IT Outsourcing - The GM Way
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Case Details:
Case Code : ITSY046
Case Length : 14 Pages
Period : 1990-2005
Pub Date : 2005
Teaching Note :Not Available
Organization : General Motors
Industry : Automobiles
Countries : US
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Background Note
GM acquired the company Electronic Data Systems (EDS) in 1984 from Henry Ross Perot at a cost of $2.5 billion and transferred all its IT operations to it. In the mid 1980s, GM did not have a CIO. This phase of IT at GM was characterized by what was referred to as the
"Legacy of many."...
Creation of Matrix Structure
At this point, Szygenda decided to start a new division, the IS&S. It was a tough task for Szygenda to create an IT department from scratch for the world's largest automobile manufacturing company...
Working of Matrix Structure
The matrix structure enabled the CIO and PIO to work as a team. Any issue under consideration would have two clear viewpoints
- a business perspective and an IT perspective. Szygenda encouraged a 'debating society' where unlike the usual CIO role, the CIO at GM debated on the implementation of the IT project by focusing on the benefits it would bring to the business before a go-ahead was obtained for a project...
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The Benefits
Through its IT outsourcing initiatives, GM was able to reduce
its IT budget from $5 billion to $3 billion between 1998 and
2003. Commenting on how GM achieved such significant cost
savings, Dr Daniel McNicholl, Chief Strategy Officer, IS&S,
explained, "Break the total IT budget into two major areas -
investment and operating cost...
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The New Outsourcing Model
In the new outsourcing model adopted in 2003, GM used
the services of multiple vendors like IBM, Accenture,
CSC, Lockheed-Martin, HP, Wipro, Sapient and Cognizant
so that their collective expertise could bring better
results in a more cost effective manner...
The Future
In its transition to the next phase of IT outsourcing
beyond 2006, GM plans to reduce the number of its IT
services providers from 70-80 to about 30-40. Compared
to the loose governance model in the third generation,
in the fourth generation, GM plans to have a tightly
governed and re-organized model... |
Exhibits
Exhibit I: Business and IT Alignment
Exhibit II: Structure of the GM Matrix
Exhibit III: Performance Objectives at IS&S: A Business Focus
Exhibit IV: Refining the Outsourcing Model at GM
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