engineering vision of GM but orchestrating the capabilities of all GMs thousands of suppliers to produce a vehicle greater than the sum of its parts.
In the 1950s, testifying for the Senate Armed Services Committee, Charlie Wilson, then a former president of GM and later secretary of defense under President Eisenhower, said, "Whats good for GM is good for the country." That quote continues to create controversy regarding the role of business, politics and social well-being. But the idea that, in technology procurement, what is good for GM will be good for the technology industry is an idea whose time has arrived.