Outsourcing the GM Way: Staying Organized

Handing everything over to outsourcers would seem like the ultimate in hands-off management.

Handing everything over to outsourcers would seem like the ultimate in hands-off management. Not at General Motors Corp. On the contrary, the GM way is to outsource everything and yet control everything. Its not a contradiction when you have the muscle of a $3.5 billion IT budget on your side.

Wielding that immense buying power is a team of top IT executives hand-picked by GM Group Vice President and CIO Ralph Szygenda. "I learned a long time ago that I have to have people that are stronger than the outsourcers," said Szygenda, who developed his ideas on outsourcing during CIO stints at Bell Atlantic Corp. and Texas Instruments Inc. before coming to GM in 1996—to what was viewed by many as the toughest job in IT.

But it wasnt always that way. Prior to 1996, different parts of GM bought their IT equipment as needed, said Tony Scott, chief technology officer for information systems and services at the Detroit-based automaker. "There was no corporate governance model as far as standards as it exists today," Scott said. "When you come from that environment, you end up with one of everything."

No more. Szygenda makes it quite clear that the company now speaks with one voice. "We dictate the technology. I have to drive common technology standards, or it would be chaos," he said. Exhibit A: In the 1980s, when GM handed over its information systems to subsidiary Electronic Data Systems Corp., the company had some 26 CAD systems. Now the number is down to one—Unigraphics.

One method of staying organized is to look at IT in terms of what Szygenda and his leaders call three "factories": operations; applications and information systems; and business management.

Does the process work? One of Szygendas lieutenants is Dan McNicholl, CIO for GM in North America, who offers a stark illustration. Coming to the automaker from Whirlpool Corp., McNicholl instantly spotted plenty of room for savings. Now he annually shaves $150 million from the IT budget: $75 million gets plowed back into IT in the form of new projects, and the other half is given back to the company.

One avenue for savings has been to move from Sun Microsystems Inc. workstations to Intel Corp.-based systems running Microsoft Corp.s Windows 2000, said Kirk Gutmann, information officer for global product development and global service delivery. Gutmann said the process can yield considerable flexibility and speed, as GM has just completed a rollout of 18,000 engineering workstations over a span of eight days.

"IT at GM is about going fast, being agile and leveraging scale," said Gutmann, who came to GM from Navistar International Corp., where he was vice president of engineering. Gutmann said GM has 110,000 PCs, 96 percent of which have a common build, on a single Windows Active Directory.

The scale of GMs buying power on the desktop is unmatched, and the company has used it to drive a hard bargain with its PC supplier, Hewlett-Packard Co., which has beaten out Dell Computer Corp. as GMs desktop supplier—for now. GM turns over its desktop stock every three years and is always seeking the best deal, McNicholl said.