DETROIT -- General Motors is hiring thousands of workers and spending hundreds of millions of dollars to rebuild the in-house information technology capability it began dismantling nearly two decades ago.
In recent years, the company had farmed out as much as 90 percent of its IT work, more than any major automaker, GM says. Most of its estimated $3 billion annual IT budget went to outside vendors. But within five years, GM expects to run nearly all of its systems in house.
The effort is part of CEO Dan Akerson's drive to simplify GM's global operations and speed decision-making through better use of data.
"Today, every single length of the automotive value chain is wired and connected," Akerson said last week as he announced plans to build a second major data center in suburban Detroit. "That means from design to the showroom floor. You have to have a core competency in IT. You have to own it, and you have to control it."
GM executives say they believe that having more control over key data and processes will improve quality and lower costs, even if it adds thousands of workers to the payroll. Within five years, GM says it will directly employ about 9,000 IT workers, up from about 1,500 last year.
"We were paying them all anyway," GM CFO Dan Ammann told Automotive News last week. "They were all working on GM full time. It's just that they worked for another company."
GM Chief Information Officer Randy Mott, plucked last year from Hewlett-Packard to execute the ambitious in-sourcing effort, acknowledges that GM will be an outlier in the auto industry. He says GM eventually will run 90 percent of its IT infrastructure, compared with about 70 percent for even the most hands-on auto company.
But Dave Bartoletti, a senior analyst with Forrester Research in San Francisco, says GM is following many other large corporations that have taken back some of their outsourced capabilities to speed results.
Outside service providers "do a really good job of keeping the lights on, but they don't necessarily innovate very quickly," Bartoletti says.
GM's embrace of in-house IT marks a return to a strategy that it pursued in 1984, when then-CEO Roger Smith purchased Ross Perot's Electronic Data Systems for $2.55 billion to help bring order to GM's expansive IT operations.
But in 1996, as the burgeoning Internet economy drove bigger external demand for EDS' data services, GM spun off the subsidiary and began farming out its work to outside vendors, including EDS itself.
Akerson, a former telecommunications executive, calls that shift one of the company's biggest strategic blunders -- "kind of like the U.S. military hiring another country to be the U.S. Marine force," he told Automotive News in November.
Bringing those functions back in house, Akerson said then, would enable GM to track and examine metrics that it couldn't readily see before, such as the exact profit it makes on every vehicle it sells globally.
Forrester's Bartoletti cites a potential challenge to GM's plans: competing for talent against sexier technology giants. "If you're an innovative IT talent," he says, "are you going to want to work for GM or Google?"
That's one reason GM says it avoided Silicon Valley in locating its four software development centers, which will employ roughly 4,000 IT workers to write programs aimed at making GM more competitive. GM has set up the centers in suburban Detroit, suburban Phoenix, suburban Atlanta and Austin, Texas.
Meanwhile, GM is investing nearly $550 million in two massive data centers, in Warren and Milford, Mich., to run the programs. The operations replace 23 smaller data centers that GM has operated globally.
Last week, GM invited reporters to tour the newly completed data center in Warren. Part of the building also serves as one of GM's software development centers and still is a work in progress. On some floors, vast fields of workstations are occupied by a smattering of IT workers.
GM expects about one-third of its new hires to be new college graduates. It also has hired about 2,500 former Hewlett-Packard employees who had been working on the GM account.
David Hall contributed to this report