GM Puts IT Outsourcing in the Rearview Mirror(technologyreview.com)
technologyreview.com
GM Puts IT Outsourcing in the Rearview Mirror
http://www.technologyreview.com/news/506746/with-computerized-cars-ahead-gm-puts-it-outsourcing-in-the-rearview-mirror/
6 comments
That cost center mindset is such a huge chasm to jump. As an individual employee there's almost no reason to take a job at a company that isn't making money off of your contributions.
Even if you're lucky enough to be in an IT-enabled skunkworks or innovation center at a large not-high-tech company, your department exists at the continued pleasure of the non-IT people who control the real revenue streams. There won't be many internal job transfer opportunities for you either unless you fancy moving out of technology and becoming an 'X who programs', someone in a non-dev role who uses coding as a sort of personal competitive advantage. [1] [2]
I agree that technology is going to enable the business advances of the future even for companies that aren't high tech now, but at the individual contributor level it's a Sisyphean task to try to drive that change unless you're an executive yourself.
[1] http://learnpythonthehardway.org/book/advice.html
[2] http://michaelochurch.wordpress.com/2012/08/26/xwp-vs-jap/
Even if you're lucky enough to be in an IT-enabled skunkworks or innovation center at a large not-high-tech company, your department exists at the continued pleasure of the non-IT people who control the real revenue streams. There won't be many internal job transfer opportunities for you either unless you fancy moving out of technology and becoming an 'X who programs', someone in a non-dev role who uses coding as a sort of personal competitive advantage. [1] [2]
I agree that technology is going to enable the business advances of the future even for companies that aren't high tech now, but at the individual contributor level it's a Sisyphean task to try to drive that change unless you're an executive yourself.
[1] http://learnpythonthehardway.org/book/advice.html
[2] http://michaelochurch.wordpress.com/2012/08/26/xwp-vs-jap/
Apart from the fact that a lot of non-IT companies (EG Banks) pay better than IT ones. Money may not be a prime motivator, but it is a motivator,
Randy Mott was the last exceptional CIO at Wal-Mart Store, Inc. His vision, personal skills and technical leadership played no small role in making Wal-Mart a leading tech company for so many years.
Another quote related to innovation I liked is, "An outsourced environment is something set up to manage the cost of what you want to keep the same."
and that's why US cars suck ass compared to German ones. because, no, actually it is really hard to build a good powertrain. and this is what customers actually buy from you. your customers don't give a shit what you can do with your software unless it leads to better products for them.
but hey, IT stroke-fests are fun.
but hey, IT stroke-fests are fun.
GM builds the automatic transmissions for many BMWs. Clearly some Germans think that GM knows what they're doing.
Being a diesel fan, and a 4x4 enthusiast I am pretty familiar with transmissions from different vendors. GM and their Allison division are know for producing some of the most reputable transmissions available. Their TH400 line is a staple in drag-racing, off-roading and most any high power application. In high power applications it is a given that the GM TH400 will be the transmission selected even if it is a Ford or Mopar powered vehicle.
They are correct in their assumption that software more and more is becoming the defining factor. Software has improved the automatic transmission to the point where humans cannot perform as well as shift points being set by software. We are amazing creatures that can instinctually feel many variables but if you can account for all of those variables and more in software we can be outperformed. Power train technology has reached that point and even vendors like Ferrari have taken notice. Vehicle connectivity and automation is the next revolution. Moving parts will be reduced to a minimum as software controls replace mechanical control parts. It has been a long time coming but software has reached the point where embedded controllers are expected and do provide the longevity of the mechanics it is replacing. The process started a long time ago with fuel management but much like the PC revolution and the mobile revolution, the proper convergence at the proper time has not taken place in the automotive market. I think it may be here now, and I think the shakeup in Detroit was needed to bring it about.
They are correct in their assumption that software more and more is becoming the defining factor. Software has improved the automatic transmission to the point where humans cannot perform as well as shift points being set by software. We are amazing creatures that can instinctually feel many variables but if you can account for all of those variables and more in software we can be outperformed. Power train technology has reached that point and even vendors like Ferrari have taken notice. Vehicle connectivity and automation is the next revolution. Moving parts will be reduced to a minimum as software controls replace mechanical control parts. It has been a long time coming but software has reached the point where embedded controllers are expected and do provide the longevity of the mechanics it is replacing. The process started a long time ago with fuel management but much like the PC revolution and the mobile revolution, the proper convergence at the proper time has not taken place in the automotive market. I think it may be here now, and I think the shakeup in Detroit was needed to bring it about.
The article indicates that GM uses proprietary software to design powertrains. Therefore, good software is a competitive advantage.
It's true, software totally doesn't help with design at all. That's why no respectable car company uses computer-aided design, or computer-aided simulations.
Rule #1: Never lose sight of your product. If youn business name is "General <Motors>", for example. Or is it better to think of you as "General Mediocre Widget Producer, Software Enabled>? The latter doesn't sound like either a great operating or marketing strategy.
I hope that we can learn that when used correctly, IT is more than a cost center
I learned early on in my career that I only wanted to work for companies that look at technology as a source of profits. If a company sees the technology department as no different from the sales department, that was the company for me. It has been my secret to a happy career, later in my career when I had reached the level of an executive, I was a partner in a company that we exited to Hotels.com, when we did one of our business partners called me on the phone and asked me if I would entertain cleaning up their technology. I remember asking pretty bluntly, if I turn your technology department from a cost center into a profit center will you invest in it. Her response was along the lines of I would have to see it to believe it, but yes I would. We exited that company 2 years later. Moral of the story is, businesses can no longer afford to take the view that they are not a technology company, it has disrupted and infiltrated everything. For the majority of businesses technology is part of the game, if they are doing it badly they are not playing the game well, if technology is not in their market, it will be and if it's not a business can leverage that to their advantage now.
I learned early on in my career that I only wanted to work for companies that look at technology as a source of profits. If a company sees the technology department as no different from the sales department, that was the company for me. It has been my secret to a happy career, later in my career when I had reached the level of an executive, I was a partner in a company that we exited to Hotels.com, when we did one of our business partners called me on the phone and asked me if I would entertain cleaning up their technology. I remember asking pretty bluntly, if I turn your technology department from a cost center into a profit center will you invest in it. Her response was along the lines of I would have to see it to believe it, but yes I would. We exited that company 2 years later. Moral of the story is, businesses can no longer afford to take the view that they are not a technology company, it has disrupted and infiltrated everything. For the majority of businesses technology is part of the game, if they are doing it badly they are not playing the game well, if technology is not in their market, it will be and if it's not a business can leverage that to their advantage now.
Well, some software is.
If it's software that's in your product, or helps your product be produced more efficiently, and is a source of competitive advantage, you'd be foolish to outsource that.
The software that runs payroll, or general ledger? Feel free to outsource that.
If it's software that's in your product, or helps your product be produced more efficiently, and is a source of competitive advantage, you'd be foolish to outsource that.
The software that runs payroll, or general ledger? Feel free to outsource that.
Boeing technical fellow LJ Hart-Smith wrote an spot on paper about outsourcing, his point was when the work is outsourced all of the profits associated with the work will be outsourced as well. GM seems to have gotten this.
https://www.documentcloud.org/documents/69746-hart-smith-on-...
https://www.documentcloud.org/documents/69746-hart-smith-on-...
It's not about who does the work, it's about how the work is done. You need continuous delivery and tight feedback loops with the end-user. Outsourcing typically fails because of long iteration cycles and feedback through contract negotiation. An insourced IT department can fail in the same way. The successful outsourcing i've seen did two week sprints with a strong local product owner who spoke directly with stakeholders. The worst outsourcing i've seen was contracting out whole projects that spent six months building "stuff" to do a big bang delivery at the end. That's the model that people doing outsourcing prefer, and it's the model almost guaranteed to fail.
I do agree about the risk of outsourcing the core business, but outsourcing makes sense if it's not core, as long as you use the right model. Ironically you have to really know how to build software well to recognize which outsourcing partners are any good. The companies best equiped to outsource are least likely to because they are already in control of their IT processes.
I do agree about the risk of outsourcing the core business, but outsourcing makes sense if it's not core, as long as you use the right model. Ironically you have to really know how to build software well to recognize which outsourcing partners are any good. The companies best equiped to outsource are least likely to because they are already in control of their IT processes.
Of course, every hour you are asking of the stakeholders is an hour they aren't working. Many of these people prefer to work on a Maker's schedule as well.
I've also seen these stakeholder meetings devolve into political battles that end up tearing the project apart due to bikeshedding concerns. These sort of projects are best outsourced to Product Owners with no organizational political affiliations. :)
I've also seen these stakeholder meetings devolve into political battles that end up tearing the project apart due to bikeshedding concerns. These sort of projects are best outsourced to Product Owners with no organizational political affiliations. :)
This is coming full circle for GM - they, not long ago, bought EDS and had all of their IT run internally. It got so uncomfortable, they had to separate EDS out to not much avail because of the stranglehold EDS had gotten on GM's operations.
Having in-sourced IT can work, but it takes a lot of work to make sure you don't end up with just a boat load of B & C players that become complacent and work just hard enough to keep the status quo.
I suppose since GM has now experience both ways they can make it work this time. They are hiring many of the same old EDS (now HP) employees though [1] - hopefully they'll turn the old mindset around and be succesful in getting things done the way they intend to.
[1]http://online.wsj.com/article/BT-CO-20121018-712331.html
Having in-sourced IT can work, but it takes a lot of work to make sure you don't end up with just a boat load of B & C players that become complacent and work just hard enough to keep the status quo.
I suppose since GM has now experience both ways they can make it work this time. They are hiring many of the same old EDS (now HP) employees though [1] - hopefully they'll turn the old mindset around and be succesful in getting things done the way they intend to.
[1]http://online.wsj.com/article/BT-CO-20121018-712331.html
Long overdue. There are multiple layers of contractors and subcontractors living off the Big 3; 100M dollar corporations that do nothing but increase the rate on the billable hours. The amount of bureaucratic waste is astonishing.
[deleted]
“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.”
Slowly but surely, I hope that we can learn that when used correctly, IT is more than a cost center, it is a competitive advantage, even if you don't think your product is IT related.