Volkswagen of America: Managing It Priorities Case

Volkswagen of America: Managing IT Priorities Case

Team 11, Professor John Wilson

Executive Summary:

Dr. Uwe Matulovic, the CIO of Volkswagen of America (VWoA), faces issues regarding to applying a new project prioritization process to select projects within limited budgets. Project selection process needs to be a primary role of organization’ planning process to ensure that there is alignment between demand (projects, regulatory environment changes) and resources supply (capital, personnel, technologies). This new process aligns the projects with corporate goals and ranks the most prioritized company goals higher than others. Meanwhile, the 3-step phase makes the process orderly, rational and transparent that nobody can pull the string behind the curtain and influence the decision-making process. However, there are some drawbacks too. The new process only focus on how projects align with the company’s strategy, there is no other evaluation criteria for the projects. Therefore, some good projects in terms of NPV might lost the chance to obtain fund because it does not rank highly.  

As a result, we recommend Dr. Matulovic to combine more criteria such as NPV, payback period, IRR and risk assessments into the projects selection process instead of only basing on the aligning the company’s strategy. Besides, the IT department should reserve budget for stay-in-business type of projects such as maintenance/supporting while the rest improvement/big IT projects have to pass normal process in order to be funded. For the unfunded supply flow project, Dr. Matulovic should obtain the fund from the Headquarter since the service mainly focuses on global business rather than local business.

Background:  

In the history of VWoA, marketing and selling were always the funding priority. IT was considered a source of overhead to be kept only at subsistence levels so that all available funds could be used in the market. As a result of this strategy, the internal IT department of VWoA has been cut several times until the new CIO Dr. Uwe Matulovic took over. He created a new IT department which he called Business Process, Technology and Organization (BPTO) and a nascent Program Management Office (PMO) to manage all IT projects.

VWoA composes 10 business units with more than 40 projects, which requires totaling $210 million for the funding. However, the budget authorized by the parent company VWAG is only $60 million. Therefore, Matulovic implemented a new process to select projects. However, the result was not satisfactory enough. For example, the new process failed to include the Supply Flow project. The Volkswagen global supply chain management was going through a change and the supply Flow project of VWoA was part of it. This initiative was important for Volkswagen to stay abreast with emerging digital technology. But the value of the VWoA Supply flow project can only be realized at the organizational level. So, the local organization were unable to understand its importance, as it does not fall under the top NRG goals.