Volkswagen of America:

Managing IT Priorities
 Introduction
Ferdinand Porsche designed first Volkswagen automobiles in 1930s

Targeted at mass market originally (Meaning of Volkswagen:-

Peoples car), Volkswagen settled into cyclical pattern of sales
(ups and downs)

In 2001, Volkswagen initiated a strategy of diversifying the product

offerings to match the global demand for vehicles. Brands were
consolidated into groups for alignment and to determine
requirements for future models

In early 2000s, to prepare for growth in offerings and sales, Klauss,

the then CEO, instituted an organization readiness program called
Next Round of Growth (NRG) and made it a key leadership focus

The pertinent goals of the NRG program were to build Brand

Customer Loyalty and improve Vehicle Value
 Information Technology at
Volkswagen

Outsourcing of most of the IT functions to an IT services provider

called Perot Systems to reduce the short term costs from 1992-
2002, over a period of 10 years

They suffered considerable loss of expert people in IT domain as

they reduced IT staff to fewer than 10 people

After a gap of 7 years, a new subsidiary firm of Volkswagen, with

the name GedasUSA was formed to look after the IT operations and
charge the external market rates in providing services to other
Volkswagen owned companies

GedasUSA started administering the outsourcing contract with

Perot Systems
 Information Technology at
Volkswagen
1999:- An eBusiness team was set up with the aim of creating
digital marketing assets and to interact with the customers in a new
way. This team facilitated proper functioning in the after sales part
and the vehicle distribution units.

1999 to 2002: Gedas USA, Perot Systems and VWoA eBusiness

teams worked together to revamp the IT environment concurrent
with the rapidly changing technology

2002 :- ELT at VWoA with the global IT organization, took a move to

form a new business unit which consolidated all the IT operations
under one roof.

Major issue was not technology but the ambiguity that was between
the government and the processes.
 Information Technology at
Volkswagen
New internal IT department was created called Business
Process, Technology and Organization(BPTO)

BPTO comprised of 23 people assumed pivotal roles as

they dealt with portfolio of challenged projects

Program Management Office was empowered to take over

management of all IT projects and to abide by the
standards

After developing the ability to do projects right, Matulovic

had certain questions in his mind: which are the right
projects to fund right now? Which projects can be funded
later or can be funded partially?
 Funding the right projects

BPTO, strategy groups at VWoA, consultants from gedasUSA

collaborated to produce a Business Architecture (BA) for
highlighting key resources

Organizational activities of the firm were categorized by BA and

they were aligned with the companys strategy. This made
governance and prioritization processes more formal

To analyze projects, their business impact and alignment with goals,

DBC ( Digital Business Council) was formed

ITSC (IT Steering Committee) comprising of senior business & IT

representatives created to guide & approve IT project
selection/prioritization
Three Phases for concluding list of projects for funding :
1. Phase I - It included :
Calling for projects & identifying their major goal
Common enterprise projects were formed and similar
projects were grouped
If projects had dependencies among them, they were
identified

2. Phase II - After phase I funding requirement went down from

$210m to $170m. Phase II consisted of:
Project proposals formally crafted into predefined template
Proposals divided into different types on the basis of
investment: and technological application involved

3. Phase III It involved:

Converting business-unit focused project portfolio into
enterprise focused portfolio
Reshuffled schedule of projects
Business units prioritized their proposals again.
Issues arising due to new funding process

There were budget problems and funding requirements were

more than the budget. For highest priority business unit projects,
only $14m was available

The new methodology was vigorously questioned by the business

unit executives for selecting and prioritizing projects

A critical project only partially funded Partial funding of some

critical projects. For example, a project related to companys
global supply chain management objectives was left scarcely
funded

Some peers of Matulovic thought that IT was just an expensive

technology and has less value compared to what they expected.

Lack of IT knowledge and consideration of global goals of the VW

group
 Recommendations

Proper funding process needs to be implemented for better and

prioritized fund allocation to projects leading to greater global
benefits

Instead of units profit, con contribution to overall companys

profit as the performance evaluation criteria for business-unit
managers

To defend the new process, reporting of ways which depict

positive effect on business should be done.

ELT should be involved more in IT architecture project decisions to

get their approval
Thank You!!