The new process: pros and cons and the criticisms of the executives

At the beginning of 2000s the VWAG define and implement a global product diversification strategy and the new CEO of VWoA launched the “Next Round of Growth” program in order to support the new strategy and increase market share and profitability. The new strategy of VW requires a consist and reliable information system ready to embrace the new trends such as web applications and eCommerce. The VWoA in the 80s and 90s invest manly in sales and marketing and reduce constantly the cost of IT. In addition, the scarce funding are not allocate properly on the strategic project and the decision making process to set the priorities was based on unstructured meeting among executives who try to persuade the CIO to fund his project through their influencial power, instead through the importance of the project for the whole organization.

2. The new process: pros and cons and the criticisms of the executives

Matulovic arrived at VWoA in 2002, he had the responsibility to design, organizing and leading the new IT department at VWoA in order to ensure the support at new company strategy and the NRG program. M. knew that the IT at VWoA had two main problems: first of all the IT was seen as a cost and not as an investment that help each units and the organization to reach their goals; secondly and consequently a limited budget for the IT investment (the cost of the project requested was 170 mln against the 60 mln set by the company). In my opinion, M. started correctly to optimize the resources both by ensuring that the current projects were delivered on time and accordingly with the defined budget (this action reduce the cost per project done and increase the image of IT department), both through the rationalization of the resource allocation among the strategic projects of VWoA.

The new policy of IT project prioritization required three phases of evaluation for each IT project in order to guarantee that each project was: aligned with the business strategy, linked with the company’s objective, synergic to the other IT project. The final list of the project was a result of three step process: 1 calling for project and identifying interdependence; 2 formal project request by business unit (each executive of the business unit); final list of the project recommended by the Digital Business Council (DBC) and approved by the ITSC. At the end, the CIO has the responsability to take the final decision accordingly with the budget and the organizational’s goals.

The main advantage of the new policy consists in: involving broadly the organization in the definition of IT priorities; avoiding dispersion of the resources in small and unintegrated projects; ensuring that the resource are allocating on strategic pojects or other investment in IT linked with the organizational strategy. As P. Weil and S. Aran underlined that the savvy IT companies that are able to manage the IT investment have an higher return of each dollar spent in IT investment and have higher profit than company that are not be able to manage the IT portfolio. Weil and Aran classified investments in IT in four categories: infrastructure (shared IT service used by multiple applications), transactional (used to automate repetitive transactions and cut costs), informational (provide information and reporting for accounting, compliance, analysis, etc.), strategic (to gain competitive advantage by support to entry in new market or launch new products or service).

Most of the executive complained with M. formally because of the complexity of the process of categorizing the project but substantially because some units not received any funding and their project were denied or postponed at the next years. In addition everyone preferred the unstructured debate among executives to allocate the funds even if this process has not been able to ensure any coherence in the decision making process of IT department and leaded to a high inefficiency with higher cost and longer delivery time.

Anyways in this criticism

...