General Motors: Switching From Outsourcing to Insourcing

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Introduction

It is hard to disagree that major and successful companies have to make a vast number of decisions to increase their performance and remain competitive. Sometimes, a firm’s leadership realizes that the company’s current level may be improved, and better achievements may be reached if certain changes are made. For example, some organizations find an opportunity to become more successful if they switch from insourcing to outsourcing or vice versa. Indeed, deciding whether to perform or make services and products internally or purchase them from a supplier is a fundamental choice, and this only factor may play a significant role in the company’s performance (Bowersox, 2019). General Motors (GM) is an example of an organization that switched from outsourcing to insourcing and managed to succeed in this uneasy transformation.

Defining Outsourcing vs. Insourcing

Before discussing the challenging journey of General Motors Company, it is important to define insourcing and outsourcing and list the advantages and disadvantages of each. The former refers to a case when a firm performs all its operations and produces all parts of its products internally (Bowersox, 2019). At the same time, the latter means using an outside firm’s developed workforce to perform specific tasks or using its resources for manufacturing products (Beers, 2020). Therefore, “the main difference between outsourcing and insourcing is the methods in which work, projects, or tasks are divided between various companies and departments for strategic” (Beers, 2020, para. 1). As noticed by Bowersox (2019), insourcing benefits by the higher quality of control and faster processes but has weaknesses like increased expenses and the necessity of managing an extended number of operations. Outsourcing allows to cut costs and get access to talent, while the disadvantages are the lack of control and proper communication.

Summary of General Motors Company’s Decision

General Motors Company is a highly successful and one of the largest multinational automotive manufacturers based in the U.S. Since the foundation of the company, it has gone through several difficulties, including forced bankruptcy in 2009 (Savitz, 2012). Just three years later, General Motors announced that it was changing its resource management system. The company hoped that by returning to insourcing, it would be able to increase productivity and become competitive again. According to Savitz (2012), the planning of the changes started after Randy Mott joined General Motors as the firm’s new CIO in 2012. At that time, “90 percent of the IT staff were outsourced,” and Mott “elected to bring those jobs back into GM, insourcing 10,000 new roles in the company” (High, 2018, para. 1). Therefore, General Motors faced many difficult changes, and over the course of five years, Mott managed to implement them successfully and return the company to its prior high performance.

Factors, Analysis, and Decisions

Mott started the changing process with a detailed analysis and evaluation of risks and opportunities, which is a core step in any decision-making. When the general picture was clear, Mott defined some goals that were essential to General Motors. For example, the company aimed to accelerate the IT transformation, increase innovation, reduce the cost of IT operations, and achieve better alliances with business partners (Savitz, 2012). Further, as stated by Bowersox (2019), to lower “risks and maintain control, firms typically insource those processes that are core competencies even if outsourcing may be a lower-cost alternative” (p. 125). This is partly what the General Motors Company’s case demonstrates.

Overall, one of the major factors that led Mott to that specific decision was the consideration of the risks and the likelihood of avoiding them. The company also wanted to be able to control all its processes and operations since the lack of control was one of its bankruptcy causes (Beets, 2018). Finally, General Motors also managed to reduce IT costs, even though this is usually a benefit of outsourcing. The change process started with hiring about three thousand recent college graduates and then setting up innovation centers at the GM’s headquarters (Beets, 2018). These two crucial steps allowed the firm to access “about 75 percent of the talent in the United States from an IT standpoint” (High, 2018, para. 3). This was indeed a significant decision that resulted in great changes and improvements.

The resulting Transformation

It took General Motors Company approximately five years to prepare for and successfully complete its shift from IT outsourcing. This case became an example of one of the most remarkable transformations in which the company did not lose any valuable resources but gained many benefits. General Motors’ results include the consolidation of all the data center operations that were spread across more than twenty different geographies, reduced costs, and increased innovation.

Conclusion

To draw a conclusion, one may say that both outsourcing and insourcing are advantageous in specific cases. It is essential for any company to check its processes once in a while and make sure that performing all tasks internally or paying other firms to do some of them is still beneficial. If specific changes are needed, including the complete shift from outsourcing to insourcing or vice versa, it is possible to succeed and increase performance like General Motors managed to.

References

Beers, B. (2020). Outsourcing vs. insourcing: What’s the difference? Web.

Beets, M. (2018). GM steers away from IT outsourcing. Web.

Bowersox, D. (2019). Supply chain logistics management (5th ed). New York, NY: McGraw-Hill Higher Education.

High, P. (2018). After five years of transformation, GM CIO Randy Mott has the company primed for innovation. Forbes. Web.

Savitz, E. (2012). Outsourcing reversed: GM hiring back 3,000 people from HP. Forbes. Web.

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BusinessEssay. (2023, January 20). General Motors: Switching From Outsourcing to Insourcing. Retrieved from https://business-essay.com/general-motors-switching-from-outsourcing-to-insourcing/

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BusinessEssay. (2023) 'General Motors: Switching From Outsourcing to Insourcing'. 20 January.

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BusinessEssay. 2023. "General Motors: Switching From Outsourcing to Insourcing." January 20, 2023. https://business-essay.com/general-motors-switching-from-outsourcing-to-insourcing/.

1. BusinessEssay. "General Motors: Switching From Outsourcing to Insourcing." January 20, 2023. https://business-essay.com/general-motors-switching-from-outsourcing-to-insourcing/.


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BusinessEssay. "General Motors: Switching From Outsourcing to Insourcing." January 20, 2023. https://business-essay.com/general-motors-switching-from-outsourcing-to-insourcing/.