Volkswagen of America: Managing It Priorities

                                       Volkswagen of America: Managing IT priorities

- Mohit Joshi

Based on the history of Volkswagen of America, it is seen that they have not been able to maintain a constant level of growth in terms of sales and profits. Very high levels of sales and profit were observed only for short periods of time whenever they launched a new model. If VWoA were unable to develop into a big seller, there would be a possibility of a long time low. The 1990s were a period of low sales so VWoA went into a cost cutting mode in order to cover their survival. One of the results of this cost cutting was that the IT department was neglected. A successful product line during the first half of the 2000s allowed VWoA to exit their cost cutting mode. The years of neglect of the IT department lead to two contradictory results with very important insinuations for VWoA. A large budget increase required to update the IT department while at the same time a feeling that pervaded among business managers that IT was not really a necessity.

The new process that was implemented by Volkswagen for managing its IT priorities was a step taken in the right direction. Rather than thinking about the benefit of the company at large, the business unit leaders previously were more fixated towards the personal gains through their individual deliverables. Before the implementation of the new process, the IT initiatives of Volkswagen’s business units were independent and separate from the company outlook as a whole. Establishing the Executive Leadership Team (ELT) was a significant move since the members gave an all round perspective which was beneficial to the company. This way, ELT was able to focus on the projects that sustained the overall goals of the company. The procedure of submitting the projects for approval and funding was standardized, enforcing the company to function with a business wide approach. This process recognized initiatives that did not produce company wide results and were focused on individual benefits. It also recognized similar initiatives with a common goal, which were under different business units. The projects submitted followed the same procedure post the setting up of the governance team. To receive the required funding, the business units were forced to do a detailed analysis on the initiatives. Having a greater return for the company while being aligned to the company goals would bring the business units closer to receiving the funding. The company established three goals: Stay in business, Return on Investment, and Option-creating investment, which prioritized funding and associated it to the business objective of the IT initiative. The criticisms of the new process were somewhat justified. Existing projects should have been prioritized depending on how critical it was to the organization. Sufficient funds should have been made available to projects that were considered critical since their advent. The decision of choosing the project for investment should be made after a lot of deliberation. However, at the same time the cost involved in the IT project should be considered a profitable investment. Since it will return a profit on the investment of the business units, IT should be viewed a profit center rather than a cost center. This is undoubtedly an improvement to the old process as it took many more factors into consideration before allocating funds to the projects.