Volkswagen of America: Managing It Priorities

1. What is your assessment of the new process for managing IT priorities at Volkswagen of America? Are the criticisms justified? Is it an improvement over the old process?

Just like any other, the new process had its benefits and drawbacks. And it comes down to the Economics of cost benefit analysis to see whether the benefits outweigh the costs considerably.

In our view, the problem with the old process was the unclear vision and undefined goals of IT infrastructure mainly because of outsourcing most of the IT business and excessively reducing the IT staff. Also, the decisions were made via unstructured debate. Sometimes these debates were done on phone calls as well. As discussed in class, it is important to have face to face and structured meetings for sensitive and otherwise important decision making. Mina Chang, CEO of Linking the World International, says “…you do business with people, not entities. The beauty of communication is found in the nuance that’s only felt in face-to-face conversations” (FORBES). Another problem was the poor project planning in earlier phases where cost and time overruns was a norm. A study published in the Harvard Business Review, which analyzed 1,471 IT projects, found that all but one in six projects had a cost overrun of 200% on average and a schedule overrun of almost 70%.

In the new process, the steps taken by Matulovic were commendable, standardizing the procedures of Project Planning by empowering the PMO which resulted in on-schedule and on-budget projects, that alone might have saved a lot of costs for VWoA and VWAG.

The new process for selecting the project appeared logical and was devised keeping the big picture in mind. The IT projects were categorized and then mapped to organization’s goals and strategies to see their impact and effectiveness. The template of the proposals was given to help the business units clearly define their goals and vision for the project. This way all the projects were measured on a single scale. Another benefit was the integration of all the business units in the process. More than one entities are involved to manage IT priorities in new process, dividing the responsibility in such a way that no one has full control of overall process. This eliminated the silo thinking and paved way for an enterprise level benefits. Furthermore, combining the projects that had the same function resulted in an efficient allocation of resources. Therefore, the new process appears to us as a non-discriminatory process in which each department was given a fair chance to submit their proposals. The process became transparent for all the business units.

However, the process came with one major cost. All this meticulous planning in multiple phases led to over complications. There were so many different teams working on the prioritization process, grouping and reshuffling the projects which created chaos among the business units. As a result, the business units focused more on aligning project with enterprise goals by hook or by crook.

2. Who controls the budgets from which IT projects are funded at Volkswagen of America? Who should control these budgets? Should the IT department have its own budget?

Currently, the budget is controlled by the parent company VWAG which uses the Top Down Budgeting approach, where the senior management decides how much the projects should cost. The budget was capped at $60 million for their American subsidiary, whereas VWoA received proposals of worth $210 million. This stat alone makes us question the process of budget decision-making. It appears that Matulovic was not involved or consulted in the budget making process. According to Duncan Haughey, the disadvantage of this approach is that the people deciding the budget should have enough knowledge and IT experience to estimate the budget of IT projects in a company, otherwise conflict may occur when the project managers are given unrealistic budgets. Clearly, VWAG management failed to understand the IT requirements of VWoA.

We think that the budget decision making should remain in the hands of the parent company. However, they should ask for the budget estimate from VWoA and allocate funds accordingly. The main advantage of this approach is that once they have received the estimated amount, they can separate the projects that will have Global impact, such as the SAP implementation project, for which additional funds could be allocated for its completion.

As for the IT department’s budget, we agree that they should have a separate budget. However, we would recommend some changes in the prioritization of the projects. The process should be simpler with inputs from the business units limited to phase 1 only, where they can submit the proposal using the predefined template. The phase 2 should have PMO and DBC regroup the projects with similar initiatives and postpone the interdependent projects for next year. The Final Phase should include all the organizational entities (PMO, DBC, ITSC) who meet face to face in a series of interactive and collaborative meetings, similar to the JAD sessions, to review the projects, aligning them to the NRG goals and enterprise objectives.

3a. How should Matulovic respond to his fellow executives who are calling to ask him for special treatment outside the new priority management system?

Matulovic needs to work on the stakeholder management plan. It is a fact that the new process has more benefits than costs. But the since ELT falls in the High Interest-High Power area of the Power Grid, they should be taken on board. Matulovic has to explain to them that the new