The global financial crisis has thrown businesses across all industries into disarray, with the auto industry being one of the most tempest-tossed. And perhaps no company is suffering to a greater degree-or more publicly-than General Motors.
With a multibillion-dollar federal bailout package in the offing, GM is consolidating and tightening its operations, reducing its number of vehicle lines and putting new plant openings on hold. IT, like all parts of the company, is under the microscope.
“Costs get scrutinized harder and harder every day. Projects that are discretionary are getting put on hold,” GM CTO Fred Killeen said in an interview with eWEEK.
In keeping with its classic role of supporting business operations, when an older plant is closed or a new plant opening is delayed, IT must keep in step. “A lot of the IT costs that we have are tied to the facilities we have,” Killeen said.
Since GM’s IT business model is based on outsourcing, contracts with outsourcers are written to be flexible enough to scale up when an acquisition is made or down when a plant is closed and the scope of work provided by the outsourcer is correspondingly curtailed. That kind of flexibility will come into play if talk about GM selling units such as Hummer and Saab and consolidating brands like Pontiac is borne out.
But the world’s No. 2 auto maker can’t focus exclusively on damage control. To emerge from the current crisis as a strong player and aspire to regain its status as No. 1, GM must plow ahead with new vehicle designs as crucial new model years loom on the horizon beyond the turbulent 2009.
“It’s critical they do not delay their future product programs,” said John Wolkonowicz, senior auto industry analyst for North America at IHS Global Insight, an analysis and research firm. “They need to keep those on track. At the end of the day, this is all about having the best products. 2011 is a critical model year for both GM and Ford.”
Although he has plenty of work to do to help his company ride out the financial storm, Killeen is not losing sight of the need to align GM’s IT initiatives with the company’s larger strategic goals. “If you don’t invest in the future of the company, you won’t have one. In a crisis, you have to decide what you need to be here tomorrow and then what you need to be here in the future,” said the CTO.
Killeen and his GM IT team, headed by CIO Ralph Szygenda, are avoiding panic and carrying through with many current initiatives-in some cases, with renewed emphasis. “The core principles that we have really have not changed. We have always had a strong focus on efficiency and technology that supports globalization. Maybe our sense of urgency and focus has increased,” Killeen said.
GMs Global Mission
Among the panoply of IT initiatives at GM, none is more crucial to the company’s success than its support for the company’s globalization push, under which the company has standardized on common applications and methods of designing and building automobiles in locations ranging from Michigan to Brazil, China and Russia.
“The ability to have people make decisions from wherever they are is critical. Being able to support people around the world through mobility and collaboration is the most important thing,” Killeen said.
The drive to globalize at GM goes back about five years. Plagued by myriad office and auto-design applications, each adding cost and complexity to GM’s overhead, the company launched an ambitious plan to streamline and consolidate.
Killeen said GM eliminated 300 applications in 2008, reducing its corporate total from 2,200 to 1,900. Back in 1996, when Szygenda took the reins at GM, the application total was a budget-busting 7,000. At that time, Szygenda has estimated, GM had the highest IT costs per vehicle in the auto industry.
Beyond achieving critical economies, the goal of globalization at GM is to enable units in far-flung locations to think and act as a common part of a single corporate organism, the company said.
In carrying out this plan, GM standardized on certain key software applications: the Siemens NX enterprise CAD application; the Siemens Teamcenter Community platform, a collaborative platform for engineers; Microsoft Communicator for instant messaging; and Microsoft SharePoint Server for virtual meetings.
Twenty thousand GM engineers have used SharePoint Server as part of the Teamcenter Community platform for several years. Now GM is making those collaboration tools available to the rest of the enterprise.
“It’s a rationalized set of systems to run globally,” said Killeen.
The expected benefits to GM of a unified global approach are greater efficiency and lower costs. In tough economic times, Killeen pointed out, SharePoint Server offers the added benefit of keeping corporate travel to a minimum, since employees are able to conduct virtual meetings with one another rather than having to get on planes to visit remote sites. To further reduce travel costs, Killeen is looking into adding IP-based audio and video conferencing to the mix.
Although nations in every corner of the globe are suffering in the current economic crisis, some are better off than others. The ability to target vehicle production in markets where there is demand is a beneficial dividend of GM’s globalization strategy.
“Some areas are less affected than others. Places like China are continuing to grow. Russia is probably similar. Emerging markets are still growing but slower,” Killeen said.
Less Is More: Virtualization and Cloud Computing
One technology gaining attention because of its money-saving potential is virtualization, which Killeen said is key to more efficient use of the company’s IT infrastructure. GM is implementing VMware ESX as well as Sun Microsystems’ virtualization technologies in its data centers.
Although GM is not yet utilizing cloud computing services such as those offered by Amazon.com and Google, the company is taking a hard look at those offerings, said Killeen.
Cloud computing services are related in concept to the GM’s all-outsourced strategy, he noted. “The cost of that kind of environment is very enticing. It does fit an outsourced model. It’s less a cultural change for GM. We’ve been in the mode of having our data somewhere else for some time,” Killeen said.
Nonetheless, a company like GM can ill afford downtime, a problem that cloud computing providers such as Google and SAAS (software as a service) providers such as Salesforce.com have suffered from.
GM would expect guarantees of uptime in any deals with cloud providers, Killeen. “We would need to have the right service-level agreements,” he said, adding that the idea of GM or a service provider building an “intracloud” that would serve only GM is an attractive idea that he is scrutinizing.
The bottom line
While Killeen enables GM to work as a global company and marshals GM’s IT resources to support stringent economies, GM must continue to pursue its larger corporate strategy of introducing new vehicles and winning over buyers.
As IHS Global Insight’s Wolkonowicz sees it, GM must convince the American public that the company is at the forefront of automotive technology. Cars like the electric-powered Chevrolet Volt can go a long way toward getting that message across, said the analyst.
“Their technology is leading, but the public does not realize it,” Wolkonowicz said.
If Killeen and company can keep GM on a steady course though the economic maelstrom of 2009, the public may yet have a chance to develop that understanding.