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Offshoring pioneer GE to hire 1,100 American IT workers

By Stephanie Overby
August 22, 2011 02:16 PM ET

CIO - To those who know their IT outsourcinghistory, GE and offshoring are practically synonymous.

The colossal conglomerate -- which Forbes named the third largest company in the world -- first began offshoring IT and business processes to its own center in India in 1996. Even after spinning off its shared services division, renamed Genpact, in 2005, the offshoring pioneer has continued to aggressively pursue the costs benefits of outsourcing to third parties overseas. (GE maintains a minority stake in Genpact.)

But recently GE CEO Jeffrey Immelt has been touting the company's plans to hire 1,100 technologists and researchers -- not in Mumbai or Manilla -- but in Van Buren Township, Mich. In a recent interview with Bloomberg News, Charlene Begley, president and CEO of GE Home and Business Solutions and senior vice president and CIO, indicated that the offshore outsourcing model may have lost some of its luster for the $150 billion company.

"About 50% of the IT work was being done by non-GE employees," Begley told Bloomberg News. "That strategy may have had its time, but there was a lot of downside. We lost a lot of the technical capabilities that we have to own."

So is this trailblazer of the offshore outsourcing model reversing course? Not exactly, say outsourcing industry experts.

Hiring 1,100 technology workers is a large undertaking; if the company were outsourcing that many jobs to one provider, it would be considered a big deal. But GE employs 9,600 IT professionals in 40 countries around the world, according to Deia Campanelli, global communications leader for GE-IT. The company also has 3,000 to 4,000 IT roles outsourced to India, according to Ben Trowbridge, CEO of outsourcing consultancy Alsbridge.

GE would not confirm how many of its IT positions are filled by third parties offshore, but Campanelli did say that the professionals it's hiring to work at its Advanced Manufacturing and Software Technology Center will be filling new roles, not replacing the company's offshore workforce.

"In a prior decade, GE's strategic sourcing intent was to outsource 75% of their IT jobs and locate 75% of those jobs in India," says Trowbridge. "Hiring 1,100 IT professionals to work outside Detroit represents an effort to balance the percentage of staff that is outsourced and offshored."

David Rutchik, partner with outsourcing consultancy Pace Harmon, believes GE's decision to recruit local IT workers points to its desire to bring architecture, product and program management, and other strategic roles in-house to drive differentiation in products and services.

GE, like many heavy users of offshore outsourcing, may have begun to suffer the limitations of the offshore model. "Speed to market, flexibility, leveraging of resources across the enterprise--without all the statements of work and red tape [that accompanies outsourcing]--is something that is hard to quantify until you've lost it," says Adam Strichman, founder of outsourcing consultancy Sanda Partners. "The reality is that for IT to become a real differentiator in business, the personnel must be stakeholders of some kind."

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This story is reprinted from CIO.com, an online resource for information executives. Story Copyright CXO Media Inc., 2012. All rights reserved.
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