IT Outsourcing - The GM Way

Despite the fact that the company's IT operations were fully outsourced, it maintained a dedicated IT division of 2000 people. None of the IT executives wrote software code; instead, they were responsible for managing GM's IT outsourcing activities. Known as the information systems and services department (IS&S), the department was a brainchild of GM's Corporate CIO Ralph Szygenda (Szygenda).

This division proved to be very effective in achieving its goals of making the company's IT operations more efficient. GM was able to bring down its IT expenditure from about $5 billion a year in 1998 to about $3 billion a year in 2003.

Industry analysts hailed GM's success at achieving effective IT and business integration (Refer Exhibit I). GM claimed to be in the third phase of IT outsourcing.

The company had set policies and frameworks for multiple vendors to work on common IT projects. Analysts felt that if GM's initiatives succeeded, it could lead to the development of ERP software for managing numerous IT contracts.

Although a few analysts believed that the multi-vendor concept was too ambitious and impractical, others were convinced...