General Motors Insources Its Information Technology Function

Software impacts every aspect of General Motors' business (www.gm.com), from how the company chooses manufacturing components to the ways that engineers and designers work together. Just as importantly, the automobiles themselves are becoming much more computerized. In fact, cars now have more software and computing power than the original Apollo mission in 1961. Modern autos contain a growing number of apps that interact with the dashboard. In addition, self-driving cars are coming soon. GM's Cadillac line is planning a partially self-driving car by 2015. So, it is clear how important software is to the giant automaker. When General Motors' new chief information offi cer, Randy Mott, assumed his position in February 2012, GM was outsourcing 90 percent of its information technology work. This arrangement was creating several problems for the company, including long lead times for new application development and a lack of in-depth knowledge of the auto industry. Mott's response was to replace the existing system with an insourcing strategy. This strategy includes hiring up to 10,000 employees and opening four software innovation centers in the U.S. GM feels that a much larger in-house IT staff, one that understands the automobile industry, could provide advantages to the automaker, including:

• Reducing the number of software applications. Mott estimates that GM has more than 4,000 applications throughout the world. Many are redundant and can be eliminated.

• Speeding up software application development to match the company's increased speed of new car and truck introductions.

• Replacing IT contractors who do not really understand the auto industry with in-house IT staff members who are familiar with the industry. GM believes that these individuals will possess the knowledge to develop superior, innovative software applications. General Motors is consolidating the company's 23 data centers into 2 much larger, more efficient centers. It is also building a global data warehouse that will enable executives to analyze detailed internal market and sales data and incorporate external information sources, including social-media feedback, into their decision-making process. Finally, the company plans to hire additional IT professionals to staff the data centers and manage the data warehouse. Sources: Compiled from J. Leber, "With Computerized Cars Ahead, GM Puts IT Outsourcing in the Rearview Mirror," MIT Technology Review, November 5, 2012; K. Flinders, "Could GM's Decision to Insource IT Start a Trend?" Computer Weekly, October 29, 2012; S. Overby, "GM Bets on Insourcing, Brings Back 10,000 IT Jobs," CIO Magazine, October 5, 2012; P. Thibodeau, "GM to Hire 10,000 IT Pros As It ‘Insources' Work," Computerworld, September 7, 2012; C. Murphy, "General Motors Will Slash Outsourcing in IT Overhaul," InformationWeek, July 9, 2012; B. Howard, "Cadillac Promises Self-Driving Cars by 2015," Extreme Tech, April 23, 2012; K. Bullis, "GM Tests a Self-Driving Cadillac," MIT Technology Review, April 20, 2012; M. Pesce, "Software Takes on More Tasks in Today's Cars," Wired, April 25, 2011; www.gm.com, accessed March 19, 2013.

Questions

1. What are potential disadvantages of Mott's insourcing strategy?

2. What are the reasons why GM, with its outsourcing strategy, ended up with some 4,000 software applications?