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A swing to insourcing?

It has been recently reported in the press that Randy Mott, the new CIO of General Motors (formerly CIO at Wal-Mart, Dell, and Hewlett-Packard) plans to insource GM’s IT. Around 90% of GM’s IT, including data centre management and application development, is currently provided by the likes of HP/EDS, IBM, Capgemini, and Wipro. The plan is that 90% of IT services will be provided by GM staff over the next three years.

At first sight this dramatic move away from outsourcing seems like an indicator of a sea-change in the industry. But is this the nail in the coffin of IT outsourcing? Will we see lots of IT jobs coming back onshore? It will be a really interesting test on a large scale but not perfectly applicable to the whole industry.

Even if this plan works for GM the lessons learned won’t be applicable to smaller firms, those with less global coverage or those less deep pockets. It is a major undertaking for GM and will involve hiring thousands of staff around the world and will represent a large up-front investment. Without a strong global presence and the full commitment of senior management this would be a very difficult plan to execute.

Mott does not plan to onshore all of GM’s IT as part of this transformation. Commodity services are simply cheapest when using labour from low cost locations.