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`GE’s IT outsourcing will drop from 74% to 50% by next year’ says CIO Jim Fowler

Sujit John Shilpa Phadnis | Dec 1, 2016, 08.44 AM IST

BENGALURU: Jim Fowler is someone Indian IT has reason to dread. As chief information officer of GE, he’s dramatically changing the way the $140-billion company spends its massive IT budget. It has been the world’s biggest outsourcer and offshorer of IT, but Fowler increasingly is bringing a lot of its IT work in-house – including into a new captive centre in Bengaluru. What’s more, he’s also competing with them in the exploding space of industrial digital IT. Fowler, who came to GE from Accenture 16 years ago, was in Bengaluru on Wednesday for the formal launch of GE Digital‘s centre here and spoke exclusively to TOI. Excerpts:

Could you start by telling us about GE Digital, and how important this new centre in Bengaluru is to you?



GE Digital is a new business unit started a year ago, and where we brought three things together – our software engineering teams that built commercial products, our internal IT team that’s been developing software to run the company, and our commercial organization doing product management and sales. We established the first development hub in California, then one in Paris, and now Bengaluru, which is the largest hub with about 1,500 employees today. We will grow this by another 1,000 in the next two years. In Bengaluru, we do both commercial software and internal software development. Five years ago Jeff Immelt (GE chairman CEO) saw how software was disrupting the consumer market and asked the question, what’s disruption like in industrial companies. He started developing the software centre. And now we have combined crucial elements into one new organization. It’s a $6 billion business (excluding what is done for internal purposes), is growing at a fast clip and we expect it to be a $15 billion by 2020.

What’s the kind of disruption you expect in industry?

From 1990-2010, industrial companies saw on an average 3% productivity increase year-over-year. In the last five years, there is only 0.5% of productivity increase. The real productivity is going to come from connecting machine data with enterprise data to drive new levels of value, and that’s what we are doing with our industrial internet platform called Predix. Inside the company, I own a $1 billion cost-out target between now and 2020. To give you an example, we have 200,000 part numbers of fasteners across all of GE. But many of them are the same parts. What we have started to do is build software for data coming out of our engineering system and start to compare the characteristics of parts to find which parts are the same or similar. We then marry that with our supply chain data to see what different prices we are paying for them. And then, with the manufacturing data coming off the machines, we understand what the cost should be. With this, we have saved $50 million just this year on contracts for fasteners. Similarly, jet engines send data back to us. We have developed software that will calculate the deterioration in the parts of the engine based on every flight. What that allows us to do is, we can create engine specific maintenance plans for those aircraft.



GE has been one of the largest IT outsourcers in the world. You have been one of the earliest and biggest clients for several Indian IT outsourcing firms. Now that you are expanding your internal IT business, how do you think the outsourcing component will change?


About 74% of our functions was outsourced and a majority of that was offshored. We went too far. When I took over the job a little over a year ago, the problem was that we had given up a lot of our intellectual property. We didn’t understand our own business processes and one of the things was to rebuild that talent base. This centre (in Bengaluru) is a place to build technical talent and how to build the database and implement software and ERP and to bring hands on work inside. We are not as concerned with partners who give the lowest cost per unit as with partners who are embedded together with my teams and driving the outcome. We have changed out mindset on why we are outsourcing. It’s not for the lowest cost. I want better productivity and outcomes for the business.

Has your budget shrunk for Indian IT service providers?

The make-up of the budget will change. I will spend the same amount of money on fewer resources. Some of that will be because they become GE employees and some of that will be because we are paying for higher quality resources. We have been able to replace three contractors with one employee. Where they had a team of 30, it ended up being a team of ten here. And the ten people are producing code that’s of a higher quality than that we were getting of the 30.


How do you see the 74% of outsourcing coming down?


The 74% will come down to 50% outsourced (in terms of number of employees) by the end of next year.


And you will consolidate vendors?


Yes, we look at partners who can understand how I can change a business process to help reach a business goal. Those who can understand and deliver that, they will get outsourcing work. I know they will be consolidation of partners and strong partners that understand will win. TCS and Tech Mahindra are great partners here. They come in and understand our business problems every day and really are focused on how they come in and help us solve those problems.



Do you also work with the Jack Welch Technology Centre in Bengaluru?


Bengaluru has been fantastic for us because we’ve had this long relationship on the hardware side with the Jack Welch centre, where a lot of hardware research happens. A lot of collaboration happens between us and them. We have built applications together. This is why we really like Bengaluru.

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Article source: http://timesofindia.indiatimes.com/people/GEs-IT-outsourcing-will-drop-from-74-to-50-by-next-year-says-CIO-Jim-Fowler/articleshow/55715136.cms

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