Cost-Cutting and Globalization
When the contracts were awarded in 2006, there was another $7.5 billion in hardware, software and application development work over five years that you were going to award. What's the status of that $7.5 billion worth of spending?
Over $1 billion per year is being awarded. It's like traditional business that people can win, that's competitive. Or it's building new systems, like logistics. That happens all the time.We're spending less on support and maintenance, but we are putting the same amount of money into the development of new systems. Overall, we may be going down or staying flat, but we are going up in the development of new applications. That has always been our goal, to save money on operations and spend it on next-generation innovation. But the cost of operating the GM environment has gone down every year for 12 years. I guarantee you, for the next three years, it won't be any different. That means we are running all of GM, including the increase of new capabilities-telecommunication capacity, adding BlackBerrys, new-generation hardware and supercomputing-we're doing all that at a lower cost than the prior year. That's pretty good after 12 years. Are you satisfied with the amount of work that's being done offshore, or would you like to see more work done offshore? It doesn't matter. The suppliers are competitively bidding, and because of the economics of the world, to be competitive, they have to do certain things. They could offshore or not. If they go offshore and performance goes down, they lose money. Now, I do know what they do, and I don't want that to adversely affect operations. If they can convince me they can do things in Ukraine and not affect GM, or do it in Silicon Valley, it doesn't bother me, because I know what cost I'm willing to pay. If things aren't done well, then they pay penalties. We let the market drive it. That way I don't have to worry about it; I can worry about building cars and trucks. I know where the work is being done, and I have people throughout the world managing it. How would you compare your relationship with EDS 10 or 12 years ago to your relationship with EDS today? Interestingly, I think it has always been pretty good, in that I have not had issues getting done what I wanted to do, in a lot of cases because I created the right contractual agreements with them. I think they struggled for years with GM not being organized enough to tell them what to do. Have there been arguments? Yes, but has there been an impasse where people walk out of the room and hate each other? Never. We've created enough win-wins, so it's been good. It might work well because we have to make it work. I'm not going to bring tens of thousands of IT people back into GM. A goal of the outsourcing model was not just cost-cutting but innovation. Can you give us some examples of innovation in IT or of business innovation enabled by IT? The motive has never been ... cost-cutting-but the results were cost-cutting. We have taken GM from a decentralized company with autonomous business units to a global company with a common business organization in 10 years. That's pretty quick. We had to do it to survive, but it doesn't solve all the problems at GM. We took out 5,000 systems. You can't innovate if you're carrying 5,000 systems you don't need. In 2006, we started to run GM's businesses globally with standard processes, but the IT companies were still fragmented and not standardized across the world. If a company is globalized so we can work with them one way throughout the world, then we can innovate. I have always pushed three things: standardization, simplification and collaboration. You need all three things to innovate. So what's your end result? In product development, 30,000 engineers and support people are using the same technology in the same way throughout General Motors. They all can work in teams like they're in one room, but on three continents. We can design cars for the United States from Brazil. It means you can leverage improved labor costs throughout the world. It cuts your cycle time drastically and saves you immense amounts of money. Globalization works.
Over $1 billion per year is being awarded. It's like traditional business that people can win, that's competitive. Or it's building new systems, like logistics. That happens all the time.
Are you still spending less and less every year on IT, as was your goal a few years ago?