Eat From the SameBy Doug Bartholomew | Posted 2007-01-07 Email Print
After spending a decade with basically a single outsourcer--EDS--GM last year tapped a half-dozen technology partners to run various technology operations. Here's how it's going so far.Dish">
Eat From the Same Dish
If there's a prime lesson for I.T. management that Szygenda has gleaned so far, it's how to get some of the world's biggest technology players to work together to get the loudest bang out of the tightest buck.
Szygenda had to find a way to not only coax the lions and tigers of the technology outsourcing junglewho normally fight over contracts like so many chunks of raw meatinto 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 peoplewithout even having GM people working with themwas 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 playersEDS, IBM, Capgemini, Hewlett-Packard, Compuware Covisint, and Wipro Technologiescompeted 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.
By doling out the contracts in phases, Szygenda cleverly holds out the promise of more work down the road for those that play ball. "They are working together because we spend hundreds of millions of dollars on development work every year, and they want to win some of that business," he says. So far, Szygenda says the transition of work from one provider to several has gone smoothly. "The amount of refereeing we have had to do is amazingly minor," he says.
Another secret to the success of the multi-vendor setup was to make sure that each of the key players knew exactly what business it had won going in. That way, each I.T. provider could feel confident about its role going forward for at least the five-year duration of the contract. As Szygenda explains, "Once people knew what business they had won, they worked together well." In other words, the first round of jockeying for business was over.
The GM CIO says he got the idea for the multi-vendor outsourcing arrangement from the aerospace industry. A typical program for a new multi-billion-dollar fighter aircraft, for example, often will include multiple contractors who must design, build and assemble components on a collaborative basis.
Another way GM ensures that all players are working off the same program is by employing the Information Technology Infrastructure Library (ITIL) to define the scale and scope of its standardized work processes for systems operations. It sets forth a common basis for the way the outsourcing players will operate to deliver service to GM.
Ensuring that the different players are speaking the same tongue is essential if this unusual arrangement is to succeed, observers say. "The use of these standards is absolutely critical, because whenever you have multiple service providers working together, integration is always the catch," Piszczalski says. "It's essential that the different pieces work together and the different service providers adhere to a set of standards so that information can flow across systems and across different geographic regions."
For instance, if a systems outage occurs in the outsourced environment, the failure could involve more than one service provider. GM has required every supplier to use the standard ITIL incident management process. They have to use the same terms and tools to notify the appropriate GM and I.T. suppliers' people, resolve the incident and report on the cause. The goal is to achieve quick resolution and avoid finger-pointing among suppliers.
At least in the early going, GM's partners generally give the outsourcing setup high marks. "Everybody is doing a pretty good job of collaborating," says Jim Angers, vice president and general manager of the GM account at Hewlett-Packard. As an example, the various suppliers had to shift management and operations among one another to establish a global I.T. call center. Overall, they redeployed 2,800 people and re-mapped 1.2 million assets, including computers and software assigned to various computing centers. Adds Frank Roney, managing director of the GM account at IBM, "It's very remarkablewe don't spend a lot of time arguing."
Maybe, but Szygendawithout providing detailssays the call center project, rather than running smoothly and quietly from the start, sounded more like a squeaky wheel bearing at first. "There were some strains with some I.T. companies because this was a different model," Szygenda admits. "It drained us to get that all working."
But even EDS, which came out on the shorter end of the stick, doesn't seem to be complaining much, if at all. "I think we did a relatively good job working together," says Jeff Kelly, vice president in charge of the GM account at EDS. Financially, while EDS' GM business continues to shrinkfrom 26% of its overall revenue in 1995 to 9% todaythe information-technology services and outsourcing giant barely felt the contract reduction in its numbers. Steadily diversifying its business over the past decade, EDS projects total sales of $21.1 billion in 2006, compared to $19.8 billion in 2005, and analysts anticipate a doubling of profits.
Another primary goal of GM is to forge truly global systems. This means having a single system for product development, one for purchasing, one for finance and so on. "GM is moving to have the same processes throughout the world," Szygenda says.
Just getting rid of multiple enterprise resource planning systemsin some cases, different versions of the same vendor's software packagepromises to save GM millions of dollars. "They get clobbered on costs by having different instances of SAP running around the world," Piszczalski says. The reason GM operates multiple versions of ERP systems is that under the previous business structure, there were different suppliers hosting ERP systems by country and by region, instead of Szygenda's goal of a single system run worldwide.
Making the global vision a reality is also going to take some doing. His information systems department of 2,000 is responsible for managing all project development efforts by the suppliers.
With the transition period over, Szygenda says GM now will focus on finding ways to harness innovative technologies to advance the business. "Now the task is building the innovation on top of the global collaborative environment we've established," he says. "The business processes that are running companies today are not optimized. I have to do this at GM to be successful."
Just how long GM's CIO can keep those big cats happy while chewing on chunks of the same slab of meat is anybody's guess, but Szygenda remains optimistic. "The report card is still out, but from the operating standpoint, it's working," he says. "I think the I.T. companies see this as where the world will be going 20 years from nowthey see GM as the ultimate test bed of the future."