GM bets on insourcing, brings back 10,000 IT jobs

By Stephanie Overby , CIO |  IT Management, General Motors, outsourcing

There's a big potential upside to GM's insourcing effort--if managed correctly. "Higher productivity, lower management burden, reduced travel costs, improved quality, reduced 'rework,' increased convenience of shared working hours, and better cultural fit are all tangible benefits experienced by organizations that have repatriated roles," says F.B. Mack, director of operations for outsourcing advisory Sylvan Advisory.

"Being able to generate some positive public relations buzz is not a bad intangible benefit either," says Mack. (And that's no small benefit given the company's struggles in recent years and its continued partial ownership by the U.S. government.)

So why doesn't everybody do it? The cost.

[ Slideshow: Bringing IT Back Home: 10 Prime Locations for Onshore Outsourcing ]

"Insourcing offshore can be done cost effectively," says Pace Harmon's Rutchik. "We're a bit dubious that GM can bring in resources in the U.S. at a price point that makes sense." The transition recruiting, and hiring costs will add up quickly. Then there's the knowledge transfer.

But a strategic IT function should never be judged on cost effectiveness alone, but rather by other measures including productivity, business alignment and innovation.

"Costs can certainly be measured, and we expect them to be higher," says Rutchik. "The question is whether productivity, innovation and agility can be translated into [outcomes like] better vehicles and more sales."

That may be easier to do in certain areas of the IT function-the computer-aided manufacturing systems that drive produce design. "Insourcing could be proven to be worth it if it drives faster design turnaround, and higher quality and better selling vehicles," Rutchik says. "It's a big if, though."

Managing IT Change at GM

Change management will also be a big task, as Mott must transform and IT organization used to managing contracts to one capable of managing IT delivery, says Bendor-Samuel of Everest Group.

And the benefits will be years in coming, which could be difficult for business partners with an appetite for quick returns.

While most IT leaders who bring certain IT functions back in house tend to focus on core competencies like architecture, design and relationship management, GM says to-hire list includes everything from developers and testers to PeopleSoft wranglers and messaging engineers.

Originally published on CIO |  Click here to read the original story.
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