Broke? GM spends $15B on tech
Carmaker says Capgemini, HP and others will get record award over 5 years to run its tech operations.
SAN FRANCISCO (BUSINESS 2.0) - General Motors, despite its billion-dollar losses and weakened credit rating, is going ahead with plans to spend as much as $15 billion on information technology over the next five years, the largest such subcontracting agreement ever. Today, Ralph Szygenda, GM's chief information officer, announced the winners of a two-year bidding process for the automaker's $3 billion a year tech budget. EDS (Research), which today manages the bulk of GM's technology infrastructure, lost about a third of its current $2 billion-a-year business but expects to continue to receive more than half of GM's tech dollars, according to an EDS statement.
Hewlett-Packard (Research) and Capgemini increased their share of GM's budget, while Compuware (Research), IBM (Research), and Wipro saw their share stay steady. For EDS, keeping more than $1 billion a year of GM contracts is a victory, as it had consistently warned Wall Street that it could lose as much as half of its $2 billion-a-year GM business. EDS has been running most of GM's business since the IT services company was spun off from GM in 1996. Its current GM contracts expire in June. EDS estimated that the contracts it won today have a value of $3.8 billion, and it could win additional GM business over the next five years. Hewlett-Packard's increase in business is a significant win for new CEO Mark Hurd and top HP executive Ann Livermore. Likewise, it's a shot in the arm for Capgemini, which has been looking to increase its IT services business in the U.S. Compuware, whose Covisint division currently runs much of the infrastructure GM uses to communicate with suppliers in North America, will expand those responsibilities to GM's Asian, European, and Latin American suppliers. IBM's failure to increase its share is an embarrassment for Big Blue. CEO Sam Palmisano had personally campaigned to win more GM business. While the money at stake wouldn't have been a significant boost to IBM's $46 billion-a-year services arm, General Motors (Research) is seen as a blue-chip account that would have let IBM demonstrate its combination of advanced computing technology and sophisticated business consulting. In a December interview, Szygenda had said that cost savings were not the primary goal of the contract award, but today, he announced that GM would cut its budget from the current $3 billion as a result of the new contracts, making the final value less than $15 billion. Smaller companies won't be shut out of GM's budget, either. Last month, Szygenda told Business 2.0 that he's setting aside $2.5 billion to $3 billion to spend on startups with new technology. ________________ Read more about Ralph Szygenda's plan to change how tech does business. Who made Business 2.0's 'Smart List'? Click here. Imagining the Google future? Click here. |
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