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CIO - General Electric's supply chain is not simply enormous. It's a byzantine web of sourcing partners, touching all corners of the globe: 500,000 suppliers in more than 100 countries that cut across 14 different languages. Each year, GE spends some US$55 billion among its vast supplier base.
Long-time GE CIO Gary Reiner knows this problem all too well, since, among his other duties, he is responsible for how the $173 billion conglomerate spends that $55 billion, utilizing GE's Six Sigma practices and taking advantage of its hefty purchasing power. (GE, for instance, buys $150 million in desktops and laptops each year from a single supplier, Dell, at "a very low price," Reiner has said.)
For years, GE's Global Procurement Group faced a challenging reality: trying to accurately track and make sense of all of the supply chain interactions with half a million suppliers-contracts, compliance initiatives, certifications and other critical data, which needed to be centrally stored, managed and made accessible to thousands across the globe. GE was using what it called a Global Supplier Library, a homegrown system that, Reiner says, had "rudimentary capability."
Reiner and his staff knew that GE needed something better, but they didn't want to build it. They wanted a supplier information system that was easy to use and install, could unite GE's sourcing empire into one central repository, had multilanguage capabilities, and also offered "self-service" functionality so that each of its suppliers could manage its own data.
But to get there, Reiner and his IT and procurement teams took a different route. In 2008, GE bought the application of a little-known software-as-a-service vendor that would ultimately become the largest SaaS deployment to date.
Software-Buying As Usual for GE
Reiner's decision to purchase Aravo's Supplier Information Management (SIM) SaaS product seems to be just like any other software decision that he and his team have made during the 13 years he's been GE's CIO.
"When we judge a solution, we are indifferent to whether it's hosted by a supplier or by us," Reiner says. "We look for the functionality of the solution and at the price." And that, he claims, has been the way they've always operated. Reiner says that his group doesn't see a big difference in cost and in capabilities between on-premise and SaaS products. "And let me emphasize," he adds, "we don't see a big difference in cost either from the point of view of the ongoing operating costs, or the transition costs."
Furthermore, Reiner says that when looking at implementation costs, "they're largely around interfacing with existing systems, process changes and data cleansing," he says. "Those three costs exist regardless of whether GE hosts that application or whether the supplier hosts that application."