On Monday I read the news that GM’s CIO has decided to slash outsourcing in a move to transform IT and its role. As reported by InformationWeek:
Today, about 90% of GM’s IT services, from running data centers to writing applications, are provided by outsourcing companies such as HP/EDS, IBM, Capgemini, and Wipro, and only 10% are done by GM employees. Mott plans to flip those percentages in about three years–to 90% GM staff, 10% outsourcers.
Other aspects of this massive transformation, that is expected to take place in the next three years, include data center, application and data warehouse consolidation, better portfolio management, the establishment of three new development centers, as well as considerable hiring of relevant IT skills.
This move, motivated by the ambition of being more responsive to business needs, runs contrary to the common wisdom around cloud computing, which assumes that “outsourcing” standard IT operations to the cloud frees resources for new development and a more transformation role for IT.
What makes it even more interesting, though, is the coincidence with the pro-insourcing spin taken by Obama’s presidential campaign, and well-summarized in this TV ad, which I happened to see yesterday shortly after my arrival in the US. The ad portrays the republican candidate Matt Romney as a pro-outsourcing guy, who may lead to the loss of jobs to cheaper labor countries, and presents Obama as the defender of insourcing and savior of local jobs. It is indeed a curious coincidence, since GM was bailed-out by the Obama administration and was then criticized for its excessive attention to foreign markets.
While I am not speculating that there is necessarily a cause-effect link here, I’d like to offer a reflection on whether the insourcing message that is characterizing Obama’s campaign may have a broader effect on the IT market in the US.
His administration has been quite aggressive on pushing cloud adoption by federal agencies, through several initiatives that both the OMB and the GSA have been conducting for the last three years. While for most government workloads, cloud infrastructure and staff are located on US soil, it is a fact that a broad adoption of government cloud would leverage economies of scale and effectively reduce the need for IT staff in individual agencies. Even further, as some workloads – around web presence and open government – may comfortably run in the public cloud, a portion of those jobs would be effectively outsourced outside the US.
So while the search for increased efficiency would call for more rather than less cloud use, the political priorities du jour may lead to different behaviors, e.g. relying more on own data center consolidation and virtualization as well as government-operated shared services, than on standardized vendor offerings.
Nor is this a US-only issue. As European politicians campaign in a very dire climate, messages that link government spending to job preservation and creation will intensify, especially in countries with overwhelming unemployment rates. It is likely that an increasingly important factor in everybody’s sourcing strategy will be politics, which is rarely a good thing from a business perspective.