GM steers away from IT outsourcing

and more news for digital executives, by journalist Mitch Betts ▸ developments at UPS, L’Oréal, Lowe's, Kroger ▸ CxO jobs & appointments ▸

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CIO Randy Mott steers General Motors away from outsourcing deals — and public cloud providers

General Motors Corp. — in a dramatic IT transformation over the past five years — has gone from 35 different IT outsourcing agreements to zero, CIO Randy Mott said in an Aug. 15 presentation at IDG’s CIO 100 event in Rancho Palos Verdes, Calif.

“I think contractors and outsourcers impede success,” Mott said. “They have a very vested interest that’s hardly ever aligned with what you’re trying to do with your company.”

The result of this insourcing: IT now delivers about 10 times more business value and innovation than was produced with outsourcers, because the internal employees are 100% focused on GM’s business needs, he said. “It's really hard to do that if you're not part of the fabric of the company.”

Mott said he had a lot of experience managing large offshore outsourcing agreements in his previous CIO roles at Hewlett-Packard and Dell. “I knew how to do it really well, and ‘really well’ sucked.”

Five years ago, the automaker’s IT group had 1,400 employees and 20,000 contractor employees (the latter from those 35 outsourcing agreements); today, GM’s IT group has 9,500 employees, all wearing GM badges, he said.

More than 80% of those 9,500 IT employees work on innovation, Mott said, whereas 75% of the contractors had been working on “run” (or, operational) tasks, “which as I remind my team is not very exciting — thinking about how do we make sure that today is just like yesterday — not exactly what you can get people motivated around.”

To grow from 1,400 to 9,500 internal IT employees, GM decided to hire a mix of experienced IT professionals and 3,000 graduates from colleges with strong computer science programs — all in the U.S. Also, about 3,000 employees from the largest outsourcer were converted to GM employees. The IT employees are located in four innovation centers: the Detroit HQ; Austin, Texas; Roswell, Ga. (near Atlanta); and Chandler, Ariz. (near Phoenix).

“There were plenty of folks in the company who said this isn't going to work … you're not going to be able to attract IT people to General Motors,” Mott said. But plenty of IT professionals were interested in the GM’s big plans for insourcing, innovation, and business transformation, he said, “so we actually exceeded our goal in terms of how fast we were able to attract talent.”

Part of the IT transformation included implementing a private cloudbut not embracing external cloud service providers. “When I talk about cloud, I'm not talking about going to the outsourced clouds. I'm not going there. I just spent six years getting out of that; I'm not going back,” Mott said.

Private cloud technologies allow GM to spin up new environments quickly, automate development tasks and other processes, and integrate legacy systems internally without dealing with external providers. “I happen to think that, if you have any scale at all, it's easier to do that yourself. And it's about a tenth of the cost [of external providers]. No kidding.”

Mott noted that he wasn’t given a big check to pay for GM’s IT transformation — it was on a self-funding basis each year. That meant reducing contractors to pay for hiring new employees; consolidating 23 data centers into two; streamlining the applications and tools portfolios; and automating tasks to reduce costs. “Each action needed to save money before you could then invest money; it was really a balancing act that required day-to-day decisions by IT leadership,” Mott said.

Insourcing allowed Mott to automate IT processes that had been handled manually by the outsourcers. “There's no incentive among the outsourcing community to automate anything since they charge you by the head,” he said.

The transformation included a battle against redundancy and complexity. For example, because of the numerous outsourcing deals, “there were 17 different tools for just something as simple as tracking tickets on systems that have problems,” he said, but with insourcing GM could move to a single ticket system.

The move away from IT outsourcing was key to Mott getting the GM job in February 2012, he said. Mott recalled that “Dan Akerson, who was CEO at the time, said something like this: ‘We're 90% outsourced. Our competition is roughly 30% outsourced. Either we’re brilliant or not. And oh, by the way, we’re the ones that went bankrupt.’ He was a very strong believer that IT is a competitive part of the company, based on his background, and felt like in order to really drive the business transformation, we really needed to take control of the IT. So if it wasn't me, it would’ve been somebody else that would have that mission.”

Who’s doing what

United Parcel Service Inc. (UPS) launched Ware2Go, a new technology company and cloud-based platform that matches available warehouse space and fulfillment services with merchants who need to get online orders to customers fast, according to Scott Price, chief transformation and strategy officer. “We’re solving for two major problems: speed to market and efficient warehousing,” he said in a statement. The offering guarantees two-day delivery by UPS.

Construction companies and other industries are increasingly using drones — instead of expensive and bulky helicopters — for tasks that involve inspections, measurements and marketing images. “On building sites, drones are saving money and time by providing digital images, maps and other files that can be shared in a matter of minutes.” — Nick Madigan, The New York Times

Beauty company L’Oréal Group and its recently acquired ModiFace unit announced a long-term collaboration with Facebook that allows consumers to “try on” makeup with augmented reality experiences delivered via Facebook Camera. “Facebook and L’Oréal share the vision that augmented reality is becoming key for product and brand discovery and purchase,” said Lubomira Rochet, L’Oréal’s chief digital officer, in a statement.

The Kroger Co. plans to open a retail tech innovation lab within the University of Cincinnati’s new 1819 Innovation Hub facility, according to a statement by Kroger CIO Chris Hjelm. The innovation lab will include Kroger R&D engineers and software developers, working alongside university faculty and students. “Our vision is to create a talent pipeline that supports our business and positions the region as a place for digital and technology students and professionals,” Hjelm said.

Engine maker Rolls-Royce Holdings plc is developing tiny, camera-toting “swarm robots” to crawl around the insides of an aircraft engine and provide a rapid visual inspection for maintenance issues, without having to remove the engine from the aircraft.

Joann Stores LLC, a fabric and craft retailer, plans to deploy the ShopperTrak in-store traffic analytics system in the company’s 870 stores. The goal is to “identify [in-store] traffic patterns to ensure the right number of team members are available at the right times to offer service and sales in each store,” a vendor statement said.

Saint Louis University in Missouri will put over 2,300 Echo Dot smart speakers (enabled with Amazon's voice assistant Alexa) in every dorm room on campus. The Echo speakers will be operated through Alexa for Business, so they won't be linked to students' individual Amazon accounts, but run through a central university account. Each speaker will be equipped with custom programs (known as “skills”) that let students ask over 100 questions specific to the campus. For example, students wondering “What time does the library close tonight?” can ask Alexa rather than call a faculty member or search online, said the university’s CIO, David Hakanson. — Ali Montag, CNBC

Talent: jobs, appointments, careers

Lowe's Companies Inc. — amidst a C-suite shakeup under new CEO Marvin Ellison — is seeking a new CIO, Ellison said on a quarterly earnings call. The company's former CIO Paul Ramsay departed near the end of July, according to a Lowe's email to CIO Dive.

Men’s apparel company Tailored Brands Inc., in Fremont, Calif., named Richard Hansen as SVP for strategy & analytics; and Samantha Lee as chief digital officer.  The company, which features brands such as Men's Wearhouse and Jos. A. Bank, said that Ben Baum, EVP for customer experience and chief digital officer, “is leaving to pursue another role.”

Derek Kramer was recently appointed VP & chief digital officer at American Electric Power (AEP) in Columbus, Ohio. He reports to Lana Hillebrand, EVP & chief administrative officer. Kramer, 42, was previously CIO for Service King Collision Repair Centers.

Recently appointed CIOs: Paul Wilson, at Farmers Insurance in Woodland Hills, Calif.; Steve Phillips (a member of the CIO Hall of Fame) at systems integrator Alorica Inc. in Irvine Calif.; Sue Kozik at Blue Cross and Blue Shield of Louisiana in Baton Rouge; Colin Schneid at Sara Lee Frozen Bakery in Oakbrook Terrace, Ill.; John P. Repko at American International Group Inc. (AIG), succeeding Martha Gallo, who is “leaving AIG to pursue other interests.”

Rob Mills was promoted from SVP & CIO to EVP & Chief Technology, Digital Commerce and Strategy Officer at Tractor Supply Co. in Brentwood, Tenn.

Job openings for digital executives in the healthcare industry: CTO at St. Luke’s University Health Network in Allentown, Pa.; CIO at Valley View Hospital in Glenwood Springs, Colo.; CIO at Sheppard Pratt Health System in Baltimore.

People recently appointed to CEO positions after serving as a CIO earlier in their careers: Sasan Goodarzi at Intuit Inc. in Mountain View, Calif.; Paul Cook at CoastHills Credit Union in Santa Maria, Calif.; Suresh Gunasekaran at University of Iowa Hospitals and Clinics, in Iowa City; Jamie Holcombe at Visium Technologies Inc., in Fairfax, Va.