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back to article GM to slash vast outsourced IT empire

You fire me? I'll fire you! It ain't that simple really, but GM CIO Randy Mott, sent into the cold, cold outside by HP's then CEO Leo Apotheker from his HP CIO post, has announced GM will stop outsourcing IT, bringing it back in house. The big loser? HP. Chief Information Officers (CIOs) control IT spend and Mott, the arch- …

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gov.uk

should take note. I would rather our taxes were spent employing competent UK staff than supporting overseas companies.

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Re: gov.uk

Damn right. And our police force should drive nothing but Rovers, their uniforms should be weaved on looms in Manchester's cotton mills, their computers should all be from Amstrad or Evesham Micro. Never mind the cost or quality, what matters is British jobs for British people!

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Anonymous Coward

Re: gov.uk

I would rather our taxes were spent employing competent UK staff rather than supporting incompetent UK companies (e.g. CRAPITA, G4S and a host of others).

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Anonymous Coward

Re: gov.uk

As one of the staff who was outsourced by gov.uk two employers ago and is still working for one of the outsourcers employed by gov.uk I am keenly aware that they were the $EXPLETIVES that were happy to get shut of me way back when. I sometimes get embarrassed at waste and inefficiency that we would never have got away with when were paid directly out of the public purse, but then I remember that this was what gov.uk wanted and lo and behold it's what they got.

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Re: gov.uk

They might struggle to drive Rovers sadly but I see no reason at all why Cheshire East PCs are swanning about in Hyundais when Vauxhall is nailing Astras together in Ellesmere Port and Toyota and rolling stuff out two counties over in Derby.

Likewise why are we having BMW motorways vehicles when depending on model JLR can supply from Halewood or Birmingham?

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Anonymous Coward

Re: gov.uk

"They might struggle to drive Rovers sadly "

Not as much as you might think. One of my neighbours works for MG, and is pootling around in a rather smart looking MG6, a derivative of the old Rover 75. A Wiki on MG6 will give you the details.

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Re: gov.uk @Buzzword

"Damn right. And our police force should drive nothing but Rovers, their uniforms should be weaved on looms in Manchester's cotton mills, their computers.... "

So once we've offshored the remaining manufacturing, and closed down the City because it's rapacious nature can't be trusted, where exactly will the money come from to pay for all the imported goods and offshored services?

There is a balance in all of this, because we couldn't efficiently meet all of our own needs. But offshoring back office work done in the UK rarely saves any money for a number of reasons:

1) Wage arbitrage savings touted by salesmen and "management consultants" are usually entirely eroded by the vendor profit margins, and lower labour productivity in offshore locations. Admittedly this only becomes apparent in the later years of the contract, when the back end loading kicks in, and the costs to the buyer exceed their pre-outsource cost by around 40%, but by then everybody involved in the original outsource decision has pocketed their cash and moved on, and there's nobody to blame.

2) Even if you could deliver wage arbitrage savings, with a significant unemployment and under employment problem, losing any back office jobs results in more people claiming benefits (be that jobseekers allowance, "disability" allowances*, housing benefit, etc). Then you've got the lost income and payroll tax revenues to the Treasury for offshored jobs. Further you've got the bureaucracy to pay benefits, and to pretend that people can be found new jobs. I'll ignore non-accrual of pension contributions, but that's worth a few additional thousand quid a year that somebody will have to make up, or do without. As a ball park, we're talking an average cash cost to the taxpayer of around £15k a year for every job that is offshored, and a loss to the economy of that plus the reduction in net domestic spending of an employed individual versus an unemployed individual - perhaps worth another £10k.

* Yeah, there's genuinely disabled people who need to be supported. On the other hand we've mysterously got twice as many disabled people as other developed nations.

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RE: Re: gov.uk

I voted your whiny ass down before I realized that your <sarcasm> tag got eaten up by the forum software.

Sorry.....

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FAIL

Let us centralise all our support into just 2 locations...

...what can possibly go wrong?

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K
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Megaphone

Re: Let us centralise all our support into just 2 locations...

Umm a lot less than using a dozen external companies that can't communicate, don't speak the same language or simply take your custom for granted!

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Anonymous Coward

Re: Let us centralise all our support into just 2 locations...

It's standard best practice, prod and dr sites, with a 1:1 mapping of prod to dr services.

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Re: Let us centralise all our support into just 2 locations...

Except that HP don't have just two production sites. They have dozens which will mostly NOT have local support.

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FAIL

Re: Let us centralise all our support into just 2 locations...

Everything will go wrong. I've worked with General Motors. They are a very screwed up company that puts cutting costs ahead of quality. Trust me, this is the beginning of the end.

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Re: Let us centralise all our support into just 2 locations...

> "Except that HP don't have just two production sites. They have dozens which will mostly NOT have local support."

"Production site," in this case, doesn't mean "manufacturing." In the IT world, a "production site" (or "production system") is the one in operation at the time. "DR" is the "disaster recovery" site, which maintains backup copies of all data and services, to be brought online should something happen to the production site.

As for support, it depends how they choose to manage that. Typically, data centers do not house first-tier support. With international companies, it is typically best for tier one to remain near the end-users, so they speak the same language and are familiar with the local processes, and have higher (more advanced) tiers more centrally located; end-users rarely interact with data center personnel.

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BillG Re: Let us centralise all our support into just 2 locations...

I had a great experience with GM while working on the initial OnStar rollout. If you're just a software dev I can see you not having a good time but when I was working with them they gave me all kinds of freebies on top of not insignificant pay.

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Re: Let us centralise all our support into just 2 locations...

Reading articles and posts on this over the years, it seems to me that outsourcing doesn't tend to work and 'insourcing' often fails to work too (perhaps less badly than outsourcing, but still - not exactly inspiring to think that insourcing could be 'less bad' than outsourcing: bad is bad). But outsourcing and insourcing *could* be (and occassionally has been) done well. So the question is, what's the actual problem? Studies always point at "mismanagement" and "incompetence" but how come these are allowed to happen - repeatedly? Is there a whole network of kickbacks, corporate infiltration and bribery going on that is kept quiet? It'd explain things better than "people are incompetent", because that doesn't say why incompetence is getting so richly rewarded.

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Anonymous Coward

Re: Let us centralise all our support into just 2 locations...

"They are a very screwed up company that puts cutting costs ahead of quality."

I don't know GM but if that is true then Randy will feel like at home. That's exactly what he did in HP, with very high success rates (measured with his and his friend Mark multi million bonuses)

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Re: Let us centralise all our support into just 2 locations...

How are Dev and Test handled though? Hopefully not on the same systems that are running Production...

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Unhappy

Re: BillG Let us centralise all our support into just 2 locations...

@"Don Jefe" I worked as a vendor, so I got to see that parts they could have purchased, verses the crap quality parts they actually purchased.

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Re: Studies always point at "mismanagement" and "incompetence"

Both are prime examples of the Seagull Management Style[1]. Unfortunately, when the "seagulls" decide to make their nest in a company, only determined, and vigorous use of seagull repellent will stop the damage from occurring.

[1] Seagull Management Style: A "mangler' (or its synonym: 'damager') arrives to work a new company. In short order, damagement lackeys that used to report to the mangler at the old work location get hired at the new company. Thereupon, these "seagulls" begin to shit all over the new company, causing financial ruin. This process of "shitting all over" continues until, a) the owners of the company get wise and evict the "seagulls", or b) the "seagulls" find a better place to shit, or c) the company goes under. Heaven help the company, and the employees left behind.

HP can rightfully say that it has been the subject of more than one seagull attack. So the hell can Yahoo!

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Outsourcing IT may look pretty sweet but really never works. I worked in the NHS for a while and if you wanted a desktop fixed, ring company1, if something else went down ring company2 who would then share a contract with company3 and blame it on them. Circles and a load of downtime which you would not have had on an in-house system and a load of users thinking you are an idiot because all it needed was a restart. Want a spelling changed in an app? That will cost you £30k. Thats the efficiency of outsourcing.

The only times I could think you would want to Outsource is if you simply cant get the technical abilities in house or for something incredibly static which won't change like email.

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Anonymous Coward

I disagree

Outsourcing does work quite often, it's just you rarely hear about the successes because that's not news. There are two scenarios where outsourcing is good:

1) Tiny company who needs IT, but can't afford or justify an FTE to keep it up and running.

2) A large company where a non-core service, which is totally understood by the in house people managing the contract. (Facilities Management is a classic example, hardware support would be another.)

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Re: I disagree

Thats practically what I said, its ok in specific scenarios. Once you reach a certain size however it normally makes no sense at all because you are less likely to require a static system (more users = more chances even if the chances are small).

Outsourcing in other areas falls flat on its face too (experiences from both private an public sectors below):

Cleaning -> we had an increase in theft after outsourcing as it was a variety of people coming in and out so it was hard to prove who it was

General Maintenance -> Suddenly having to get 3 quotes to get a lightswitch changed, more expensive for the common jobs

IT -> Slower support response times, more poorly trained staff -> worse user experience -> expensive change requests -> less flexibility

Care Assistants -> Due to employee terms being reduced (£7/hour, no sick pay, no pension) high turnover of staff leading to much worse care quality for people who required care

I really could real them off. I am not saying it can't work but it often doesn't make sense once you reach a particular size. This is the same regardless of the size of company. For example where I work we Outsource the management of our PABX - this makes sense because we only have 100 phones to manage and we couldnt justify keeping all the spares and experience in house.

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Re: I disagree

"Outsourcing does work quite often"

Payroll is a classic example. Anyone who has worked on payroll will tell you it is a pain. It has to be 100% right or people get upset and you start to dread new budget day rules which can mean that no matter how much you have parameterised the thing you might have to rewrite chunks of it.

It is best left to companies who specialise in payroll.

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Anonymous Coward

paradigm shift and bellend in the same sentence

being as lazy consultant strategists make their money just doing what some large corp has just decided is their strategy , this will be the big paradigm shift the bellends will be trumpeting.

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IF it works it will be great.

I never really understood why anyone thought core applications were best handled by a third party who had little or no investment in the business. Especially when sloppy contracts meant they were positively incentivised to provide a bad service.

lets hope its a start of a U-turn.

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Anonymous Coward

positively incentivised

Excuse me whilst I continue vomiting in the corner...

Now can we stop with this management lingo crap and get back to "normal" English.

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Joke

GM tp buy HP

http://www.scribd.com/doc/52801884/GM-EDS

http://www.independent.co.uk/news/business/computer-colossus-looks-to-life-after-spinoff-from-gm-1335327.html

Funny old world.

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Same trick, same ideas, same result

I think the tenure of Mott as HP CIO can be described as the dark ages of HP IT. Having all datacenters located in the U.S. gave every location outside the states a complete new experience of the term "latency", Which doesn't exist in Mott's dictionary. And the overall motto was:" We're not happy as long as you're happy". No IT service was safe from getting screwed, even if it cost the businesses millions. As long as Mott could pretend to safe some millions more: business is irrelevant. It'll be interesting to see if he's got the power to break the IT solutions responsible for car production. Would be inline with the HP experience then..

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Anonymous Coward

Re: Same trick, same ideas, same result

True, but you have to put that at least partially on Hurd. Hurd told him to slice the HP IT costs in half, even after prior cuts to HP IT. The irony is that Hurd was arguing that HP's customers should increase their IT spending even while he was drastically cutting HP's own IT spending.

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Anonymous Coward

Re: Same trick, same ideas, same result

Mott shit on our internal IT so bad we had entire groups "off the grid" and doing self-support because it was the only way they could get their job done.

I'm sure he was encouraged by Hurd... maybe persuaded is a better way to put it, but having known GM indirectly for years, and knowing how dysfunctional they are, odds are this is going to be ugly. Probably not publicly either.

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Coat

A Grand Mott?

"We got several billion from the taxpayer! I suggest we use them!"

"Don't be too proud of this governmental terror you have created! GM’s pension obligations remain a concern. The shortfall has increased to $24.5 billion from $21.4 billion a year ago. How are we going to reduce the outlays to our suppliers?"

"Fear will keep the suppliers in line. Fear of insourcing!"

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Anonymous Coward

Mott did a great job

He was so good that $orkplace stopped buying HP - and we spend a few million per year on IT.

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Anonymous Coward

Not that I like the guy

...but Mott was our CIO. He was in charge of our internal systems (i.e. the IT infrastructure that HP employees use to do their jobs) - not the Enterprise Services division (the part of the company that does outsourced IT for other companies).

If you're not HP it's unlikely he had any direct impact to you, and if you were a Services client you can point at the CEO (Hurd or Leo probably) and the head of ES (probably Anne Livermore) - not Mott.

Of course, Mott and his crew would occasionally stick their nose into client conversations to tell everyone how clever they are. If we (ES) delivered Mott quality IT to our clients we'd have no business at all. You guys might have had a bad experience with us, no doubt - it happens, and for all sorts of reasons - but unless you had users rebuilding machines "off grid" because their IT was such shit that they couldn't function otherwise... you didn't get Mott quality service.

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loop counter ?

step 1. Save money on IT by outsourcing (& pocket management bonus)

step 2. Save money on IT by bringing back inhouse (& pocket management bonus)

step 3. Repeat steps 1 & 2 until costs approach zero. (& buy bigger yacht)

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Re: (& buy bigger yacht)

Oh, that sounds like the Larry Ellison model.

Does that island count????

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"It is best left to companies who specialise in payroll."

At SME scale (and that's about 700 employees and lower) you might be right. But if you've already got a good accounting technician and an accountant who is competent on taxation then you could do your own payroll at that lower scale still using these resources as partial FTE. Above the 700 FTE you're talking about needing a minimum of one FTE to do payroll, and you can probably employ somebody capable in your existing finance function at around £25k to do that, including a one user licence for Sage Payroll. Outsource it, and for monthly payrolls and annual P60s et al, you'd be talking about a headline quote before variations of £40 per employee per year, so that would be £28k per year *plus the variations* which is where the margin is added - so stuff you will need, like payroll tax records are retained for three years, in your basic quote, but the business needs to keep them for six or seven years (kching, kching), duplicate documentation - "not our problem mate, we'll give your employees access to our system, and you can print yer own (additional cost in house) etc etc.

The usual problems with payroll are usually not system or process errors by the payroll supplier/in house team, but end to end errors like line managers failing to notify of leavers, employees not submitting time sheets, failure to notify bank detail changes, unsigned or incomplete expenses submissions. But the outsourcers will charge you extra for over-payment recovery. They'll charge extra for restructuring and changes. They'll charge extra for faulty documentation, they'll charge for new tax rules etc etc.

So once you have the scale to justify an in house function, it makes financial sense to get somebody competent in to do it. The richest people I've every come into contact with (rich private equity types working in the ERP space) were also the meanest gits I ever came across, and they didn't mess around outsourcing payroll, or even using their own software - they knew where the money was, and he simple answer was to keep stuff in house unless there was a damned good reason to pay somebody else quite a lot to manage it.

My own outfit do payroll in house, we've had quotes to outsource it, and even the headline tender figures are no lower than our average operating cost.

By all means out source if it makes sense, just don't believe you are going to save money, or that your payroll problems will be solved.

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WTF?

Outsourcing - a very old way to waste money

The Oozalum bird when attacked

Flies round in ever-decreasing circles

Until it finally diappears up it's own rectal passage

From which place of safety it hurls abuse at it's assailants.

Chorus:

Oh! we're off to see the Wild West Show

The Elephant and the Kangarooooooo

Never mind the weather

As long as we're together

We're off to see the Wild West Show

etc......

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