GM to Slash Outsourcing, Bring 90 Percent IT Jobs In-House

Newly installed General Motors CIO Randy Mott announced a massive three-year plan to move almost all of GM’s IT services in-house, bringing everything from data centers to software development into the fold and taking work away from outsourcing companies such as HP/EDS, IBM, Capgemini and Wipro.

The plan is to move 90 percent of the IT services work in-house, up from only 10 percent today, says Information Week.

Insourcing to this extent will force GM to go on a hiring spree for software developers, project managers, database experts, business analysts, and other IT pros over the next three years, says Information Week. And the automotive maker plans to create three new software development centers in the U.S.

GM’s outsourcers, including EDS, could lose contracts once valued upwards of $3 billion a year. As a result, IT workers at those companies tied to the GM contract may want to consider applying to GM down the road.

GM Punches Transformation Accelerator  

The scope of GM’s IT transformation is huge. It also comes at a time when the major auto maker is keenly in the pubic’s eye after its massive federal bailout several years ago. Other aspects to GM’s transformation plan outlined in Information Week include:

  • Insourcing: Flipping from 90 percent outsourced IT to 90 percent of work done by internal staff.
  • Data Center Consolidation: From 23 data centers to two new ones in Michigan, with the latest hardware and more automation.
  • Application Consolidation: 40 percent or more of GM’s apps could go, by moving to standardized, global applications.
  • Software Development Centers: Likely three in U.S. sites to be determined (one will likely be in Detroit), based on the local development talent.
  • Portfolio Management: Every IT project will require a cost-benefit analysis and a priority set by business units.
  • Data Warehouse Consolidation: GM has about 200 data marts today and plans to move to one data architecture so data’s easier to access and use.

While there will likely be much grumbling among the IT rank and file, Mott has been a change agent at all of his previous posts at Wal-Mart, Dell and HP, before joining GM six months ago.  He’s clearly been brought in by GM to make big things happen quickly and has the support of CEO Dan Akerson, who apparently puts a high value on technology and its place in driving the company’s future.

Related Links

General Motors Will Slash Outsourcing In IT Overhaul [InformationWeek]

Comments

  1. BY Fred Bosick says:

    Maybe GM executives are among to first to realize that IT is far too important to farm out to the lowest bidder.

  2. BY Computer Science Grad says:

    It is good that GM wants to “bring 90% of IT jobs In-House” but what does that truly mean? Does that mean the workers from the outsourced companies have first shot at working for GM here in the US? Are they only hiring the workers from the outsourced companies who have a minimum of 10 years experience in the field? Will new graduates be able to fairly compete for IT opportunities at GM? Is the salary for IT personnel going to decrease? Is the cost of GM vehicles going to increase? And if there are only going to be 3 Software Development Centers here in the US, how many IT personnel are they going to need?

    I want jobs to return to the US but not at the cost of keeping me in an indigent working class category or placing me in an indigent working class category. Americans are not being told to go to school and get a higher education (bachelors, masters, or doctorate degree) so they can stand in a wellfare line and live in a shelter. If a person takes the time and spends the money to get an education, an employer should give them an opportunity to work for a reasonably decent wage in their field of study.

    I hope this is a move in a positive direction that benefits GM and IT professionals.

    • BY Noname says:

      IT should be at the trades school level not bachelors, masters, or doctorate degree CS that has a big skills gap.

    • BY Don't like BS says:

      “The plan is to move 90 percent of the IT services work in-house…”

      I’m asking the same question. What does this mean? I think there are good odds it won’t equate to significant increase is US employment. Otherwise they would have been more specific.

      Just more hot air from corporations and government.

  3. BY Glen Smith says:

    It means that GM either plans to get into the outsourcing business itself or that GM is going to start doing off shoring directly. From a business standpoint, out-sourcing just means hiring body shop employees while in-sourcing refers to hiring your own. It does not necessarily have anything to do with whether or not the employee is on some type of work visa, a US Citizen or an off shore job. Nor does it necessarily mean that the employees of GM will be better treated. It only means that your paycheck is coming from GM. Of course, that does mean you get hired by GM and not some body shop that serves a body shop that serves the body shop that actually serves GM. You probably know who GM is, in the out-sourcing model, you may not even realize you are actually working for GM until you show up.

  4. BY Rafik says:

    Anyone who says anything negative about this should be exported to siberia!
    Other companies should follow this lead. Enough selling out on the citizens of the country.
    Good on you GM.

    • BY Glen Smith says:

      Why? This says nothing about changing the make up of employees in their IT department only that they plan to start paying those employees directly. In the face of US-based healthcare mandates, this probably means an increase in off shoring.

      • BY Computer Science Grad says:

        Good point Glen. The article does not mention anything about changing the make up of employees in GMs IT department. The same IT personnel can be paid directly from GM no matter where they are located on planet earth. As long as GM is paying the IT personnel directly, legally the IT personnel are considered to be “In-House.”

      • BY Glen Smith says:

        Computer Science Grad,

        I actually suspect that GM might have plans on becoming a provider of IT consultants. It has expanded into other business lines successfully before. I would not be surprised to see them offering cloud services in the next few years. Given their size, they can “eat their own dog food” via a private cloud and then “rent out” excess capacity kind of like they do in the utility business. Look for them to increase their lobbying efforts in places like DC to also give them some competitive advantage (read increased regulation) in the cloud. business.

        • BY Computer Science Grad says:

          That is possible only because there is much money to be made as a provider of IT consulting, but I would prefer they build a “quality” vehicle that does not break my bank account. I suspect the only reason we are hearing about GM wanting to bring in 90% of their IT “In-House” is because they have already increased their lobbying efforts in Washington, DC and lined certain politicians’ pockets with goodies so they will be competitive in the cloud. I am sure plans were finalized years ago and now they are in the beginning process of acting on those plans. I just want GM to consider IT professionals and hard working Americans as they continue to transfom and increase their billions.

  5. BY Dan says:

    Please read the article in entirety. As there will be three new software centers to be created in the US, I am presuming there will be more IT jobs in the US. Which is a welcome news.
    However, I will only belive it when it happens. GM is a company which has been bankrupted before. In order to compete for the cost of the vehicle, not sure it will actually transpire due to higher costs for insourcing/onshoring and higher healthcare costs for the employees.

    I know tariffs were bad when tried in 1932, but at that time it was a different econmy. In this global economy unless anti-dumping practices are enforced (for labor and goods) its hard to imagine things getting turned around anytime soon.

    Multinationals went overseas for cheaper costs, but they lost the buying power of homebase in the process.
    Hopefully different thinking may help to spur the growth.

  6. BY Private says:

    I’ve seen this pendulum swing several times with major companies. Going from In House to outsourcing to save money, back to In House to have better control, back to outsource, back in In House. Give it some time and it will swing again. Same thing with going from dumb terminals to desktop PCs and now to Citrix (new name for dumb terminals).

  7. BY Mike Jones says:

    Americans need to support companies that do this by buying their products. Outsourcing is affecting the U.S. economy and it is not just IT jobs that are going. There are hundreds of companies in India, Brasil, and China that want to take over IT, administrative, insurance, engineering and architectural jobs from U.S. workers.

  8. BY jayobrien02 says:

    Finally A very large American Company gets it ! Now as long as they make a good car that lasts I will for the first time in my 45 years be in the market for a new GM.
    Way to go GM !

  9. BY Karen says:

    Outsourcing in IT is really not that profitable anymore. My company outsourced everyone in my department-23 jobs lost in my dept alone and hundreds in others. Now I find they have 100 staff offshore and about 5 oniste co-ordinators here. Nobody knows what is going on anymore and so top management does not even have a clue about how much work is being done. Not much savings and everybody is grumbling-but who is going to tell the top management?

  10. BY sairam says:

    Kudos to GM. I pray God to give GM all fortune. Let USA come back to its position in hiring USA citizens.
    Thanks to GM.

  11. BY William Norton says:

    Bravo

  12. BY SP says:

    Outsourcing has a context. It means outsourced ‘outside of a company’. The resources to do the outsourced work can be within US or outside of US. However, for big companies it is more likely that it is outsourced overseas; or even if it is outsourced to a ‘local’ US company, they may internally outsourced outside of US.

    The bottom line is, outsourcing is not as profitable as it used to be for a company. Problems in outsourcing outside of US includes at least: time-zone communication issue, not effective in accountability/traceability on revenue spent, infrastructure needed to support offshore development/testing (because most infrastructure are within US), ‘season-ness’ of developers (offshore outsourced entities tends to save money by using more junior people), etc etc.

    Most important of all is the development culture. Don’t cut corners trying to push for quick release, only to find mountains of production issue afterwards. Use ‘Extreme Programming’ the right way, not as a process to hide sloppiness, have good design (not extreme detail) upfront, let architecture/developers do their job (different staff has different roles), etc

    Way to go! GM!!

  13. BY Bob Plugh says:

    I worked at several companies that “outsourced” their software development to various third world countries including India, Pakistan, China, and others. In EVERY SINGLE CASE bar none, when all was done and said, OUTSOURCING COST MORE. It is easy to point to hourly wages that are 1/10 what they are here, however, outsourced projects require VERY EXPLICIT documentation, something that almost NO company had produced prior to their “outsourcing binge”. So, these outsourcing companies point to the documents that are handed them and say, “ECO (Engineering Change Order)” which means ADDITIONAL MONEY HAS TO BE NEGOTIATED.

    By the time all the “extras” get negotiated, and the OVERHEAD of keeping the architects here and happy, not to mention the time slips due to being MANY HOURS OUT OF SYNC, HUGE turnover in these houses, and GENERALLY POOR QUALITY of software written in these 3rd world hell holes, by the time any software was delivered that could actually be shipped, the companies were typically 50-100% OVER THEIR ORIGINAL budget.

    The biggest win was for the “manager” that proposed this, got a huge bonus, moved up in management or, more typically, to another company to screw them over the same way. The biggest loss was to, well, everyone else.

    • BY RU@6 says:

      The “outsourcing” talked about is simply jobs done by another company. The majority of these jobs are done by US citizens IN the US. I feel sorry for these folks. Some of them started AT GM, then were taken over by EDS, THEN taken over by HP. Each time they lost benefits. I’d say they won’t fair well in the latest transition. There are some jobs outside the US but they are simple PC help desk positions. My heart goes out to the US workers this effects.

  14. BY Vince Domantay says:

    Great move by GM. It’s about time we get the jobs back in this country!!!

  15. BY Joe Sea says:

    Kudos!

    It’s about time our companies realized outsourcing, of any type, does not save money! Unfortunately the bad decisions negatively impact the workers, the business and our economy while the knucklehead that proposed this garbage have moved on and is making more money than he/she deserves!

    I’ve had the unfortunate experience of having to clean up some of this outsourced programming (India) and it was a complete mess! Not worth the $10-$12 per hour they payed for!

    Hopefully GM is starting a new trend in our country! Let’s KEEP the AMERICAN jobs here in AMERICA!

    • BY ri200 says:

      Bravo for GM, but I wonder if on the other hand, they will now look for more H-1B workers and not American Citizens/Legal Residents.

  16. BY Greg Novotny says:

    Yes! Yes! Yes! I hope the trend continues and we keep jobs and the associated revenue in our economy. Think about who buys GM cars (and other products made in the USA). Was offshore outsourcing ever a really good, long-term idea?

  17. BY Frustrated US citizen says:

    Unfortunately we US employees are not realizing the ploy that these corporate and politicians play. As always we believe in their statements. In this case now a days due to this outsourcing issue and obviously elections are near as well since citizens will be asking those questions on economy. Basically what they are doing is that Indian development and support companies has opened offices here. They brought in their H1/B1 Visa employees with them, mind you, not US hires. The companies will be forking out project work to these companies who will be local here showing that they are employing local US based companies. Again they will be following the same trend but in a different manner. Instead of giving project offshore it will be onshore but to the same indian companies. This is the reason why our politicians keep increasing the H1/B1 Visa quotas every year, mainly for one country, i.e India. Please do not get fooled by these statements as it will be miniscual # of jobs that will be given to US citizens. As always these corporation and politicians run on our tax money but they only look for our own pockets – how to take care of their pockets. Looks like one lesson they have learned very well from these 3rd world countries and forgetting about their own country that US comes first.

  18. BY Ed Matthews says:

    Off-shore outsourcing originally became popular due to the high demand for IT personnel and the comparatively low USA supply during the years before the dot-com bubble bust. The per hour labor was less expensive – but more importantly – it provided an ample supply of IT resources to USA based companies in keeping up with the every changing technology needs. Also, since the working hours time zone were opposite ours… the work could “follow the sun” and be done more quickly than our USA time zones could provide. As a result, a competitive advantage with the technology development and products delivered to internal customers much quicker. A very prudent and sensible business decision.

    My experiences managing off-shore talent have all been positive as a “direct hire” manager managing outsourced on-shore, near-shore (Canada) and off-shore. No down-side from a productivity standpoint. Whether or not it is now more economical to direct-hire (even if the talent still lives in India as a mobile worker) with sky rocketing healthcare costs and other benefits per employee… I don’t know. The “follow the sun” advantage is still certainly very real. My current employer only outsources in the USA to mid-America mobile workers in very large numbers.. with no end in site. Their bases in Cali and the East Coast also have large numbers of employees. The outsource move to mid-America is due to the much lower cost of living and thus the lower per employee wage. On the other hand, a couple of large hospital health systems have told me the cost to outsource in any form is greater than direct hire and only engage for “special projects” – - and never off-shore since their figures reflect a higher cost than on-shore outsourcing. Both were mid-America based and did mention management, communications, and controls costs.

    I do hope, like many in this trail, that the GM words are deployed at face value to mean USA based direct hires holding to the standard that has proudly given then the surname of “Generous Motors”.

  19. BY Mike b says:

    Yeah right!!! Outsourcing is cheaper with all the problems it brings. It is still cheaper. Labor is cheaper. They don’t have to pay ungodly benefits and they don’t have to pay all the taxes. I can pay a foreigner a fraction of what I pay a US employee, not pay for any benefits including medical, 401k, FICA, social security, taxes … Where the hell do you come up with outsourcing costs more?? Getting am American employee to do anything is a damned nightmare. A bunch entitlement minded lazy whimps!!

    • BY mcp123 says:

      Apparently GM doesn’t feel that way and is obviously more American than you…

      If it takes someone three times longer to develop something and they are 35% less productive (as outsourced work usually is) then it absolutely does make more sense to bring the work in house.

    • BY Mike says:

      MItt? Is that you??

    • BY Computer Science Grad says:

      LOL! You sound like a disgruntled employer. Can you be a little more specific on what “ungodly benefits” are? Many people in other countries do not have the same standard of living as the US. If living in a one room shack was considered good living in America, maybe Americans could work for the same wage as some employees overseas. I have no choice but to pay taxes, social security, and FICA because it is mandated by the federal government of the United States. I do not need 401k. I do not need an employer to give me medical benefits. Hell, I don’t even need 40 hours per week. Just give me a job with a reasonably decent wage. I just want to eat, wear clean clothes, keep a roof over my head, and enjoy my life without drowning in debt after college for the most part. I don’t think that is too much to ask.

    • BY Cindy says:

      Then you go right ahead and outsoucre those jobs and you take your overpaid greedy ass and go live in that same country that you hire that cheap labor you speak of. You rich SOB’s are not going to force us into a Oligarchy Government like you are trying to do. I am calling on all my follow Americans to kick your greedy asses out of this country so that the rest of us can build a secure future for our children and the long life of our country. By the way those so called ENTILTEMENT you speak of are paid for by the workers. Oh I forgot, your above having to pay those fees, that by the way come out of our pay checks automatically without the option of not be apart of money hungry programs that are stolen from by politicains that you buy off with your lobbying money. Until all the coruption is exposed we are in danger of losing our middle class and the future for our children. I am an American Indian and I SAY GET THE HELL OUT OF MY PEOPLES COUNTRY WE DON’T WANT PEOPLE LIKE YOU HERE TO TEACH OUR CHILDREN YOUR GREED!!!

      • BY To The Point says:

        Very angrily stated but very well put. Like you and many Americans, I wish something could be done about the inefficient government system that stands today. There are too many well educated and well trained Americans that need to be employed here in the US. American businesses need to give Americans an opportunity.

  20. BY Mike says:

    I can guess it makes business sense but the article should delve deeper into the reasoning behind this change.

    • BY gk says:

      I hope they will also sponser for H1B, Greencard for folks like me who worked in US for 10+ yrs and working in India now. Professionals are professionals. Once they are used to the work culture in the US they want to work in the US. Who wants to work in the US should be able to work in the US. Who wants to work in different parts of the world should work there. There is need for globality and talent.Working in the US, you will be able to be near to the customer, convert the requirements faster and develop quality products easily. Nothing beats the benefit of working in the same zone face to face. Yes, benefits like medical, 401k, FICA, social security, taxes should be paid to the employee who spends all his life for the employer. It is a good concept.

  21. BY Tex444 says:

    Money or barter has always represented the greediest among us and the most forward thinking as well. Consider that I have lamented for 3 decades the evils of “outsourcing” American jobs and the decimation of the “middle class” that would bring. Most of my fears became reality due to the money grab that American nationals realized by hiring cheap overseas labor and all the while economic pundits were claiming that labor was not much of a driver concerning globalization…Bunk. Two things come to mind here, unfettered capitalism is a pox on humanity and second, capitalism unto itself is the finest regulator of prices and the structure of same that will ever be. BUT, my Pseudonym for globalization is that the richest nations will go to the middle and the poorest will get somewhere close.

  22. BY a99weeker says:

    I for one am glad the trend is turning around. Not going negative in my comments about off-shoring of IT as I have seen how it really goes I sure hope the Kansas City leaders can do something to land a series of these potential openings.

    Apparently, local KC companies have pretty much “dried out” the talent pool in KC (per the companies). Myself, a talented MF/COBOL developer and a hard-working, very hungry to learn more (web technology) is READY to work for them. Just have to convince the local KC employers to hire & invest in the “less than 110% match” employee and train us to become the local answer they seek.

  23. BY Avi S says:

    If the US produce more graduates with sound math and programming skills, demand to look for programmers elsewhere will diminish. Unfortunately, US education system in K-12 grades is terrible. Students are very weak in science and math. Very less competition to get into math, science and engineering program in colleges which produce below average intelligent graduates, and as a result they can not compete with Indians. The US can not keep up with today’s competition because of weak education foundation to current young generation. IT jobs require intelligence and excellent ability to think logically, which can be developed through excellent/tough math curriculum. So do not blame others my fellow Americans. first clean the mess at your own home !!!

    • BY DW_W6 says:

      I disagree. The motivation to outsource has always been cheap labor. You comment is more accurate in the arena of high end technical skills like PhD, but IT is not an area where the US is lacking.

  24. Pingback: A Preview of Outsourcing Trends in 2014 - Dice News

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