IT Outsourcing : The GM Way

Abstract

The case gives a detailed account of IT outsourcing practice at General Motors (GM), the largest automobile manufacturer in the world. It traces the history of IT outsourcing initiatives at GM and presents the benefits that were gained by the company from its IT outsourcing strategy. The case details how GM was able to use the learning from its initial outsourcing experiences to modify its outsourcing model. It further discusses how the innovative matrix structure of GM’s in-house IT department played an important role in making its outsourcing strategy a success. This case highlights the importance of effective IT and business alignment for a successful IT outsourcing initiative.

"At a company of this size if you don't have information technology linked to business, you could waste a lot of money - not a thousand dollars or even a hundred million dollars, but billions of dollars."

- Ralph Szygenda, Group Vice President and Chief Information Officer, GM in 2004.

"GM is transforming into a true 'real-time corporation': marrying strategic leadership, high-speed business processes and digitisation to achieve velocity in driving bottom-line results that differentiate GM from the competition."

- José Carlos Eiras, CIO (Europe), General Motors in 2002.

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. This initiative of GM to bring down the IT budget without compromising on IT initiatives was appreciated widely by analysts in the industry.

More>>

        Case Code   ITSY046
   Case Length    12 Pages
              Period    1990-2005
 Organization     General Motors
        Pub Date     2005
Teaching Note    Not Available
     Countries    US
      Industry    Automobiles

Issues

• Analyse the suitability and implications of an outsourcing strategy for a company’s IT needs.

• Study and analyze the problems faced with IT outsourcing.

• Compare the advantages and disadvantages of in-house IT infrastructure development with IT outsourcing.

• Study the role of matrix structure in the effective management of in-house IT department.

GM,IT-Business Integration,IT Strategy,Business Process Outsourcing,Matrix Structure,Precision Strategy,Service Level Agreements,Vendor Management,ERP for IT Management,Process Information Officers,Process Improvement.

Please note:

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.