GM Outsourcing deal - 1 Yr Overhaul

By prashanth, February 5, 2007 3:41 am

Baseline has a piece, on 1 year look at the GM Outsourcing deal : The new multi-vendor outsourcing deal is already helping to further slim GM's global I.T. costs. The automaker's new service providers will further consolidate its computing resources and data centers, Szygenda says. "GM is saving a lot of money," he says. "We expect much lower costs over the five-year period."

On Szygenda's watch from 1996 to 2006, GM's information-technology budget was cut from more than $4 billion to less than $3 billion by 2005. A spokesperson commented that Szygenda is looking for a similar-size reduction from the new deal. And, given GM's gargantuan 2005 loss of $10.6 billion, that may be far too conservative a cost-reduction target for comfort. "They really need to cut I.T. costs by half," says Martin Piszczalski, an analyst specializing in the automotive industry at Sextant Research, a consulting firm in Ann Arbor, Mich. "A lot of the cost cutting is going to be shifted onto the shoulders of these service providers."

Szygenda had to find a way to not only coax the lions and tigers of the technology outsourcing jungle-who normally fight over contracts like so many chunks of raw meat-into the same room, he had to get them to essentially eat out of the same dish, and get some to eat less. "Having IBM people working with EDS people or HP people-without even having GM people working with them-was pretty amazing," he says.

The CIO's secret ingredient to coax the world's biggest I.T. services companies to work side-by-side is an old-fashioned helping of carrot-and-stick economics. "We need to always have an economic incentive, and always to have competition," Szygenda affirms. The unlikely alliance of outsourcing players-EDS, IBM, Capgemini, Hewlett-Packard, Compuware Covisint, and Wipro Technologies-competed for the first $7.5 billion round of contracts last February.

Now they're competing once again for the remaining $7.5 billion worth of contracts the auto manufacturer is expected to grant over the coming five years. GM won't specify which projects will be up for bid, except to say that there will be applications development work in supply chain, manufacturing and business services, including financial systems.

General Motors Outsourcing Challenge: Reduce costs by fostering competition among outsourcing vendors and creating infrastructure supporting global vehicle development and production.


Restructure operations, including information technology, to reduce overall structural costs from 34% of revenue in 2006 to 25% of revenue in 2010.

Diversify from one "monopoly" vendor to six primary providers of technology integration and support services.

Reduce annual technology spending from $3 billion in 2004 to about $2 billion in 2010.

Reduce the number of different instances of SAP in use worldwide from roughly 70 to about a half-dozen or fewer.


Hewlett-Packard: Contracts worth $700 million over fi ve years. HP will work with GM's Information Systems and Services organization to provide server management, application maintenance and systems integration. HP also will manage GM's global engineering workstations, ERP hosting and product development servers.

Capgemini: Dollar value of contract not disclosed. Capgemini was awarded six contracts for enterprisewide application integration management for strategic planning and architecture, program management, and verifi cation services; application integration management for purchasing and supply chain; sales, service and marketing; and business services, plus support for sales and marketing systems and dealer systems.

EDS: $1.3 billion in contracts in 2006, down from $1.9 billion in 2005 (awarded $3.8 billion in contracts over fi ve years). EDS continues as a strong player in global product development, manufacturing and supply chain applications, as well for as gmac, OnStar, corporate information systems and computer infrastructure operations.

IBM: Will handle applications support for quality and parts and service, as well as enterprise computing infrastructure integration management.

Compuware Covisint: Continues to provide GM with electronic data interchange to enable business-to-business supply chain collaboration with suppliers, adding GM's suppliers in Europe, Asia-Pacifi c and Latin America.

Wipro: Continues to provide application data integration services.

Source: 1

Prashanth Rai

One Response to “GM Outsourcing deal - 1 Yr Overhaul”

  1. Elliott Nadelman says:

    As a software engineer I am so glad that your outsourcing IT is going so well!

    Your success has really encouraged me to look at my situation. I have purchased 7 GM cars in the last 20 years and while I have had a good experience perhaps I am missing an opportunity.

    Since I will be buying a new vehicle this year I think it may now be time to outsource my vehicle to save money and be more efficient. Perhaps Toyota, I have heard good things about them.

    Thank you for bringing to my attention your success in outsourcing my job… I hope to be able to return the favor real soon.

    All the best,
    Elliott Nadelman

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