Outsourcing IT GM Way1

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Outsourcing IT: The GM Way:

Outsourcing IT: The GM Way

Early GM:

Early GM ‘Legacy of Many’ No uniform desktop environment or an E-mail system On Manufacturing Side it had 23 Computer Aided Design and Manufacturing System (CAD-CAM) No centralized modeling Strained Relations with Suppliers

A start of IT Outsourcing in GM:

A start of IT Outsourcing in GM Electronic Data Systems (EDS) was acquired in 1984 and in 1996 recognized as independent company having ten-year Master Service Agreement. Ralph Szygenda was First Chief Information Officer (CIO) appointed by GM ‘Out-in Sourcing’ GM perception of cost efficiency by working with single large IT outsourcing provider catering to entire gamut of IT needs

Difficulties faced by GM with EDS:

Difficulties faced by GM with EDS One Vendor doing majority of outsourced work was privy to exclusive knowledge of company’s business No other vendor in the market knew companies business well CIO should maintain a close relationship with its suppliers and distributors so that EDS do not exert undue influence on them EDS failed to establish acceptable standards of interaction between its business partners and vendors Slow technology adoption and its laggard status in industry

Szygenda’s Initiative as CIO :

Szygenda’s Initiative as CIO He decided to start a new division , the IS&S IS&S incorporated mix of both old and new employees ensured that along with new vigour , knowledge gained through the EDS experience was preserved He invented a novel matrix structure and created a new position Process Information Officer (PIO) Szygenda faced challenges to start this new division they were: To create an IT Department from scratch for the world’s biggest automobile manufacturing company Recruiting Best Talent from all over the world

Creation of Matrix Structure:

Creation of Matrix Structure Sample structure

Working of the Matrix structure:

Working of the Matrix structure Main objectives Work as a team Debating society Precision information technology Negativity Tension Delayed processes

Changes in structure:

Changes in structure System development factory Development Maintenance Operating factory Manufacturing Supply chain activities IT business management factory Contact management Purchasing HR

The Benefits:

The Benefits IT Budget reduced to $5 Billion to $ 3 Billion between 1998 and 2003 Outsourcing model was beneficial in two major ways Implemented changes faster and in cost effective way Streamline its demand and supply Improvement in cost effectiveness, market share, profitability and quality whereas cycle time, delivery time and launch times were decreased

The Benefits:

The Benefits No investment as there was not full fledged IT Department No hardware and No software was maintained Due to absence of IT staff, No time and Money was spent on career planning of the in-house IT Staff. ‘Event Driven Method’ On the expiry of every contract, GM had opportunity of having better services, make more improvements and re-set the prices.

The New Outsourcing Model:

The New Outsourcing Model Adopted in 2003, GM used services of multiple vendors. Like IBM, Accenture, CSC, Lockheed-Martin , HP, Wipro, Sapient and Cognizant. GM distributed 20% of its IT work to other vendors. Concept of multiple vendors working on single project & approach in relation to costs. Structure of an IT outsourcing contract was a “Firm Fixed Price” one.

Improving Vendor Delivery:

Improving Vendor Delivery Szygenda and GM management team visit suppliers’ top executives once a year. Instituted a vendor report card. Assigned each vendor a GM mentor. Established corrective-action meeting that take place every two weeks. Szygenda claimed “VMP has disciplined GM’s project management system , 90% projects fairing well on ; time , cost and quality”. Dashboard

Focusing on Process Improvement:

Focusing on Process Improvement Appointed five process CIOs called PIOs to drive consistency for their process areas across GM globally Revamped IT standards and formed a permanent IT standards council to reduce complexity, lower operating costs and leverage GM buying power Established vendor management process Added virtual factories to the organizational structure to streamline the process of strategizing and executing GM encountered variant situations.

Future Plan of GM in Outsourcing:

Future Plan of GM in Outsourcing Reduce IT service providers from 70-80 to 30-40 New Pyramid S tructure

Future Plan of GM in Outsourcing:

Future Plan of GM in Outsourcing Putting emphasis on IT’s role in Vehicle Development and budget pertaining to such development develop capabilities to interface technology like MP3 players, mobile phones, and navigation system. Futuritic Innovation like adaptive Cruise control Standard Software Application that could help numerous IT Projects across the globe

Future Plan of GM in Outsourcing:

Future Plan of GM in Outsourcing ERP application in IT management

Slide 17:

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