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Business Impact

With Computerized Cars Ahead, GM Puts IT Outsourcing in the Rearview Mirror

The Detroit automaker is bringing thousands of IT jobs back in-house as it seeks faster software innovation.

GM’s decision to bring its IT jobs back to the U.S. highlights a broader trend—one that may accelerate as software becomes more important across different industries.

For a dramatic sign of the strategy reversal under way at General Motors as it moves on from its 2009 bankruptcy, look no further than the IT department.

When Randy Mott, the company’s new chief information officer, took the position in February, the company had been outsourcing its information technology work—just like countless other global corporations seeking to shed costs. A massive 90 percent of this work was being done outside the company.

Over the next few years, Mott wants to invert that percentage, and his plan involves job numbers that would make any politician salivate. The 210,000-person company could hire up to 10,000 employees and plans to open four software innovation centers in the United States. 

“GM’s outsourced IT model was expensive, inefficient, and outmoded,” CEO Daniel Akerson said on a third-quarter earnings call with investors last week. “Now all of that is changing, and it’s going to help us manage the business with even more speed and precision.”

The plan could prove crucial as cars become more computerized. And as companies in other industries make products packed with more software and seek to mine the data they collect, GM’s insourcing strategy for IT could spread.

At GM, Mott aims to help speed the introduction of new cars and trucks and to better gauge consumer demand in the 30 countries where the company operates, he says. “An outsourced environment is something set up to manage the cost of what you want to keep the same. We really want to move where we are at to a different place.”  

GM will be focusing on automating much of the routine work and consolidating the company’s 23 data centers into two much larger, more efficient operations. The idea is that a much larger in-house staff, one that understands the auto industry, could eventually double the speed at which it delivers new software applications within its business and to other companies it works with. Today, software touches all parts of GM’s business, everything from how manufacturing components are chosen to the ways engineers and designers work together. Mott’s team is also building a global “data warehouse” so executives can see and compare more detailed internal market and sales data, and better incorporate outside information sources, including social-media feedback. “It’s not that we can’t get at it today. It just takes longer and takes more work,” he says.

Harvard Business School professor Alan MacCormack, an expert in product development management within the software sector, says that outsourcing even routine software development can carry risks for companies that are seeking innovation in that area. He notes that today’s vehicles have more software and computing power than the original Apollo mission. “Everybody can make a decent enough powertrain. But what differentiates you is what you can do with your software,” he says of car makers generally. “Companies have to be careful that they don’t outsource the crown jewels.”

With a growing number of apps that interact with the dashboard and even self-driving cars on the horizon, software is clearly becoming more important to cars and trucks themselves. GM’s new software centers won’t work directly on any in-vehicle technology, but they would support divisions that do, Mott says.

GM’s press officer, Juli Huston-Rough, says that the company is also working to accelerate software innovation by opening its OnStar vehicle system to some third-party developers, and by focusing its R&D and engineering divisions on emerging trends in car automation and software. GM’s Cadillac line, for example, plans a partially self-driving car by 2015. 

Under Mott’s direction, two centers, which are slated to employ 2,000 new workers, have been announced in Detroit and in Austin, Texas. For these, GM is recruiting young college grads as much as seasoned pros. This month, the company also announced plans to hire 3,000 employees directly from Hewlett-Packard, which had worked with GM under an outsourcing contract.

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