Amid ongoing corporate difficulties, General Motors has been leaning heavily on CIO Ralph Szygenda to cut waste and speed innovation through a fully outsourced approach to IT. In 2006, GM awarded $7.5 billion in outsourcing contracts, and before 2011 the company will award another $7.5 billion. That "big-bang" moment in 2006 followed a stormy relationship with Electronic Data Systems, which was acquired by GM in 1984 and spun out as an independent company once more in 1996. EDS still retains approximately 60 percent of GM's IT work. GM's other major outsourcing partners are Hewlett-Packard, IBM, Capgemini, Compuware subsidiary Covisint and Wipro. Two years have passed since Szygenda sat down with eWEEK to discuss his then-early outsourcing strategy. He recently spoke again with eWEEK, offering Editorial Director Eric Lundquist and Contributing Editor Stan Gibson an update on how far GM has come and how much further it must go.
It has been nearly two years since GM handed out its IT outsourcing contracts. Are all the partners meeting their agreements with GM?
It's going very well-better than I had thought. The suppliers work well with each other. I have 1,500 people that manage them, but there hasn't been one case where I've had a major incident between suppliers. Every now and then you catch one trying to make the other not look so good. But, overall, it has worked well.
It's amazingly complicated, but GM is complicated to start with. The issue for the suppliers is globalization. We have forced them to put in a globalized model. In most cases, they don't run a global model, but a national or regional one. So using the same processes has worked amazingly well. It has made the processes of managing IT simple.
The other aspect is multisourcing, or multiple companies working together. We allow collaboration-we don't tell them exactly how to do everything. That's worked well.
So, have we gotten done what we wanted to do? Yes, we have. Most people thought this would never work. Instead, many companies have come to GM to learn how to do this. Fortune 20 companies are interested in how the suppliers are supporting us globally. They would like to have something like that, but they don't.
Overall, it's working well. Every day is hard-but every day is hard in the auto business.
If partners were not meeting their goals, how would you handle them?
If you don't do it well, you get penalties. And we can walk away from contracts for lack of performance. Remember, winning new business is based on the performance of existing business. Each year, we're still bidding out hundreds of millions of dollars of business that they want to win. Also, we have report cards that rank the companies every six months. They know exactly where they stand, and we make decisions for future business based on that.
We know how well they're performing against other suppliers. If we had outsourced to only one company, we wouldn't know that. However, there are not a lot of IT companies, so you can't throw out a new company every day. It's a win-win model. We don't want them to lose.
Do I get mad at a suppler daily? Yeah. I won't tell you which one I just got off the phone with two hours ago.
Have you assessed penalties?
Sure. We do it constantly, based on performance, reliability-anything. And remember, all development of new systems is done at a firm, fixed price. So they lose if they don't deliver it on time.
You haven't terminated any of the agreements?
That's right. Some companies have been disadvantaged with regard to winning new business, based upon performance, but they haven't lost anything they already had.