olkswagen was founded in the 1930s. Like its name in Germany, its brand positioning
was originally positioned as a car brand that ordinary people can afford. Volkswagen initially focused on designing and manufacturing cars. Obviously, there is no need to say anything about their competitiveness in manufacturing capabilities. It is worth mentioning that Volkswagen’s business strategy is commendable. If the success of ‘Volkswagen Type 1’ is an expression of their manufacturing capabilities, then the diversification of products from one to ‘Audi’,’Volkswagen’ two brand sets is undoubtedly the success of the business strategy. And the information system allows Volkswagen company to process large amounts of information and operate efficiently.
VW of America is a subsidiary of VWAG in the United States. In the 1990s, VW’s Volkswagen and Audi two brands faced challenges in the US market. VWoA executives was trying to reverse this trend. In order to put more funds available In the market, executives decided to reduce short-term IT costs. In 1992, VWoA signed a ten-year contract with an IT companies and drastically reduced its internal IT staff to fewer than ten people. Over the next seven years, VW of America clearly felt that the layoffs were excessive and that their IT knowledge was not even sufficient to manage the outsourcing contract. Therefore, the number of VWoA’s IT staff gradually increased back to 28.
In 1999, VWAG established a new group company, gedas AG. In the United States, a subsidiary of gedas AG was also established, gedas USA. Gedas USA was responsible for managing the VWoA outsourcing contract and taking over its IT operations after the outsourcing contract expired in 2002. To speed up the start of gedas USA, VWoA’s 28 IT staff were all transferred to gedas USA. So VWoA seems to have lost IT knowledge again.
VWoA consists of 10 business department and they are embarking on the challenging task of reforming prioritizing and selecting IT projects. These 10 business departments submitted more than 40 project plans and required a total of up to 210 million U.S. dollars. At the same time, VWAG, the parent company of VWoA, only gave a budget of 60 million U.S. dollars, which means that there are many programs that cannot obtain funding, and Inevitably create a sense of loss.
The shortage of funding budget seems to be the main problem facing VWoA. But the underlying reason may sound even more serious. The executives of VWAG is hesitant to adopt IT. In the 1980s and 1990s, information technology began to take off. At that time, Volkswagen underestimated the power of information technology and therefore did not make full use of it. I think this is part of the reason why the masses could not develop at that time. I can understand Volkswagen executives’ considerations, but I’m still surprised that they still have a vague attitude toward IT in 2004.
Due to the shortage of funding budget from VWAG, VWoA formed a new IT priority management process. The process is composed of 4 teams. (Team member may come from different departments) The 4 teams are the Executive Leadership Team (ELT), IT Steering Committee (ITSC), Project Management Office (PMO), and Digital Business Council (DBC). ELT is responsible for implementing the ‘Next Round of Growth’ goals, and IT governance also belongs to it; ITCS composed of high-level business and IT representatives is responsible for the direction and approval of the entire IT project selection and prioritization process; PMO arranges IT projects. Proposal and approval process; DBC is responsible for completing the necessary project classification for the final recommended project list, assessing business impact, determining whether it matches the target, and weighing the decision. The approval process is completed by four teams with different functions. The IT project funding of VW of America is costly, time-consuming, and data analysis is complex and difficult; but at the same time, within a limited budget, it is easier to colliding out more favorable strategy and ideas for the VW of America.
The entire process was implemented in three phases, from July to September 2004. The first phase is Calling for Projects, Communication Process, and Identifying Dependencies. In July, before the business department officially submitted the proposal to the PMO, the company strategy team and the gedas strategy advisor held a seminar with the participation of DBC members. At the meeting, representatives of the various departments informally stated their project initiatives, and from Functional perspectives briefly explain how the project will change the business. As the conference progresses, there will be quite a few projects that the departments are prepared to invest in. These similar projects can be grouped into a common project. When discussing individual projects, the DBC also Identify the relationships between projects. For example, some projects need to wait for the completion of other projects before they start. This has led to the move of some project proposals from the 2004 list to the 2005 or even 2006 list. The result of this activity was reduced from the initial $210 million project proposal to $170 million.
The second phase is the Formal Project Request From Business Units. At this phase, each department can use the pre-determined template to formally produce the project proposal. In addition, each department can use the pre-determined template to formally produce the project proposal. In addition, the project can be categorized by two types of investment types and the type of technology application involved. The company has identified three categories of investment types: Stay in Business(SIB), Return on Investment(ROI), and Option Creating Investment(OCI). And identify three different technology applications: Base Enterprise Platform, Enterprise Application, and Customized point solution. Once the proposals for each project are ready, the heads of each department prioritize these projects. Because the leaders are all ELT members, they will put the project and the target ‘Next Round of Growth’ together to prioritize.
The third phase is to convert business department requests into business goals. When all requests are submitted, DBC will hold a two-day meeting outside the company. On the first day of the meeting, the first three priorities of each department were finalized. The second day was linked to the company’s goals to discuss and determine the final target sets. A project that is critical to the company’s global supply chain management goals has only been partially sponsored. Because from the perspective of the US importer, the value of the project is not directly related to the company’s goals.
The CIO of Volkswagen of America, Dr. Uwe Matulovic is in a very embarrassing situation. If he does not follow the result of the approval process, then this is a very bad start for new process, and it will be difficult to get support in the future; if he complies with the results, he must find other ways funding the SAP project. Regardless of the situation, he should set priorities and make decisions based on the company’s benefit.