General Motors: Life in the Fast Lane

 
 
By Alison Diana  |  Posted 2008-09-29
 
 
 

At General Motors, there is no longer a double yellow line separating information technology and business professionals. Instead, the automotive giant has created a dual-lane highway, where upper-level managers well-versed in both business and IT help drive operations, profitability and product design.

The 100-year-old, Detroit-based company’s IT strategy began in 1996, when General Motors hired its first and, to date, only, CIO: Ralph Szygenda. As GM’s group vice president and CIO, he was given the keys to a company that featured extremely decentralized management and information systems, as well as the movement of about 30,000 technical people from EDS, which GM bought in 1994 and spun off two years later.

“It was getting pretty lonely,” recalls Szygenda, who, at the time, was one of only 20 on-staff IT employees at GM.

In a move that stunned many—but has now become a model for many businesses in multiple industries—GM began outsourcing about 90 percent of its IT operations. “The company knew it had to change, and it knew it had to drive more common business structures and efficiency to continue to be successful,” Szygenda says. “The separation of GM and EDS forced GM to look closely at itself and determine what to do. It basically gave GM a clean sheet of paper.”

Making Business Hum

Szygenda took this clean sheet and wrote down two main goals: One was to standardize on common processes at GM sites around the world. The second was to integrate information technology into GM by including a CIO and a process information officer (PIO) at each business.

“This matrix let two people—a CIO and a process information officer—talk to me on any issue.” Szygenda says. “The CIO was technical and focused on today, and the PIO was focused on strategically changing the company.

“The heads of engineering trusted process information officers because of their experience. But if you brought CIOs to the engineering heads—realizing that, at the time, the business units didn’t know what CIOs were—they would think of them as pure technology people and wouldn’t listen to them. You had to get somebody who could speak their language—someone who had designed trucks and cars, but who also understood information technology.”

The auto manufacturer needed to change, and creating a dynamic that features two strong leaders within each business has prevented CIOs from clinging to applications or processes, Szygenda explains. Since then, IT has removed 5,000 systems, along with the associated management and support costs. GM went from

22 computer-aided design programs to one, which is now used by its designers everywhere in the world.

“We have taken out $12 billion of cost since 1996,” Szygenda reports. “We’ve put back $7 billion to redo telecommunications around the world and have given back $5 billion to GM.

“We didn’t ask for any money: It was all mined out of GM. When you don’t ask for more money and you mine it out of the company itself, it’s a lot easier to sell [a project] than if you’re asking for $500 million.”

Standardizing on all GM applications and tools allows the company’s more than 30,000 engineers, developers and support staff to use the same IT solutions, in real time, throughout the world. “It’s like they’re all in the same conference room,” Szygenda notes.

GM’s suppliers must follow the same rules and use one organization to support the company at all of its locations. “Every IT supplier has to support GM throughout the world,” Szygenda adds. “IBM cannot have IBM China and IBM Australia and IBM Germany. It has to all be the same. All these suppliers use the same processes to support us.

“They all do the same thing, so everything looks the same, and they all know how to work with each other. If you’re running a company as big as GM—in real time, 24 hours a day, seven days a week—it all has to run together as if it’s one.”

No Geeks Allowed

Since GM sources the vast majority of its IT development, maintenance and support, the company does not have legions of software developers. Instead, the company hires people with both business and technology expertise, and entrenches them in GM’s many lines of business.

“A lot of young people today love information technology, but they also love business,” Szygenda says. “They love this type of job because we’re not ever going to outsource it.

“This part of the business is a neat place to be. I have 2,000 people who are top-notch business information people, with both IT and business backgrounds. They may have been in IT and gone back to get their MBA, or they may have a business background and gotten a degree in IT.”

To ensure a steady flow of qualified candidates, GM works with a core group of universities. There’s even a custom-created course at Carnegie-Mellon’s Heinz School of Public Policy and Management. More than 100 GM employees have graduated from the program, and about 100 more are studying the curriculum.

“We don’t hire any undergraduates in this business,” Szygenda says. “The people we hire are technology MBAs.”

Opening up GM to this level of experience has enabled the company to create new products, services and revenue streams, he says, pointing to OnStar as one example. “It dominates the market and has saved peoples’ lives,” Szygenda says, “and it’s all driven by information technology.”

Non-IT ZonesM

Of course, GM faces some problems that IT cannot solve. Because of its history and former business structure, the company is combating legacy problems with health care and pensions for its many former employees. However, GM has worked with the United Auto Workers Union on a plan designed to reduce its liability by billions of dollars in 2010, Szygenda says.

In addition, finance arm GMAC is facing the kind of losses that many other financial firms are battling in today’s economy. And GM continues to inject funds into struggling parts supplier Delphi, which has been flirting with bankruptcy.

Like its competitors, GM also is investing heavily in alternative fuels: ethanol and flex-fuel, hydrogen fuel cells, hybrids and electricity.

“Operationally, GM has done many things over the past 10 years to optimize this company,” Szygenda says. “It has many issues that are legacy issues. Even if you were the most optimized company in the world, you’d still have those issues. And, finally, this is a fashion business.”

Car styles may come and go, and the popularity of various features may wax and wane, but Szygenda—a 40-year veteran of the IT business—is betting that by completely integrating IT and business, and by tackling head-on the legacy challenges inherited by current management, General Motors will successfully continue its 100-year road trip.


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