GM says new data centers will improve vehicles, margins
WARREN, Michigan (Reuters) - General Motors Co said it is investing $546 million in two new Michigan data centers in hopes it will free up millions of dollars to boost vehicle quality more quickly.
The largest U.S. automaker unveiled a $288 million data center in the Detroit suburb of Warren on Monday, which went online in January. Construction of a $258 million companion center at the GM vehicle proving grounds in Milford, Michigan, will begin this summer.
GM officials said the centers will help engineers to spot and solve problems more quickly than when it outsourced about 90 percent of its information technology (IT) needs.
"We had five, six key suppliers of IT services and each one of them had their own little control center, and we couldn't see any of what was going on in our network," Chief Executive Dan Akerson told reporters at a media event in Warren.
"Today we can look into our plants, our production, where supply chain is a problem or an asset," said Akerson.
In the next five years, GM aims to bring 90 percent of its IT work within the company. The two new data centers will get new vehicle designs and technologies to consumers faster and boost the company's bottom line, the company said.
By 2015, when the Milford center is scheduled to be operational, GM will have reduced its IT facilities to two from 23, company officials said.
A number of GM's competitors outsource about one-third of their IT functions, GM Chief Information Officer Randy Mott said.
"When we started this journey, we were the most outsourced," Mott said. "I think we'll end on the side of being the least outsourced ... We're coming down kind of full swing back."
The Milford center will be about 40 miles from the Warren facility and each will be able to serve as a backup if the other goes down with technical problems, GM said.
The value of the IT equipment for each of the centers is expected to be about $158 million.
GM said it has outsourced the bulk of its computing and IT functions in recent years, which was more costly and not as effective as the two data centers. Akerson said the company was spending between $1 billion and $2.5 billion on "shadow IT" services to back up its suppliers.
GM officials said employees around the world will be able to get access to the super-computing abilities of the two data centers.
It will also cut costs on crash tests, it said. Simulations by computer will generate data that will help in designing safer vehicles and save $350,000 for each crash test avoided, GM said.
Suppliers making tooling for GM vehicles in development will be paid quicker and allow them to prioritize deliver of critical parts, which may reduce engineering expenses by millions of dollars, GM said.
GM was able to get a return of 20 times its IT investment for one particular project to improve its global warranty process and speed up how fast it spots and fixes problems, said Tim Cox, chief information officer of GM's development services.
The data centers will allow engineers to do many of these kind of projects, Cox said.
(Additional reporting by Bernie Woodall in Detroit; Editing by Jeffrey Benkoe)