You might think that Tony Scott, chief technology officer for IS and services at General Motors Corp., would be kissing fancy wireless initiatives goodbye.
After all, the news released by the automotive company to Wall Street on Oct. 18 wasnt good. Hit by the slowing U.S. economy and the soaring cost of consumer incentives, the Detroit-based company reported a third-quarter net loss of $368 million and even bleaker fourth-quarter warnings. GM CEO Rick Wagoner even released a wary statement: “Were buckling down to enhance our cost position while remaining very aggressive in our effort to maximize revenue and grow market share.”
But Wagoners words were actually music to Scotts ears. Thats because, unlike many IT managers who are reviewing or even scaling back wireless deployments in light of the slowing economy, Scott is spearheading a major 6-month-old wireless strategy make-over that he believes will help GM not only maximize revenue and grow market share but also improve customer service.
Already, the initiative has helped GM identify and prioritize potential wireless projects; led to the launching of one series of major wireless deployments; and helped the company zero in on the 802.11b, or WiFi, WLAN (wireless LAN) standard as a core enterprise technology for GM. Eventually, the initiative will help GM identify a host of wireless standards and lead to wireless initiatives that will touch practically every aspect of the companys operations, from marketing and sales to the factory floor.
Although Scott wouldnt say how much GM plans to spend on wireless, its clear the strategy initiative has led the company to an important conclusion: Wireless is key for GM.
“Along with supply chain and CRM [customer relationship management] issues, wireless is one of GMs top priorities when it comes to our IT budget,” Scott said. “We see great potential making certain applications and business functions accessible through wireless devices.”
Theres a lesson in GMs take on wireless for IT managers at other companies: If youre not developing a strategy right now, youre late to the game—especially if end users have already brought their own wireless devices into your computing environment. In addition, dont expect wireless to turn a profit overnight. In fact, wireless wont make sense in some applications for some time. But, experts say, particularly for large, global, multifaceted enterprises like GM, now is the time to begin picking wireless standards and deciding where wireless will pay off first.
“If you look at the business General Motors is in, they have a lot of supply chain components that are mobile-oriented, and wireless is crucial to their business,” said Ken Dulaney, an analyst at Gartner Inc., in San Jose, Calif. “If you have 100 large businesses, GM is at the top of the list of companies that could benefit from the cost savings and improved customer service.”
Many IT managers would agree—at least in theory—with GMs bullishness on wireless. A recent study by Meta Group Inc., of Stamford, Conn., estimated that 20 percent of business-to-business transactions will be wireless by 2003. The report also stated that for enterprises, the business-to-employee and B2B applications are taking precedence over business-to-consumer applications (see chart, at right).
But todays economic climate means many companies have switched abruptly from managing for profit to a frantic search for ways to conserve cash. Organizations are no longer looking for long-term investments that reap ROI (return on investment) within five years. They want to see bang for their buck right now. In many enterprises, experts say, that means wireless can wait.
“Enterprises are still interested in wireless initiatives, but they are only interested in mission-critical applications, and executives want ROI now,” Dulaney said.
At GM, the march toward wireless was jump-started by Ralph Szygenda, GMs vice president and CIO. Under Szygendas leadership, GM has spent the past five years investing $1.7 billion in new Internet applications, while reducing its IT costs by $400 million to $500 million.
Over the last two years, Szygenda and Scott have seen growing interest among GM business managers in wireless capabilities. While much of the wireless hype involving GM has centered on its OnStar division, which delivers wireless applications, including cellular and Internet service, to automobile consoles, the wireless action was taking place internally, much of it at the workgroup level.
Already, end users were playing with wireless hardware such as mobile phones, Palm Inc.s Palm VII devices and Research In Motion Ltd.s BlackBerry wireless e-mail pagers. At the same time, manufacturing plant managers, already well-versed in radio frequency and spread-spectrum technologies, had begun clamoring for newer wireless technologies. Without standards, however, IT managers and help desks were spending an increasing amount of time and money managing various wireless devices and protocols.
Finally, in April, Szygenda decided it was time to develop a GM strategy for deploying wireless technology globally. He formed a wireless strategy task force led by Scott and consisting of 30 people from divisions of the company worldwide. The initial assignment: to write a white paper outlining where wireless was currently being used at GM and where GM could take advantage of wireless opportunities.
Sixty days later, the task force, headed by Scott, presented Szygenda with a strategy for untethering GM. First, the group recommended a framework for prioritizing potential wireless proj- ects. While the company was excited about the potential of wireless technologies, the task force decided deploying wireless for the sake of being on the cutting edge would not work. Every wireless project would need to save GM money, and the projects that did that quickest should be tackled first, the task force said.
Next, the task force recommended that any wireless project the company began would need to be able to be deployed globally and would need to be based on universal standards.
And, finally, the wireless task force narrowed its wish list and decided where the company would focus first on inserting wireless capability: at construction sites to enhance communication, in office environments to improve collaboration, and in manufacturing and materials handling processes to improve quality and reduce inventory costs.
Scott admitted that debates got hot and heavy over how money for wireless projects will be allocated among divisions. The verdict: Wireless may be a priority, but only projects where the company could see the fastest return would be launched.
“Our criteria for how we spend remains the same regardless of the economy,” Scott said. “Were making a business decision for what enables business the best. Were looking for return on investment while managing a broad portfolio of activity.”
The focus on quick ROI meant that, of the three broad areas of focus for wireless deployments identified by the task force, GM would concentrate first on deploying WLANs at construction sites. This year, the company began breaking ground on several factories worldwide. Typically, GM would lease bandwidth to provide network connectivity for contractors and vendors working out of trailers during plant construction. Once construction was completed, the network would be torn down. As part of the wireless strategy, the company chose instead to buy WLAN services from a number of vendors. Those vendors install the 802.11b infrastructure on the construction site, which GM purchases as a service. Users can communicate over the LAN from their notebook computers or handheld devices. When the project is over, the WLAN hardware can be easily redeployed at another construction project. Savings from the deployments, which began this summer, have been significant, Scott said.
Globally, GM has chosen to standardize on 802.11b-based WLANs using the Cisco Systems Inc. Aironet suite of products and is now also beginning to set up new office environments with WLANs to provide wireless capabilities to laptops and handheld devices within conference rooms. The idea, Scott said, is to allow office workers to collaborate by exchanging e-mail, Microsoft Corp. PowerPoint presentations and other content without having to find a fixed LAN connection.
The company has also begun to deploy wireless capabilities in manufacturing divisions, mainly in support of materials handling. Like many enterprises, GM would like workers on loading docks, for example, to be able to enter inventory information into ERP (enterprise resource planning) systems as soon as it arrives from suppliers to speed its arrival to the manufacturing shop floor.
Even as Scott forges ahead with wireless projects, however, he continues to exercise caution. While there are departmental pilots under way using Palm handheld computers in sales, service and marketing areas, he said he has no plans to provide wireless access to mission-critical systems enterprisewide just yet, particularly if that means replacing existing wired network infrastructure.
“We dont believe there is a broad financial return at this point in replacing wired LANs with wireless LANs,” Scott said. “Most of our facilities are already wired and are delivering at 100MB Ethernet. To replace that with 802.11b would be a downgrade in terms of network grade and wouldnt save us any money.”
In addition, Scott foresees other problems working wireless into existing GM infrastructure. While the company expects eventually to see great savings from wirelessly enabling applications such as CRM and ERP, bringing WLANs to the manufacturing environment could actually introduce safety concerns. GM, Scott said, is now studying to what extent WLANs could interfere with the wireless communication spectrum currently used by manufacturing-floor machines.
And, as gung-ho as Scott is toward wireless at GM, he believes the technology still has a long way to go. While GM favors open standards, security concerns surrounding 802.11b, for example, helped persuade the company to standardize on products from a single vendor—Cisco—to avoid security gaps that can result from attempting to knit together products from different vendors.
“Right now … the security model is something that has been a bit difficult from an administrative standpoint,” Scott said.
The next phase of the wireless task groups work, under way now, will be to settle on wireless standards beyond 802.11b that can help with security. GM is also looking at other wireless standards, such as Bluetooth.
Still, Scott believes the potential of wireless at GM will eventually outweigh all the administrative headaches and current technical shortcomings. He is also well-aware that many in the wireless world are hoping GM will help the technology finally live up to the hype.
“Were not telling our guys that work in the wired space to quit their jobs because, certainly, wired has some pretty strong advantages,” Scott said. “But our belief is that wireless will change everything about the way we run our business.”