GM Shakes Up Outsourcing Industry

Opinion: Globalization is forcing top-tier outsourcers-many of which have strengths confined to a few big regions-to stretch their capabilities around the world as never before.

To listen to General Motors Vice President and CIO Ralph Szygenda tell it, he has changed the outsourcing industry forever. Is he exaggerating?

Maybe not.

In case you havent been paying attention, GMs 10-year contract with Electronic Data Systems will expire next June, and GM has spent the past two years in a vast project to generate bids on approximately 40 big contracts from a wide range of providers.

Its safe to say we have never seen anything quite like it.

Indeed, conversations with several outsourcing partners likely to win pieces of the GM pie indicate the experience has been transforming.

"The whole process is different from what weve done in the past," said Jim Angers, vice president and general manager of the General Motors account at Hewlett-Packard.

"The size and complexity of this deal ... will be different from what any IT supplier has done in the past." HP, Capgemini, Cisco, IBM Global Services and EDS are the core finalists.

/zimages/5/28571.gifClick here to read more about GMs outsourcing model.

One major difference is globalization. GM is global like few other companies—and its contracts are global as well. This is forcing top-tier outsourcers—many of which have strengths confined to a few big regions—to stretch their capabilities around the world as never before.

"Ralph wants global in the sense of single processes and standards worldwide—doing things one way globally. GM has the leading operations management in the world. Their ability to monitor by dashboard and process whats going on anywhere in the world is really extraordinary," said Frank Rooney, IBMs general manager for the General Motors global account. "We have created offices to support GM 24/7 around the world."

In addition, the vendors must cooperate with one another far more closely than they have in the past.

This involves attending the same meetings and even disclosing some proprietary information—and trusting that it wont be abused.

"We needed to feel comfortable working with other suppliers that we werent going to give up significant intellectual property but enough so that we can help GM realize its goals," Angers said. "We collaborate every day to support GM," Rooney said.

GM has been faced with striking a delicate balance between fostering competition among providers as well as trusted relationships with them. So far, key partners say, GM is succeeding.

"We feel very comfortable about it. We helped craft what the third generation of outsourcing is about," said Paul Spence, CEO of Capgeminis outsourcing services. Spence said Capgemini staff worked to hammer out the architecture that GM is putting out to bid.

/zimages/5/28571.gifClick here to read why Stan Gibson says outsourcing is growing up.

He said Capgemini has been honing its collaboration skills at accounts in Europe where it handles application management while competitors deliver the underlying infrastructure.

For example, Capgemini is working at HM Revenue & Customs (which collects taxes in the United Kingdom and is a former EDS client) with Fujitsu and British Telecom. "Its part of Capgeminis DNA to work with partners," said Spence. "We work with EDS at GM today."

Szygenda told me hes certain the new contracts will save his company money. He also said he has taken pains to ensure that GM does not buy on price alone and miss out on technology innovation.

To do that, he has tried to build innovation into the contracts—while driving his outsourcing providers to standardize on certain technologies and specifications. "Were going to leverage our own R&D for continuous transformation. That will be good for both companies," said HPs Angers.

One thing that nearly all the finalists have going for them is that they have worked with GM previously. In addition, GM, by stretching this process out for a couple of years, has let its providers get accustomed to it.

So, has Szygenda changed the outsourcing world? In pushing partners to globalization, yes. In demanding cooperation, perhaps less so than at first might seem the case.

But the world will be watching when the auto maker opens the envelopes in January, and whether others follow "The General" depends in large part on GMs ability to remain in charge.

Stan Gibson can be reached at

/zimages/5/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis on IT management from