In this newsletter we do an analysis of GM’s new IT Transformation plan to give the reader an example of how the IT Maturity Method can be used to both evaluate and dramatically improve an IT organization. While the detailed internal operations of all IT organizations are kept private, and thus a detailed IT Maturity Method assessment cannot be provided, GM’s recent release of their general strategy does provide an opportunity for the reader to see how usage of the IT Maturity Method would dramatically improve a macro level IT Transformation plan.
InformationWeek discusses General Motor’s new IT Transformation plan (http://www.informationweek.com/news/global-cio/interviews/240002892?pgno=1) in its July 9, 2012 issue. They outline seven initiatives. In this newsletter we do an analysis of each of the initiatives from an IT Maturity Method perspective.
Initiative #1 In-sourcing 90%
The first initiative is to change their outsourcing model from 90% to 10%. In Crain’s Detroit August fifth issue (http://www.crainsdetroit.com/article/20120805/FREE/308059966/it-insourcing-earns-gm -praise-but-no-trend-expected#), Frances Karamouzis, a vice president and analyst for New York-based Gartner said that “Thirty to 65 percent is what I call the safe zone” for outsourcing. In the same article, Bruce Belzowski, an assistant research scientist with the Transportation Research Institute at the University of Michigan, states “We always thought GM was revolutionary in its outsourcing. What happened to cause one person to say, ‘We need to bring it back in’? Are IT strategies that flexible?”
From an IT Maturity Method the question is not whether to outsource or not, but rather what and how to outsource. Further, the GM IT Transformation makes a critical characterization blunder, they discuss all in-sourcing from a software development perspective. IT’s business is NOT software development, it is instead Business Enhancement. The concept of IT as software development is archaic, and was of importance decades ago when software was just starting to be understood. Today there are an untold number of exceptional Commercial Off The Shelf (COTS) IT systems available for almost any activity. The challenge today is finding the right combination of (and integration of) COTS and IT systems to enhance the different processes of significance to specific business endeavors.
While, there are always good reasons to keep some IT and software activities in-house, there are also many reasons to outsource. Number one being that software development is NOT the primary business of most organizations. GM moved away from in-house software development many years ago for this very reason. GM does not stand for General Software, but rather General Motors.
Further, GM is responding incorrectly to the problem they are experiencing. They are running into issues managing vendor relationships, or more appropriately “Vendor Integration”. In response they are swinging the pendulum back without moderation, where they should instead be looking at how to do Vendor Integration better.
Jim Ditmore’s summarizes a number of the pluses and minuses of in-sourcing and out-sourcing in his article Why IT Outsourcing Often Fails (http://www.informationweek.com/news/global -cio/interviews/240003659?pgno=1). An excellent example on how to better integrate vendors is provided in his article, in it he relates how he helped a business move from one poor performing vendor to two competitive vendors. In some sense GM tried this when they moved from EDS as a single vendor to a multiple vendor model several years ago. Unfortunately, even with GM’s change to a multiple vendor model there were still many vendor integration issues. This was partially due to how GM organized the move to multiple vendors. Instead of having multiple vendors for specific business processes, vendors had monopolistic ownership for specific business processes. As opposed to fixing this and other Vendor Integration issues, they are running back into the old in-house model they had decades ago of all software being in house, which many year ago, they already learned, did not work.
In IT Maturity Newsletter #17 (http://theitmm.com/News/Outsourcing/outsourcing.html) we go into greater depth on the WHAT and HOW of outsourcing and how to do Vendor Integration effectively.
GM is still acting like a behemoth in trying to go back to managing every line of code of development. No company can afford to behave that way anymore. Companies need to master integration with other entities to survive in today’s rapidly evolving environment. While other companies are moving to clouds and services to handle common, non-critical software related activities such as payroll, GM is announcing a doomed full speed move in the opposite direction.
On the positive side GM is recognizing that they have an issue with too much outsourcing and that they need to bring IT activities in-house for innovation reasons, which is praised by many in the above cited Crain’s Detroit article.
The fix this GM should create processes around the WHAT and HOW of Vendor Integration such as discussed in IT Maturity Newsletter #17 as mentioned above.
GM has announced more details of their transformation (“Why GM’s Hiring 3,000 IT Pros From HP”). This includes 1) the hiring of 3,000 supplier employees; 2) purchasing software for: infrastructure monitoring and management, information security, data management, analytics, and portfolio management; and 3) “service contracts with GM to help the automaker with its data center consolidation, legacy application modernization, and security-related projects”.
Thus, from a pragmatic perspective the model of moving from 90% outsource to 10% in-source appears to being bent. Service contracts clearly indicates a significant investment in retaining outsourced expertise. The purchase of software also indicates a reliance on outside expertise, as maintenance and consulting usually are included.
As Mott is well familiar with HP’s suite of services and software, it is not a surprise that he recognized the value of using external expertise in the areas mentioned above. If this same insight is applied to innovation areas such as “working with business units to craft IT-powered projects” he will recognize that there are many external sources that can be similarly leveraged. Then, the 90-10% model will be broken in those areas also. In IT Maturity Newsletter #15 we discuss numerous different types of innovation areas besides generic IT and business unit/function. If this insight is extended to these other areas the 90-10% model will be broken across the board.
Initiative #2 Centralized Data Warehouse
Their Data warehouse consolidation initiative has significant flaws due to a similar focus on the IT world of the past. In today’s world there is geometrically more data, as well as more sophisticated tools for analysis than in the days when Randy Mott (Current GM VP of IT) consolidated Walmart ’s data. Data and associated analysis tools cannot be, and should not be forced to be 100% consolidated.
Much data of value to analyze exists on the internet, such as in social media. Further, manufacturing plants and other parts of business entities are gathering far too much data to consolidate everything in one location. While Mott’s vision of doing analysis across all of this data is admirable, a lack of understanding of the complexity of today’s data is obvious. Data models of today and associated analysis can be at most federated.
On the positive side GM is recognizes that they need to integrate data. The negative side is that they don’t know how to do it in today’s rapidly changing world.
To fix this GM should enhance their approach via the usage of federated data analysis.
Initiative #3 Portfolio Management
Another example where the IT Transformation plan identifies the correct problem but has an old school (and flawed) solution, is the desire to analyze every IT request from a business value perspective. The supposed introduction of excessive bureaucracy mentioned by many of Mott’s critics , while of concern, is not of greatest significance.
The book Leadership Improvement: The IT Maturity Method (http://www.amazon.com/Leadership -Improvement-The-Maturity-Method/dp/1478120835/ref=reg_hu-rd_dp_img) discusses how organizations can and should be creating strategy in near-real time. Mechanisms are laid out to insure that every process team is advancing best in class solutions. The largest gap in Mott’s solution is that this is not happening. The analysis of advances should not just be of whether value is being provided, but rather that BEST value is being provided. In only this way can organizations stay ahead of their competitors.
To fix this GM should identify BEST value solutions in near real time via methods such as the IT Maturity Method.
Initiative #4 Data Center Consolidation
In the fourth initiative GM plans on consolidating Data Centers, with two major centers in Michigan and five cache centers around the globe. While as a standalone plan this is exemplary, it is what is missing that shows a significant weakness.
There is no mention of public or private clouds. Neither is there mention of how they are trying to advance their data centers within plants and other decentralized facilities. There is dramatic work going on in the industry with respect to data center transformation, yet the GM IT Transformation plan only appears to be focused on one slice.
To fix this GM should seriously invest in identifying clouds, software as service, and strategies for decentralized data centers. Examples of how to do the later are included in Online IT Maturity Method Leadership Improvement Training (http://theitmm.com/Training/Online_Training/online_training.html).
Initiative #5 Application Consolidation
Like data center consolidation, GM’s IT transformation initiative for application consolidation is exemplary. However, again the fault is in what is not mentioned. Utilization of emerging new IT tools is not mentioned. No room in the application consolidation plan is made for the occurrence of rapid innovation within IT and the fact that application portfolios will need to expand to take advantage of this. While a primary benefit for GM in-sourcing mentioned above is innovation, which has the implication of taking advantage of new IT applications, there is no consistency with the application consolidation plan. The discussion is only of reducing the number of applications by 40%.
Identification of new IT applications includes in-house innovation, as well as integration with external innovations. Types of innovation (or critical differentiators) are discussed in greater depth in IT Maturity Newsletter #15 (http://theitmm.com/News/Innovation/innovation.html).
To fix this the IT Maturity method can be used to identify IT application innovations across a broad spectrum of types of innovation.
Initiative #6 Hiring
While it is critical for any enterprise to bring new blood with new ideas in on a regular basis, it is also critical to retain strong bases of domain knowledge in workforces. While GM’s plan is intended to bring almost all domain knowledge in-house, the interim effect will be to lessen domain knowledge as many individuals vendor teams will be transitioned out. The plan is too dramatic (10% in-house to 90% in-house) to have the desired effect in the short or even mid-term.
More importantly the model they proposed was to go to prestigious schools to do their hiring. New entries into IT from academia are unlikely to have a strong base of domain knowledge which is one of the critical goals of the stated IT Transformation. Domain knowledge exists in a broad diversity of external vendors, consultants, and academia. Additionally, external vendors are coming up with exceptional new Commercial Off The Shelf (COTS) Software focused on specific domains on a regular basis, effectively embodying dramatic amounts of domain knowledge. Any hiring strategy needs to take all of this into account.
Hires should be made based on domain knowledge with respect to both business processes and innovation opportunities. Hiring also needs to take into account what knowledge can be leveraged more effectively from external sources. If a COTS tool has been built by a team of Ph.D.’s it is unlikely that any number of hires could duplicate and maintain that level of domain knowledge. It would be much more advantageous to leverage the domain knowledge within the COTS tool.
The IT Maturity Method can be used to improve this. Details can be seen in the book Leadership Improvement: The IT Maturity Method referred to above.
GM has announced more details of their transformation. This includes the hiring of 3,000 supplier employees. While many wonder whether utilizing old resources for new innovation makes sense as typically workers keep old habits, the fact that new resources will be balanced out with old resources is highly beneficial. While this is still a far cry from identifying the right resources for the right activity, it is an improvement upon what was initially released.
Initiative #7 Software Centers
Like hiring, GM’s IT Transformation plan to have three or four software development centers in the US does not take into account domain knowledge appropriately. Centers need to be oriented around where domain knowledge is, not just blind guesses on where generic IT experts are situated. As GM’s primary business is automotive design, manufacturing, and sales, any internal software development needs to be closely aligned with the associated internal business process contacts they work with. Thus, a Michigan software development center is obvious.
With their Software Center plan it is clear that GM hopes to leverage innovations in IT that might line up with innovations in their different business lines. However, the plan has the cart before the horse. It is innovations in business lines that need to be identified first, then appropriate development centers can be identified.
As mentioned in IT Maturity Newsletter #15 innovations can be in business processes, products, services, manufacturing, supply chains, and distribution chains. As different innovations in these areas are identified, associated IT expertise and domain knowledge is likely to be located in diverse geographic areas. It is this expertise and domain knowledge that needs to be leveraged. If a specific geographic area has a significant amount of this expertise than a software development super center like that in Michigan would make sense. However, guessing that this will happen is presumptuous. Based on where the innovation evolves, it is equally likely that numerous distributed Software Centers would make sense.
To remedy this the IT Maturity Method can be used to identify innovation as discussed in IT Maturity Newsletter #15.
With the above IT Transformation plan GM looks to be behaving like the big behemoth of the past that failed. To be successful in today’s emerging IT world any business should not rely upon the old models of the past, old thinking of the past, or leaders who are stuck in the solutions of the past. New solutions such as The IT Maturity Method should be embraced.
To fix this GM can use the IT Maturity Method (http://itmaturity.com) including all of the fixes mentioned in each of the above individual initiatives. In this way GM can transform not only their IT organization, but more importantly the larger enterprise.