Vw of America Managing It Priorities

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VW of America
Managing IT Priorities
Case Study


Company Situation
Over the past several decades, Volkswagen of America (VWoA) has struggled with finding and maintaining a steady growth rate. Instead, over the past 40 years the company has had large peaks and valleys in the number of vehicles sold.[1] One plan to smooth out the growth curve was to position the company into two main categories, classic and sport. This positioning led the company to plan for future growth throughout the brands, as well as define five clear goals for the company to manage its growth.[2] These five goals highlighted several areas of opportunity for the IT department in the company as well as within VWoA.

The first issue faced to this company is clearly the model of the IT department. The company had six internal departments or groups that prioritized IT resources, headed up by the internal CIO. The decisions made by the IT department of the past were then transferred to Perot systems or gedasUSA, essentially leaving the company without any true IT resources. Both companies were seen as outsourcing for the projects even though gedasUSA clearly was an internal company, and costs even though billed at market value, were truly less expensive than market price if they were charged at cost to the company. This could have been a major deciding factor as the company estimated the cost of all business projects to be $210M and only had a budget of $60M. This type of outsourcing is also limiting the knowledge of the company’s past IT roadblocks as many or all of the long term associates have left the company during the transitions. This transitioning allowed each of the business units to begin to develop their own relationships with web developers over several years in an effort to bypass the companies used for IT development in an effort to get projects completed on a faster timeline. This fragmentation of the web developers could easily drive up costs as well as lose any ability to share learning from one project to the next.

These fragmented groups came from the ten internal business units that had become accustomed to getting at least their number one priority project done each year. This has taught each department head to be only concerned with his or her own unit and not fully understand how their goals fit into the company’s long term strategy. This selfish behavior has begun to show itself in the new decision making model in two ways. The first is that each department has begun to tie their wanted projects to enterprise level projects to gain higher priority even if they are not truly related. The second behavior is that ELT team members are pushing for favors from the CIO to “squeeze” un-funded projects into the timeline during perceived downtime. These favors and peer pressure allow possible projects thru the decision systems established that may not fit into the five priorities established by the company. One example of this is the need for the company to create and fund an enterprise wide distribution system to handle the increase in product models from nine to 22 by 2008. The CIO has been able to get projects on track and on budget but has not been able to find the best way to determine if a project should be taken on. The enterprise wide distribution is a good example of this. It is a long term solution that will be needed for the company to compete and does not directly benefit any one department. This allows the project to fall to a lower priority and gives the decision makers more money to fund projects that directly affect their day to day lives.

Analysis and Evaluation
The company has three main sources of IT knowledge at its disposal. The first and most costly is the business unit relationships with the web-service providers. The second is the contract with Perot Systems. The third and least costly is the GedasUSA group. This is an IT based subsidiary of the VWAG group. By using a true cost for IT...
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