General Electric (GE) recently announced plans to add more than 15,000 U.S. jobs in the next three years. About 1,100 of those new jobs will be in Michigan at GE’s center for information technology just outside Detroit, a unit known for its high levels of outsourcing. GE has already added 660 jobs in Michigan, which has one of the nation’s highest unemployment rates due largely to declining industry.
In the past, “About 50 percent of the IT work was being done by non-GE employees,” says Charlene Begley, chief information technology officer at General Electric. “That strategy may have had its time, but there was a lot of downside. We lost a lot of the technical capabilities that we have to own.” By bringing operations home, GE hopes to improve the quality of its technology in order to compete for customers who always want the latest, most advanced products.
Begley notes the increasing popularity of iPads (AAPL) and other mobile devices, and the need for GE to create “better user experiences” in order to remain competitive. “So we’ve got a team that’s really good at writing user applications that are sexy, impressive and quick,” said Begley.
The global value of information-technology outsourcing contracts has fallen 20% in 2011 as some of the largest jobs exporters begin moving back home. In the Americas, the value of outsourcing contracts fell 51% during the second quarter, according to data released July 20 by TPI Inc.
“GE, GM and companies like them founded the whole outsourcing business,” said John Keppel, president of information services and chief marketing officer for TPI in an August 3 interview. “What we’re seeing in America is more about the maturity of the market. Clearly there are some macro-economic factors and political factors that play into that to varying degrees.”
One of those factors is a tax incentives program in Michigan. In 2009, GE announced that it would invest $100 million in its Michigan site, and that state officials had offered more than $60 million in incentives over the next twelve years. Another factor is new evidence that a single center employee can handle the workload of three outside contractors, partly due to lower costs with an in-house center. As China’s and India’s economies grow, the gap between manufacturing expenses in the U.S. and those abroad has narrowed.
However, Begley says that the Michigan center is not an issue of expense, and says that the company still values their employees in India. Rather, Begley argues that GE has been given an opportunity to “cherry-pick” Michigan talent that will add value to all of the company’s operations.
“People in the business world, small and large, are finding that having your research and design all co-located has enormous benefits,” says Fred Hochberg, president of the U.S. Export-Import Bank. “The manufacturing process informs the engineering process and then the engineering process informs the manufacturing process.” Begley says her IT employees, businesses, and customers “need instant data anywhere, anytime. And for us to, like, have to call a contractor for that technical skill slows us down.”
GE has increased its information technology workforce by 30% to 9,600 worldwide over the past decade, and plans to expand to 11,000. CEO Jeffrey Immelt has been looking for a variety of GE production sites closer to the markets they serve around the world.