How GM saved a billion dollars

General Motors' IT group has undergone a thorough transformation in the last eight years, one that has seen the company knock more than a billion dollars off its annual IT budget of $4 billion. Tony Scott has helped drive that change over the last five years as CTO for GM's Information Systems & Services organization. He reveals that behind the savings is a massive effort to consolidate - going from 7,000 legacy systems in 1996 to fewer than 3,000 today - and ideally he'd like to get that number down to about 1,000. The backdrop for all this is GM's unique 100% outsourcing arrangement, which both helps and hurts. Network World's Jeff Caruso sat down with Scott to talk about how the transformation is going.

How long have you been 100% outsourced?

Literally, since we bought Electronic Data Systems in the mid-'80s. GM bought EDS with the notion of EDS becoming not only the internal IT department for GM but also continuing its business on the outside. In '96 we spun EDS off as a separate company but entered into this 10-year master services agreement, which essentially makes EDS our primary outsourcer but allows us under some complex rules to compete and bring in competition.

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General Motors' IT group has undergone a thorough transformation in the last eight years, one that has seen the company knock more than a billion dollars off its annual IT budget of $4 billion. Tony Scott has helped drive that change over the last five years as CTO for GM's Information Systems & Services organization. He reveals that behind the savings is a massive effort to consolidate - going from 7,000 legacy systems in 1996 to fewer than 3,000 today - and ideally he'd like to get that number down to about 1,000. The backdrop for all this is GM's unique 100% outsourcing arrangement, which both helps and hurts. Network World's Jeff Caruso sat down with Scott to talk about how the transformation is going.

How long have you been 100% outsourced?

Literally, since we bought Electronic Data Systems in the mid-'80s. GM bought EDS with the notion of EDS becoming not only the internal IT department for GM but also continuing its business on the outside. In '96 we spun EDS off as a separate company but entered into this 10-year master services agreement, which essentially makes EDS our primary outsourcer but allows us under some complex rules to compete and bring in competition.

Do you have a lot of competing outsourcers?

We do, yeah. After this seven- or eight-year period we have brought in a significant number of competitors, but EDS is still the dominant player.

Then you probably don't have a lot of the fears that other IT people might have in terms of outsourcing part of their business, losing that control.

Actually, it's been the opposite. When we spun EDS back out, it was, what info about GM's information systems do we need to know, and how do we regain that knowledge from this 100% outsourcer that we started in '96? So it's almost a flip of the question.

Are there some things that you would prefer to have more control over, or are there things that you miss?

It's a difficult question. I worked in a lot of different IT departments, never one 100% outsourced before. For a company of GM's size and scale, the outsource model absolutely works. We don't even think about reverting to a different model.

There are some things I do miss. We do everything by contract, so one of the effects of this model is that in some cases your opportunity to make changes is coincident with your opportunity to change the contract. On the good side, that creates a cadence of change and a cadence of opportunities that lets you constantly re-evaluate the technology and the suppliers and so on. On the flip side, if you want to do something mid-cycle, sometimes it can be more difficult. But net-net, it's an advantage.

What's your take on offshore outsourcing, a very controversial topic?

It's a difficult question for me to answer given the global nature of what we do - when you sell cars and have plants in as many places as we do and therefore the IT operations in those countries. . . . Secondly, we're 100% outsourced, so we have EDS or IBM or HP or AT&T provide all of our services. We have less than 2,000 IT people that are GM employees. So they're not replaced by anybody, either offshore or outsourced. But they work in Singapore; Russelsheim, Germany; Maidenhead, England; and Sydney and all kinds of different places. It's a global, international company, and then we use suppliers that provide support and have presence in all of those places that we do business. So I just don't think GM is in the model that a lot of other companies are in that regard.