by Beth Bacheldor

GM Continues IT Outsourcing

Dec 20, 2010
Enterprise Applications

The automaker is, yet again, renewing IT outsourcing contracts worth millions of dollars.

Back in the summer, General Motors renewed two outsourcing contracts with Capgemini to manage and support the automaker’s sales and marketing as well as dealer systems. The combined value of the contracts—two five-year agreements—is $250 million (you can read more about that here). Well, GM is at it again. It has just renewed three contracts with Capgemini, valued at $100 million over the next five years.

Now, as many of you know, after infamously accepting a $49.5 billion U.S. government bailout to finance its bankruptcy, GM appears well on its way to a rebound, if not a redemption. In November – in a landmark IPO (the biggest in U.S. history, it was reported) raised $20.1 billion by selling 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares. Days later, banks bought GM shares and expanded GM’s IP to $23.1 billion, making it the largest in global history.

In a Bloomberg article earlier this month (you can read it here), GM’s CEO Dan Akerson said the automaker will not make the same mistakes that led to its “near-death experience,” as he puts it in the article. There are pay restraints (no increases in base salaries, for example) and Akerson said he’d like to implement incentives and variable pay for management. As reported in the article, Akerson also points to a culture resistant to change, arrogance, and an underestimation of competitors (particularly foreign car companies). The article doesn’t give many specifics.

But if the new deals say anything, they indicate that the existing outsourcing contracts GM has with Capgemini (and also with HP; in the blog I wrote here I also talked about the $2 billion contract with HP ) are going well enough to be renewed.

This time, the automaker is renewing three application integration management contracts with Capgemini. The deals extend Capgemini’s ongoing work in supporting GM’s Next-Generation Systems Factory Operating Model. Under terms of the renewed contracts, Capgemini will continue providing GM standardized processes for application management and for developing common, integrated-based solutions that can scale with GM’s business needs, according to a press release on the deals. More specifically, Capgemini will work with GM’s IT group to provide services in strategic planning, data management, systems engineering and architecture, software engineering, program management and verification and validation.

I tried to find more information about this so-called Next-Generation Systems Factory Operation Model, but didn’t have much luck. Of course, GM has been spending quite a long time and money updating the IT architecture and systems that power its factories. A few years ago, Mary Hayes Weier (a friend and a former colleague) did this great articleon a big initiative GM had done overhauling the IT infrastructure that, at the time, was supporting 160 global plants. That overhaul included standardizing software and processes at every plant, updating networks, and creating four command centers–in the United States, Latin America, and Europe. As Weier reported, that overhaul included two global rollouts of standardized software apps: a product routing and tracking system designed to help GM produce vehicles as planned, and an in-plant order management system linking suppliers into the assembly line.

Anyway, I’m interested in hearing what you all have to say about GM’s use of outsourcing, and whether the auto giant is on the right track – the track to redemption, so to speak. What say you, readers?