General Motors pushes for third-generation outsourcing

General Motors is inviting suppliers into its plants and IT departments to learn about the company's environment so they can bid...

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Outsourcing

General Motors is inviting suppliers into its plants and IT departments to learn about the company's environment so they can bid for the car giant's worldwide IT outsourcing contracts.

Much of GM's IT is already run by EDS under a 10-year master service agreement, worth $3bn, which ends in 2006.

"This is not to get rid of EDS," said José Eiras, chief information officer of General Motors Europe, speaking at the CIO Symposium in London. "We want EDS to continue to win a big part of that spend."

Eiras said the new approach marked the beginning of third-generation outsourcing at the company.

"The first generation was when GM bought EDS and all GM IT employees were transferred to EDS in 1984," said Eiras. He called that process "out-insourcing".

The second generation, from 1996 -2003, was when GM and EDS severed their links with EDS to become a standalone IT services company. This period saw GM rebuilt its internal IT department using matrix management approach, said Eiras.

"You need higher-level people for matrix management approach and people need to be more mature. Total control for IT is very easy but it doesn't work in a company like ours," he said.

GM's second-generation outsourcing saw IT become an enabler not an inhibitor, said Eiras, with IT costs being cut by £1bn in seven years and IT spend going down from 2.5% of revenue to between 1.4% to 1.5%.

The challenges for the next five years include:

  • Getting the right products in place
  • Implementing a worldwide CRM system. Europe is piloting GM's global CRM project
  • Structural cost improvement
  • Real-time business processes
  • Transition to third-generation outsourcing.

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