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Volkswagen of America: Managing IT

Priorities

Stefan Radisavljevic
Section 4

Ricardo Perez Garrido


Technology and Innovation Management
IE Business School

Madrid-2014
Problem Statement
CIO of Volkswagen America (VWoA), Uwe Matulovic with his IT department team, controls a
budget of 60 million dollars capped by Volkswagen Global, which is situated in Germany. The
problem of Matulovic is funding the right projects with the limited amount mentioned above. In
order to solve this problem Matulovic should answer the following questions: which are the right
projects to fund right now? Which projects can be funded later or can be funded partially?
Pros and Cons of the New System
According to the case to solve the problems mentioned above Matulovic implemented the new
process of determining the appropriate projects. Since, there is no perfect thing in this life; the
new system had its minuses and pluses too. Lets start with drawbacks. The new process wasnt
successful, because of such factors like the lack of considering the global goals of Volkswagen,
lack of IT knowledge in newly created Business, Process, Technology and Organization(BPTO)
department, high concentration on the enterprise goals of the company, low attention to the
infrastructure flaws and finally, we can assume Matulovic was much more concentrated on
spreading the budget according to NRG (Next Round of Growth) ranking, than according to the
needs of the company and the head office requirements. Additionally, the failure can also be
concluded from the fact that Supply Flow project was partially funded.
Further one can notice totally justified criticisms, which is the reason of the following factors.
First of all, the IT knowledge was lost and CIO didnt have an IT background, thus a lot of
decisions probably werent sufficient. Second, some ELTs members understood the system
procedures better than others and as a result tried to cheat by associating their projects with
enterprise goals to get an approval. The executives also try to ask Matulovic for special treatment
outside the project. Finally, the process treated the projects separately and didnt force through
the same procedures.
Although, the new process was not perfect, it definitely had some benefits. It was the
improvement over the old systems, because the process was structured and organized.
Additionally, the new system tried to keep its IT employees. In contrast, the old one had a
noticeable loss of IT employees in 10 years, which had a negative impact on Volkswagen
America. Apart from this, the new process tried to have some connection with the companies
goals, which we cannot say about the old process.
Alternative
There are two different alternatives to this problem. First one is to keep working with the new
existing system. In this case, Matulovic will defend his new system, but probably will keep
receiving the complaints from different stakeholders: the executives, the head office, etc. Of
course, if CIO decided to keep the current model as it is he will probably satisfy the enterprise
goals, but wont improve the performance. For instance, in the case BPTO team decided to spend
50 % of the budget on strategic projects and chose a minor share for the company IT
infrastructure, which according to the case is not perfect. Thus, based on the prioritization
process of the company some projects like Supply Flow, which are important for the companies
operational procedures, but dont have huge strategic value, may take a long time to be approved.
It is difficult to say what will be the outcome of this alternative, but my assumption based on the

information from the case is that without changes in the system, everything will lead to firing
CIO and VWoA will still have a plenty of problems in the IT department.
Recommendation
Second alternative is to change the new model. So lets start with the question: who should
control the budget? Despite the fact that CIO of VWoA didnt control the budget efficiently I
dont reckon that anybody else in the company can control it, because one of the main tasks of
CIO is to monitor the budgets of IT investments. But I should say that in this particular case the
approval, but not the control of the project and its procedures should be done by CEO or
reconciled with him/her, since CIO didnt have appropriate background and experience for that.
Apart from this there is another option. I suggest hiring an IT professional as a deputy or
assistant of CIO with a good experience in controlling budgets and understanding business
management procedures. That kind of professional can also assist CIO in finding the drawbacks
of the new system.
Further, IT department should have its own budget which will not be connected with IT
portfolios. First of all, the IT department budget assists CEO and a financial department in
controlling expenses of an IT sector. Further, it also helps an IT department itself to control their
personal outlays. Of course, we should understand that there is a huge difference between an IT
department costs and an IT investment costs. The second one is more complicated and more
difficult to assess.
Further, the case presents an issue between CIO and the executives, who ask for special
treatment outside the new process. My solution to this problem is that Matulovic shouldnt
provide any special treatment. First of all, it will not be ethical, since he is not following the rules
of his own system. Consequently, if one of the executives is treated differently, other executives
may ask for the same behavior and in the end the new system will lose its pros of being
structured and organized.
Now lets talk about the approval of Supply Flow project. Supply Flow is the global project,
which improves the performance not only of VWoA, but the global company. Accordingly,
Volkswagen America and all other Volkswagen companies around the world will have almost the
same system and database. Consequently, if the project is not fully funded the performance of the
company will not improve, because all information, campaigns and other data from the head
office and the other companies of the world will not or will be partially available in SAP
database of VWoA. Therefore, Matulovic should approve the project immediately and make
some improvements in his new process regarding global projects approval.
To sum up, my recommendation of what new system should include for the determination of the
right project is that primarily, the improved model ought to consider the global goals of
Volkswagen. Further, the projects related to the IT infrastructure should be considered as projects
with high priorities. Otherwise, VWoA wont have appropriate tools to manage its operations and
its business. Additionally, the company should figure out how to improve the background of their
IT specialist. Of course, if the company achieves perfect or close to perfect infrastructure system

next step will be to pay attention to strategic goals. If the recommended model doesnt work, my
suggestion is to look for the flaws and criticism of the model and correct the mistakes.