For some companies, outsourcing IT is not just a cost-cutting strategy, it’s a way of life. Take General Motors, for example. GM has been contracting out its tech work since the company spun off its IT subsidiary, Electronic Data Systems, into a separate entity in June 1996.
At the time, GM inked a 10-year services agreement with EDS. Through the years, the automotive giant also engaged dozens of other major suppliers -- such as IBM, Hewlett-Packard, and Capgemini -- as well as hundreds of subcontractors all over the globe. Managing the contractors and setting IT strategy required some 2,000 Information Services and System personnel worldwide.
When all of those contracts expired this June, GM’s IS&S Group decided to do things a little differently. First, it reduced the number of primary suppliers for its $15 billion worth of contracts from 18 to about six, and made them responsible for hiring and managing their own subcontractors, says Lisa Gage, director of corporate strategy and planning for the IS&S Group.
“We are in the business of building cars and trucks,” Gage says. “We shouldn’t be spending tons of time trying to manage tons of IT suppliers.”
To further simplify matters, each primary supplier was awarded contracts on a global basis -- so GM could rely on a single source for, say, all of its HR management applications or engineering workstations worldwide. More important, GM created standardized work processes in every region of the world.
In the past, Gage says, contractors for IBM Australia might have handled a process differently than their counterparts in IBM Germany or IBM USA. If GM wanted to move employees from one region to another, they had to learn a new way of doing things each time. Under the new regime, every GM process is the same regardless of region -- whether it’s filling out a purchase order, managing network capacity, or negotiating an SLA.
Other benefits? “Speed of execution,” Gage says. “When we find a better way to do something in one place, we can roll it around the globe rapidly. That helps us drive out waste.”
GM also standardized all the touchpoints for every process, so all suppliers use a common interface for reporting information back to GM.
“When you grow as a company, you tend to have a lot of different groups operating independently,” Gage notes. “To go to a global management structure you need to knit them all together. The more we drive standardized work, processes, and infrastructure, the less complexity we will have.”.