Szygenda: GM deal could have far-reaching impact on IT

Computerworld - General Motors Corp. CIO Ralph Szygenda said the company's outsourcing deal announced today will have ramifications well outside the company because of its insistence that vendors follow similar IT services standards.
"There really hasn't been standardization in the information technology industry -- it's an immature industry," said Szgenda in a conference call announcing the company's multibillion-dollar outsourcing deals with six vendors.

Ralph Szygenda, CIO General Motors Corp.

GM is requiring its vendors to follow standard practices for approximately 40 IT operations, such as software development, asset management, monitoring of computer operations and notification of users when there is a problem.
"I think some of [the vendors] will take these processes and use them on other accounts, and therefore it might help the IT industry," Szygenda said.
GM spent two years working to bring its vendors together and getting them to agree to similar processing standards, Szygenda said. GM is outsourcing about $15 billion worth of IT work over five years. Today it awarded contracts to six vendors, valued at about half that amount over that period (see "GM awards IT outsourcing contracts worth $7B").
It's not just GM's use of standards that will affect other IT outsourcing users, analysts say. GM's decision to hire multiple vendors for shorter contract periods will have a big impact as well.
"I think it will be influential," said Linda Scardino, an analyst at Gartner Inc. in Stamford, Conn. "We all have been watching and waiting to see what GM is going to do, and all indicators are they would pursue a multisourced strategy."
Scardino sees GM's push for standards as a big step toward the "industrialization of IT," where vendors use common processes to deliver services, much like the older manufacturing industries.
Robert McNeil, an analyst at Forrester Research Inc. in Cambridge, Mass., said GM's use of multiple vendors will give it flexibility, drive competition and manage risk. Another decision by GM that could sway other companies is the setting of five-year contracts, which could prompt other companies to set shorter outsourcing deals, he said. GM's initial agreement with Electronic Data Systems Corp., which expires this year, was for 10 years.
GM's deal is "the death of sole-source delivery -- it really does indicate this," McNeil said.
GM is building many of its standard practices around the IT Infrastructure Library, a set of best practices. Such a strategy will improve benchmarking of IT services, which could help reduce IT services prices, McNeil said.
GM's requirement that vendors cooperate with each other was a challenge sometimes, saidJim Angers, who manages Hewlett-Packard Co.'s business for GM. In working with other vendors, "you feel like you are sharing how you actually manage clients," he said. He added that HP needed to make it work "if we were going to have good transitions and great interconnects between the companies."