Inside GM’s plan to ditch outsourcing

GM’s new CIO Randall D. Mott is leading GM’s boldest and potentially most expensive bet on IT
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First Published: Thu, Oct 11 2012. 11 23 AM IST
A file photo of Randall D. Mott. Executives at the tech industry’s biggest names are praying Mott fails, and fails soon enough so they can renew their dialogues for fresh outsourcing business.
A file photo of Randall D. Mott. Executives at the tech industry’s biggest names are praying Mott fails, and fails soon enough so they can renew their dialogues for fresh outsourcing business.
Updated: Fri, Oct 12 2012. 12 23 AM IST
Bangalore: At 54, the new chief information officer (CIO) of General Motors Co., Randall D. Mott, is proving to be quite a maverick. Within months of joining, he has reversed the automaker’s information technology (IT) outsourcing policy, and announced that nearly 90% of IT works will be done by in-house staff in three-five years.
Executives at the technology industry’s biggest names are praying Mott fails, and fails soon enough so they can renew their dialogues for fresh outsourcing business. In a year when the global technology spending on IT is expected to slow and customers are squeezing rates, an “insourcing” poster child is the last thing the industry wants.
After all, a successful model of bringing technology jobs back to the US at a scale that the nation’s biggest automaker is attempting may just inspire others—especially in an election year.
Mott is leading GM’s boldest and potentially most expensive bet on IT, and it’s the hottest topic in the outsourcing industry, especially among his former colleagues at Hewlett-Packard Co.—the biggest supplier of IT services to the automaker.
Already at stake are outsourcing contracts worth several billions of dollars, including a $1 billion deal with Mott’s former employer HP, another $250 million deal with France’s Cap Gemini SA, apart from ongoing contracts with India’s Wipro Ltd. Wipro wouldn’t comment citing the mandatory silent period ahead of its quarterly results announcement.
Still, if insourcing of IT could work at this scale, the industry should have seen some successful case studies by now. Outsourcing experts and executives familiar with GM’s latest plans are not too convinced by the plan.
Mott’s plan is to create an internal IT organization of 10,000 engineers, with nearly 30% of them being fresh college graduates hired from campuses across Michigan and other US states. In many ways, he seems to be building a ‘mini Wipro’ inside GM, albeit at potentially much higher costs.
GM has already started discussions with vendors on its new plans, Juli Huston-Rough, a spokeswoman of the company confirmed. She declined comment on specific outsourcing contracts and whether they will be scrapped.
Mott is not the first American CIO to have attempted this. Eight years ago in September 2004, the then JPMorgan CIO Austin Adams scrapped a $5 billion IT deal with International Business Machines Corp. (IBM).
Years later, the bank found the insourcing model unsustainable given a lack of skilled IT engineers in the US. JPMorgan’s current IT head, Guy Chiarello, has been reversing what his predecessor did by increasing offshoring of IT and back office projects to India among other centres.
Experts such as David Rutchik, partner at outsourcing advisory firm Pace Harmon, said hiring IT talent is the least of challenges Mott will face. “The real risk is the cost to do it. It’s hard to imagine GM bringing in internal US resources at the right price point.”
So what does this mean for India’s top tech firms looking to work with large customers such as GM?
They could surely play a role in GM’s push for creating more local IT jobs in the US and use this as an opportunity to get closer to the real business, beyond pure technology decision makers, said a Detroit-based IT consultant who requested he not be named because he works with GM on IT hiring.
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First Published: Thu, Oct 11 2012. 11 23 AM IST
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