...9-606-003 REV: JUNE 14, 2007 ROBERT D. AUSTIN Volkswagen of America: Managing IT Priorities Dr. Uwe Matulovic, chief information officer (CIO) of Volkswagen of America (VWoA), placed the telephone in its cradle and leaned back in his chair, replaying the just-completed conversation with one of his peers from the Executive Leadership Team (ELT). The call, Matulovic mused, had been similar to three others he had participated in that week, each with a different ELT member. The results of a new prioritization process—a list of IT projects that would be funded in 2004—had been unveiled only a few days earlier. But already a storm was gathering. The phone calls from other executives had common themes. All the callers had expressed concern that high priorities for their areas of the company had not been funded. Some had repeated views expressed during the prioritization process by people who worked for them about supposed categorization mistakes that penalized their business units. And each of the calls had concluded with an informal request to insert an unfunded project (or two) into the IT department’s work plans. “We don’t have to reopen the process,” the most recent caller had said, “but perhaps spare capacity might be applied to make some progress on this project in 2004—we’ve done this before, and it would mean a lot to our area and to the company’s growth plans.” The 10 business units that made up VWoA had proposed more than 40 projects, with funding requirements...
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...for managing IT priorities at Volkswagen of America? Are the criticisms justified? Is it an improvement over the old process? The new process is clearly an improvement over the old process. The following are the three strengths of the new process: 1. Matulovic created a new internal IT Department – Business Process, Technology and Organization (BPTO), which would serve as a centralized point of contact for all IT activities and governance issues. This resulted in much improved and effective IT governance, one in which IT supports business goals and that IT-related risks, benefits, and opportunities can be identified in a much clearer and faster fashion. Also, by having an internal IT Department within VWoA, this would mean that VWoA now has dedicated IT employees and internal expertise required in order to keep up with the dramatic growth in the use of IT within VWoA and to remain competitive among the competitors. 2. The design and flow of the new process for funding projects are now much more organized and involve various stakeholders in the decision-making process. By including everyone in the process, the VWoA is able to account for all possible small details and draw a big picture of the project structure from these parts. This process helps the organization streamline projects with similar functions and fund projects with higher priority in order to save money and time and to achieve the best synergy and utilization for VWoA as a whole. 3. The phase three of the...
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...9-606-003 REV: JUNE 14, 2007 ROBERT D. AUSTIN Volkswagen of America: Managing IT Priorities Dr. Uwe Matulovic, chief information officer (CIO) of Volkswagen of America (VWoA), placed the telephone in its cradle and leaned back in his chair, replaying the just-completed conversation with one of his peers from the Executive Leadership Team (ELT). The call, Matulovic mused, had been similar to three others he had participated in that week, each with a different ELT member. The results of a new prioritization process—a list of IT projects that would be funded in 2004—had been unveiled only a few days earlier. But already a storm was gathering. The phone calls from other executives had common themes. All the callers had expressed concern that high priorities for their areas of the company had not been funded. Some had repeated views expressed during the prioritization process by people who worked for them about supposed categorization mistakes that penalized their business units. And each of the calls had concluded with an informal request to insert an unfunded project (or two) into the IT department’s work plans. “We don’t have to reopen the process,” the most recent caller had said, “but perhaps spare capacity might be applied to make some progress on this project in 2004—we’ve done this before, and it would mean a lot to our area and to the company’s growth plans.” The 10 business units that made up VWoA had proposed more than 40 projects, with funding requirements totaling...
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...Introduction This case identifies problems and recommends effective solution to chief information officer of Volkswagen of America Dr. Matulovic regarding the new priority management system for approving important IT project and also making right decision in spending IT project budget. 1. Insufficient Budget: The 10 business units that made up VWoA had proposed more than 40 projects, with funding requirements totaling $210 million. However, the parent company of VWoA (VWAG) budgeted only $60 million. In choosing the right projects to fund was a process that consisted of three phases: Phase 1-Calling for projects, communicating process, and identifying dependencies. It was able to reduce and re-categorize projects because business units realized that many of their initiatives were very similar to other initiatives throughout the company which lead projects to become grouped together into common enterprise projects. In addition, the phase also identified dependencies among projects. Phase 2-Formal project requests for business unit. During Phase 2 each business unit was required to classify each proposal into the type of investment (Stay in business, Return on investment, and Option-creating investment) and the type of technological application (Base-enterprise IT platform, Enterprise applications, and Customized point solutions). Phase 3-Transforming business unit requests into enterprise goal portfolios. This phase is that DBC converts the emerging business-unit-focused...
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...1. What is your assessment of the new process for managing priorities at Volkswagen of America? Are the criticisms justified? Is it an improvement over the old process? The new process is much more structured and organized so it is definitely a substantial improvement over the old process. In the new process IT projects are prioritized to determine funding in a very efficient way, ensuring that the projects that are very important to business strategy meet their financial requirements, enabling business unit managers to work together so they would make decisions focused on the overall strategy of the company. With the new process IT resources would be aligned to corporate and business unit goals, keeping expenses under control, as well as schedule and cost overruns. I think that the criticisms by the Executive Leadership Team members were not justified at all. 2. Who controls the budgets from which IT projects are funded at Volkswagen of America? Who should control this budgets? Should the IT department have its own budget? VWAG (the parent company of VWoA) controlled the budget from which IT projects are funded at VWoA which in this case was $60 million. However this budget was controlled through a process that involved several organizational entities. There are four specific teams involved in this process: 1) the ELT (Executive Leadership Team) which had primary responsibility for executing the NRG program, the ITSC (IT Steering Committee) that would guide...
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...VW America Case: 1. What is your assessment of the new process for managing priorities at Volkswagen of America? Are the criticisms justified? Is it an improvement over the old process? Beginning with Pischetsrieder’s arrival in 2001, VWAG initiated an unprecedented product-diversification rebirth, globally as well as in the US. A consequence of this strategy required a comprehensive business realignment within VWoA called the “Next Round of Growth” (NRG). NRG clarified two high-level strategic business goals, “Build Brand Customer Loyalty” (number one) and “Improve Vehicle Value” (number two). Somewhere, during this course, I read “the primary function of IT is to support the business’s strategic goals and objectives.” With the newly defined goals within NRG, we see that Dr. Matulovic is doing just that. He is instituting a long overdue process of prioritizing IT projects which are aligned to the goals and objectives of the company. Today we say that this is a basic business fundamental but we need to keep in mind of the timeframe that this is occurring; the 1990s through the early 2000s. In this study we are seeing a company not only undertaking a major product line transition but a company in transition during the emergence of IT technologies. Through all of this and its history I see that VWoA is finally getting it right; aligning their IT priorities with their business goals. As with any new process, criticism and resistance will always be within an organization...
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...VWoA Case Matulovic, the new CIO, has two primary concerns at VWoA: defining governance and establishing development process directives. However, Matulovic is in a difficult situation; he faces inadequate funding, new business architecture and increasing pressure from his peers. His circumstances are predictable given the history of IT consideration, by VWoA, as a source of overhead and the highly unpredictable U.S. market for Volkswagon Group. Matulovic’s biggest hurdle is in regards to the capped funding that has been determined by the parent company (Volkswagon Audi Group). VWAG allotted VWoA only $60 million, out of the requested $210 million, for IT projects. Given the scope of VWoA initiatives, the amount is far from adequate. However, at the time, there were no additional funds available. The procedure for deciding which projects will receive funding is streamlined by a new prioritization process. This process for managing IT priorities is part of a new business architecture designed to align organizational activity with corporate goals and strategy. During the first few years of any new policy or procedure there are bound to be unforeseen complications. The largest glitch was how the new process did not account for “behind the curtain” programs such as the intercontinental Supply Flow Project. The Supply Flow Project should absolutely receive funding. The cost should not come entirely from VWoA, but allocated amongst the global Volkswagen group of companies....
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...Volkswagen in America : Managing IT Priorities Introduction: Volkswagen in America is a case which deals with the major issue of projects prioritization and the other issues are budgeting and funding requirements. A change for good in an organisation is necessary to keep it going but sometimes it leads to disappointment. In this case, Volkswagen has recovered by introduction on new models and changes in the organisation and then they recovered by introducing the product diversification and it was successful then it as there was insufficient IT knowledge it started e-Business but IT functions weren’t performing optimally. To overcome this new IT department was established. Dr. Uwe Matulovic, the chief information officer had to face the challenge of creating the IT environment in VWoA and introduced the Process of Prioritization and ‘Business Process, Technology and Organisation’(BPTO). The process of prioritisation was introduced which was logical and managed all the sectors of the organisation. This process is based on the goals of the enterprise. This led to the problems: a) Business units to create a project associating with enterprise goals. b) The business units were trying to influence the project as they wanted their unit to be funded. c) Most of the business units were not considered. d) The projects which were globally important were not funded. e) Most of the employees were self centered they were only thinking about their own business units instead of...
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...1. What is your assessment of the new process for managing priorities at Volkswagen of America? The new process for managing priorities at Volkswagen of America provides more transparency and reduces duplicity in projects compared with their old method. Volkswagen established a Project Management Office (PMO) and required business units to prepare the list of proposed projects at the beginning of the year. This was a great first step in highlighting the similarities amongst the projects prior to budgets being set and work being done. It also identified the dependencies of projects on one another and allowed some to be de-scoped for subsequent years. In turn, this reduced the estimated cost from $210 million to $170 million. In phase 2, business units prepared a more formal proposal with information such costs, benefits and how the project links to a business/enterprise goal. While not embraced entirely by some of the groups, this was a good method for aligning IT projects with business strategy. By documenting a more formal proposal, Volkswagen was able to use this detailed information to help narrow down and prioritize projects. During phase 3, executives were asked to indicate the top three projects for the year. These would most likely be applied to the majority of the budget and any other projects would have to figure out a way to get funding or place projects on hold for a year. This more organized structure of prioritizing projects is substantially better than throwing...
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...Volkswagen of America Case Questions & Answers: 1. What is your assessment of the new process for managing priorities at Volkswagen of America? Are the criticisms justified? Is it an improvement over the old process? To manage priorities at Volkswagen of America, a new process was implemented. It was the most efficient way of implementing a project in terms of selection and precedence,for the type of projects whose main aim was to meet the financial requirements in respect to the NRG goals. Although, there were some drawbacks in the system due to the way they evaluated all the projects using a type of ranking system.For example,if VWoA used a ranking system to select a project, their corporate did not fund for projects at the lower levels as they did not meet the company goals, even if the project would have a potential to gain success or a positive impact on the business. According to me, the criticisms are not justified, as the company derides IT as the main reason for increasing costs.This aspect of the company about IT is not completely true. The costs involved in IT projects should be considered as a long term investment which yields higher return. Therefore, the best way of selecting a project is through the ranking system which will not only help the project team choose the project easily on the basis of priority but helps in problem solving too. The new process however has helped in improving the business units in a big way because these business units...
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...INFORMATION TECHNOLOGY MANAGEMENT INTRODUCTION With a weakened global economy, consumer confidence at record lows, and widespread layoffs unlike anything we have seen in over eighty years, information technology is taking on new roles in the business world. CIO's are relying more heavily on IT in order to reduce operating costs, increase productivity and give their companies a competitive edge. Historically viewed as an expense and liability, IT is now being thought of as strategic business enabler. Management of IT and the associated strategy, funding and security are top of mind for many in today's challenging environment. Executives are under more pressure than ever to maximize return on their technology investments. However, our research has revealed that there are several key concerns that appear to be trending throughout corporations as they determine the exact roles IT should play. READINGS Members of the group read several chapters from the textbook, Information Technology for Management: Improving Performance in the Digital Economy (Turban and Volonino, 7th Edition), as well as numerous articles on various information technology subjects. A topic which received a significant amount of attention throughout our readings is the importance of aligning IT strategies with the business priorities of the company, and how this is critical to the success of an organization. An important component of this alignment is ensuring that the IT division...
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...Case Study 1: Volkswagen in America – Managing IT Priorities INTRODUCTION This report identifies problems and recommends effective solution to CIO of VWoA Dr. Matulovic regarding the new priority management system for approving important IT project and also making right decision in spending IT project budget. IMPACTS OF INSUFFICIENT FUNDS * Estimated project budget was $170 Million but the parent organisation allocated only $60 Million. This reduced the efficiency of VWoA’s final result as most other projects were unfunded. Recommendations: CIO Dr. Matulovic could have raised for more IT project Budget from parent corporation VWAG. Board members of VWAG and Dr. matulovic could have discussed about requesting fund from government as government – private partnership or made partnership with any other private organisation for funding or could have applied for Bank loan. * Failure of SAP implementation over supply chain management domain caused a major loss to the organisation. Recommendations: As this was highly important and most costly ERP system implementation process they can guided and funded completely by VWAG parent company. As they are very critical ERP system and their failure cause adverse effect, Dr. Matulovic and IT steering committee could have fully funded the project from the allocated $60 Million budget CORPORATE GOVERNANCE ISSUES * Poor governance of internal structures, internal operations and lack of communication or reporting services lead...
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...Introduction and Summarisation The purpose of this case study is to highlight issues or problems evolving Volkswagen of America (VWoA) and how its projects are funded, while effectively identifying possible solutions to CIO, Dr. Matulovic. Unfortunately, Dr Matulovic is being challenged with hostile employees as he has introduced a new process of dividing the scarce budget to various projects to be funded. The new process has now been used for the first time, and is responsible for the controversy surrounding Dr. Matulovic, due to the fact that many of the organisations departments received no funding for their projects. Dr. Matulovic is now at crossroads about what to do with the situation. Key Issues and Problems The first and most obvious problem was that most to all of the projects were somehow funded on the old process or at the very least received little funding, however with the new process in place, projects with a rank of a 2 or 3 are rarely selected to receive funding which many considered unfair. Additionally, many argued the fact that IT infrastructure projects are not forced to withstand the same process and were treated separately was not reasonable and again was unfair. Another implication was that a project which is critical to the company and its global supply chain management was left only partially funded. The company’s multiyear SAP implementation was only midway finished and additionally needed full funding to stay on track, which in turn caused major...
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