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Give General Motors Corp. credit for one thing: the worlds largest automaker is not afraid to break new ground. Now the company is seeking nothing less than to rewrite the rule book that outsourcers and their customers will follow for years to come. Group Vice President and CIO Ralph Szygenda calls it the “third wave” of outsourcing: Competing providers will vie for many smaller slices of the GM pie, oftentimes partnering with intense rivals on the same projects. And theyll have to like it—or hit the highway.
“In the next generation of outsourcing, people will not pick one company to give everything to. Competing outsourcers will have to work with each other,” said Szygenda in an exclusive interview at GMs headquarters in Detroits Renaissance Center.
The third wave continues GMs history of exploring new outsourcing territory. Having acquired Electronic Data Systems Corp. to take over its IT operations in 1984, GM divested itself of the systems integrator in 1996. The company is still in the midst of a divestment deal that stipulates a special relationship, gradually relaxing through 2006.
“What Ralph is trying to do is have the best of breed rise up to the surface,” said Frank Dzubeck, president of Communications Network Architects Inc., a Washington consultancy.
Another analyst concurred. “You would get the best of what the providers have to offer. Its an interesting idea, and providers are already fighting tooth and nail for each new contract. This would move it to a whole new level,” said John Madden, of Summit Strategies Inc., in Boston.
Similar practices have been followed in the aerospace industry, where contractors often break a big project into pieces. “This is kind of like the aerospace industry. It worked there,” said Szygenda, who spent the early part of his career at Texas Instruments Inc.
According to Kirk Gutmann, information officer for global product development and global service delivery, “The goal is to foster competition among outsourcers” across GMs three so-called IT factories: operations, applications and IS, and business management.
Thats the intent, anyway. But, said Madden, “this creates a management headache.” The need for new procedures to manage the complex task of handling multiple outsourcers—and their contracts—is where plenty of work needs to be done before the dream can become reality.
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But Szygenda and his cadre of IT executives are thinking of a solution. Theyre calling it IT ERP (enterprise resource planning). Szygenda envisions a suite of applications that encompass project management, service-level-agreement management, operational reporting for problem resolution, and configuration and change management.
Tony Scott, GMs chief technology officer, said new software is needed. “Its beyond any one vendor to support and manage, and its beyond one person or a group to comprehend. You really need some digital assistance in this space in order to measure, forecast, deploy and provision in a much more complete form than is available now,” Scott said.
Dzubeck said existing software can do much of this work already. “I disagree that there arent those things now. IBM, EDS have them. Theyre giant scheduling and workflow management systems,” he said.
Dzubeck said several startups have attempted to build software thats similar to what Szygenda is looking for, but in each case, they failed to receive sufficient funding to bring products to the market.
But Scott asserted that existing tools are not up to the task. “There are some project management tools, but you need to be more sophisticated than the tools we have today,” he said. “Project management tools dont get down to real-time network capacities and do predictive models based on that.
“ERP tools might be difficult to adapt,” Scott said. “There are certainly principles that could be applied, but I dont see the kind of top-to-bottom support for IT ERP that you would need in anybodys tools today.”
It also seems clear that GM will need company in the form of other large outsourcing users seeking to go to the third wave. Otherwise, GM would need to have custom code created, and that would severely dent the new economies that Szygenda is seeking. “You could take SAP [AG products] or Siebel [Systems Inc. products] and modify [them], but what Ralph wants is an off-the-shelf buy,” said Dzubeck.
One IT executive in the financial services industry, Paul King, CIO of government services at J.P. Morgan Chase & Co., in New York, said the idea is intriguing. “I am very interested. I understand the concept. Its an extension of supply chain and a little like the way Wal-Mart [Stores Inc.] did it,” said King, referring to the process of mandating standards on which different vendors compete.
Scott maintained the effort will have to go beyond applications. It will have to encompass standards for providers to follow as they deploy technologies. “When you have multiple outsourcers, theyll implement technologies in different ways. At the end of the day, if Im going to get the best total cost of ownership, Ive got to get multiple outsourcers to support Oracle in the same way,” Scott said. “I want a GM template for Oracle. It doesnt matter if its IBM or EDS doing the integration work.”