Volkswagen of America - Managing It Priorities

Submitted by

Group 10

17 March 2015

   MIS PROJECT

     PORTFOLIO MANAGEMENT

Volkswagen of America : Managing IT Priorities

This Volkswagen Case study is about the action of Volkswagen of America, the U.S. subsidiary of Volkswagen AG, to find out a process for setting IT funding priorities so that they align with business priorities and the company’s overall strategy. The process is carefully thought out and executed, but still encounters difficulties. Prior to this, IT was not a prime concern for VWoA. An IT steering committee controlled the budget. VWoA needs to find alternative sources of funding which could be raised in discussion with the parent company or getting the CEO involved in the funding effort. This should begin immediately as alternatives would need to be found when the plan does not succeed. The objective is to contribute to the strategic supply chain position of VW AG with applying an exception handling process and at the same time following VWoA’s strategic goals of the NRG program in spending the $60 million budget only for projects in the top ranked goal portfolios. Reasons include keeping consistency by conforming to the new IT prioritisation process which would prevent resistance and business units fighting against it. Additionally VW would want to avoid potential conflict with VW AG due to implementing the globalisation efforts.

This case underscored the critical importance of careful integration of IT and business functions within a corporation's strategy.

Approach to create a portfolio for IT applications

One of the key areas affected by this change was the IT area and it had to adapt quickly to this new paradigm as well as to other changes such as ecommerce applications. A new process was implemented to review submitted projects from all business units over three phases and to select the ones best aligned with company goals. Due to involvement of huge money, high costs for existing legacy systems and a complex prioritization procedure, there was a perception amongst the high level business managers that IT costs were high when compared to the actual benefits that were derived out of it.

The prioritization of IT projects at the VWoA is under the high-level business architecture created by the Business Process, Technology and Organization (BPTO), which is the company’s IT department. The budget used for controlling IT projects at the company is controlled by the Executive Leadership Team. Despite the fact that IT department is an independent business unit to oversee all the IT issues in the firm, it has no control over the budgets used to fund IT projects. An independent budget for the IT department is needed if it is to manage the IT projects effectively. This is because the IT department plays an integral in the selection and prioritization of IT projects, implying that controlling their own budget is needed if the funded projects are to be executed effectively with respect to time and cost, and eliminate potential cases of critical projects being unfunded.