As the dust settles over the euphoria of GM’s $7.5 billion contract with six vendors, it is probably time to read into Ralph Szygenda’s broader strategy — of mapping the business goals of an ailing organization to a radical IT strategy.
In this hour, more than anything else, what needs to be celebrated is the fact that the top management at GM and the Board have allowed the CIO to experiment — one is deliberately not using the word gamble — right after its second worst year in history. It says a lot about the trust that IT has built for itself in the boardroom.
Yes, GM’s contract is noteworthy because of its sheer size. Yes, it is unique because of Szygenda’s new model that makes the vendors work with each other in a collaborative model. But more than all that, GM’s IT contract is significant because here is a case of IT being used to turnaround the organization. Even the vendor selection mirrors it.
Take EDS’ case. While much of the discussion has been centered on the size of the EDS deal, the point that has somehow been missed is that most of these contracts are in areas around manufacturing and CAD/CAM systems for product development and some part of supply chain. These are crucial but comparatively slow-to-change areas, unlike say sales & marketing. Also, transition in these traditional processes would be far tougher to manage. By handing it over to the incumbent vendor, that has depth of execution but is less dynamic, GM has avoided transition pains, made full use of EDS’ execution capabilities, while at the same time cut down on costs, because of the competitive bidding.
On the other end of spectrum is Capgemini, a vendor with much less execution capabilities in North America, but with high consulting capabilities. GM has awarded application-integration management to Capgemini in areas such as sales and marketing systems; enterprise-level strategic planning, program-management services; global purchasing and supply chain; and global sales and services, along with business services.
Hewlett-Packard (HP), a vendor with lots of experience in IT but not so much in services has got management of the vast majority of GM's global-engineering workstations, enterprise resource planning hosting, global product development server environments and many of the servers in GM's Asia Pacific region. It will also provide the applications maintenance, monitoring, block-point testing and deployment and user support for select global product developments and GMAC applications. Broadly speaking, apart from a few other application areas, HP has by and large got the IT work related to engineering and product development. This part of the business requires constant technology changes and a considerable depth of execution capability, which HP has brought in by hiring quite a few senior managers — like Steve Smith and John W. McCain — who are EDS’ veterans. Quite a few middle-level managers with EDS experience have also joined HP. What’s more, many of them come with direct GM experience.
IBM, which many observers feel, has not been a significant winner, will support the applications of GM's service and parts’ operations as well as its manufacturing quality-assurance systems. In addition, IBM will also provide part of integration management and operations support of GM's worldwide IT-computing infrastructure.
Two vendors — Covisint and Wipro — get specialized work. Covisint, a subsidiary of Compuware will support business-to-business supply chain collaboration for production and non-production suppliers. Wipro will integrate GM’s middleware systems and Information Systems and Services’ (IS&S) software tools globally.
In short, instead of choosing the IT-services vendors based on the traditional model of IT expertise, GM has mapped their technology and business skills to its own business areas. In the manufacturing area, it has taken a cautious, less radical approach that requires very little change, while in areas such as sales and marketing, it has gone for new vendors who promise a lot. Engineering and product design is an area where a fine balance is required and the vendor selection also reflects this.
What is also clear from the contract award is the fact that by taking a global approach, GM has acknowledged the reality that North America is no more the big hope, and that it will bet on newer locations.
Some amount of kite flying has already started, with questions like who will get the other half of the contract that is not yet announced; and which of these vendor services can be extended to provide part of the business services (BPO). But then, that is largely speculation now.
The coming few days will decide how this experiment — remind you, not the gamble — will unfold.
