IT Push to Speed Product Development, GM’s Akerson Says

WARREN, MI – CEO Dan Akerson is promising a faster, more nimble General Motors will evolve over the next three years as it rolls out $16 billion in new product in North America, backed by a huge investment in in-house information technology.

The IT play is the latest move by the auto maker that already has had some success in reinventing itself following a 2009 bankruptcy that forced it to shed brands, close plants and shrink its workforce.

“So if you’ve seen the (new) GM of the last three years, you ain’t seen nothing yet,” Akerson says in christening the new Global Data Center here that is part of the company’s massive IT overhaul expected to be completed over the next five years.

The auto maker is in the process of turning its IT philosophy on its head, taking work that used to be 90%/10% outsourced/in-sourced and reversing that formula. The result will be faster product-development, higher quality, lower costs and greater innovation, officials say.

The crown jewel in GM’s IT transformation is the giant Global Data Center officially unveiled to the media today. It is one of two facilities, along with a nearly identical one to be built over the next 18 months in Milford, MI, that will consolidate worldwide operations once spread throughout 23 separate centers.

The two facilities will house applications and data used by GM around the world and act as a control center to monitor the state of the auto maker’s operations, from manufacturing plants to dealers.

Also part of the IT overhaul are four Innovation Centers tasked with developing software GM will use worldwide.

The auto maker is in the midst of a hiring spree for the Innovation Centers, located here and in Roswell, GA; Austin, TX; and Chandler, AZ; with plans ultimately to employ about 9,000 workers. Many of the new employees will be recruited right out of college, and GM says it picked its four locations based in part on the presence of universities that focus on IT and software development.

On the surface, it would appear an odd strategy for the auto maker, only four years removed from bankruptcy and massive job cuts, to be investing more than a half-billion dollars in facilities and taking on thousands of new workers.

However, executives believe the move won’t hike costs but give the auto maker a competitive advantage.

Randall D. Mott, vice president and chief information officer, says that while GM historically spent 75% of its IT resources simply running the day-to-day operations, the new setup will allow upwards of 80% of staff to focus on innovation.

“As we look at our opportunities going forward in terms of the overall restructuring and transformation of the business, we see IT being an integral part of that – a competitive advantage, as opposed to someone just doing a technology play,” he says.

Akerson says in outsourcing, GM didn’t always get the attention it needed. “We have to have a core competency in IT,” he says. “We have to turn IT into an advantage.

“As we look at GM today, we’re trying to transform a company to be a better competitor globally, and this is a big step forward.”

Typically, even the most aggressive auto makers in-source about 65% of their IT needs, officials say, so the move to pull 90% of its work in-house is an aggressive bet by GM that it can gain efficiencies, speed product development and improve quality.

Akerson says when he took the IT investment proposal to GM’s board, “I wasn’t sure whether 25% or 35% was the right amount (of outsourcing), but I was sure it wasn’t 90%.”

Says Mott: “When we started this journey, I think we were the most outsourced. And now I believe we’ll be the least outsourced.”

Akerson doesn’t pinpoint how much time GM hopes to take off product-development cycles. But he says there is between $1 billion and $2.5 billion of waste in IT spending each year the auto maker is hoping to eliminate.

The new Global Data Center here is impressive, with its massive computing power and a 5,040-sq.-ft. (468-sq.-m) command center that features a wall of video monitors to track the state of health GM’s global manufacturing facilities, among other tasks.

The center consists of four 10,000-sq.-ft. (929-sq.-m) Data Halls housing its computer servers. Two of the halls are complete, with the other two available as more capacity is needed. GM says the operation houses 24 server clusters, has 1,600 miles (2,600 km) of high-capacity fiber cabling and has processed 9,234 trillion bits of data since Jan. 15.

Mott says it will be five years before GM’s new in-house IT operations hit full stride, but the auto maker already is beginning to see the benefit in systems-software innovation and other improvements. This year, the group has more than 400 projects under way, he says.

“It’s really a 5-year ramp, with every year more innovation than the year before,” Mott says. “And, clearly, the innovation builds on itself as well.

“So I would say we’ve started the climb, but you’re not going to see us be at full capacity for roughly five years – but we’ll get most of that within three (years).”

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