October 05, 2012, 12:38 PM — GM's announcement that it will bring most of its IT work back in-house over the next three to five years was certainly a dramatic about-face for the automaker, which was an early adopter of outsourcing and offshoring.
Former GM CIO Ralph Szygenda's "third wave" of outsourcing is being replaced by new CIO Randy Mott's first generation of insourcing, resulting in the $150 billion company's hiring--or rehiring--10,000 technology professionals.
"GM seems to index far to one side or another--first being a major outsourcer to one primary firm, then creating a very public multi-vendor environment with shared responsibilities and risks, and now actively espousing [its] insourcing decisions," says David Rutchik, a partner with outsourcing consultancy Pace Harmon. "These [moves] grab attention but need to be right for the business goals."
"Most other car operations have this capability and it is not surprising that GM would follow this direction," says Peter Bendor-Samuel, CEO of outsourcing consultancy Everest Group. "What is surprising is the [scale at] which they are attempting to do this."
Manufacturing CIOs Look to Shift the Mix
While most companies may not be making such major insourcing moves, many CIO are reconsidering the outsource-insource mix, particularly in the manufacturing industry.
"Manufacturing will be an interesting area to watch over the next few years, because we are hearing a lot about insourcing among the big manufacturers," says Cliff Justice, principal in KPMG's shared services and outsourcing advisory. "We're talking to many companies that are considering some large-scale insourcing, because they believe they need better access to the innovation engine of technology."
Will they scrap all of their incumbent outsourcing deals? Not likely. But, says Justice, "they will focus on partnerships that drive innovation, new technologies, and competitive advantage into the organization, as opposed to just low-cost commodity outsourcing done principally for labor arbitrage."