Introduction
With the evolving technology, organizations are putting more efforts to keep up with these advances in technology. The business environment has to a great extent been influenced by the constant changes that are being witnessed in the market currently, technology has made it easier to come up with methods of production that are more effective as well as means of receiving orders, raw materials and processing all of this.
The communication process is therefore to a large extent reliant on the level of technology that has been adopted in an organization; that is why it is very important for the organization to keep in line with the constant technological changes that are taking place in the market place in all business aspects (Sward, 2006).
This case relates to the efforts that were put by Volkswagen to set up an Information Technology infrastructure in the organization. This involved integrated efforts from all the concerned departments in a bid to identify, allocate funding and fully oversee the successful management of the IT system in the organization.
The areas that were given key priorities will be identified in a bid to determine whether the decisions that were made by the management of Volkswagen concerning the business priorities were right and whether the organization could have done better in this situation.
Therefore the budget allocations to the IT department will be considered and the way in which they were made; ultimately, this will come in handy in determining whether this was the best approach or what would have been the result had the management decided to give the IT department the authority to prepare and manage its own budget allocation.
Background Information
The process of funding and overseeing the implementation of the IT system at Volkswagen America was initiated and overseen by the CIO Dr. Uwe Matulovic; it involves an involvement of all the major stakeholders in the organization including the Executive team leaders, the program management office, the IT steering committee as well as the digital business council and the other major personnel from the business Units within Volkswagen America (Austin, 2007).
Among the major issues that were of concern and which needed urgent consideration included the issue of overseeing a means of governance and directing the process of development, there was also a major hurdle regarding the amount of funding that was available had been allocated implementing the new business architecture at Volkswagen America; this branch was very crucial for the market share that the Volkswagen group enjoyed in the United States.
There was a capped funding for this implementation of the IT projects in the organization, the VWoA needed a total of $210 million to successfully implement these projects but only $60 million had been allocated by the parent company, the Volkswagen Audi Group.
Given that this amount was inadequate to fully cater for the IT projects that were in process, there was a need to come up with a new process of giving priority to the projects that were to be funded; however in all this it was very important to ensure that the new business architecture had the capability to match with the corporate goals for the organization as well as the business strategy. It was also very important to ensure that the benefits of this program would be able to be felt at a global level within this organization.
With the limited funds the management of the business team at VWoA presented a major challenge, this could be attributed to the allocation of funds to the various projects and business units in order of priority.
As a result, the leaders of the business units whose projects had not been funded had a case to feel left out and thus oppose the new business architecture. In this regard, the CIO had to ensure that all the units were represented in the process of determining the best way in which to determine the prioritization procedure for the projects that were due to receive funding.
Key factors in the Prioritization Process
One of the most important considerations that were put in the process of developing the new business architecture was the involvement of the leaders of all the business units to ensure that there was an all-round involvement of all the concerned parties.
All the business unit leaders had an opportunity to present their case on why their projects needed to be given priority in the funding process; the actual prioritization process needed to be carefully considered an analyzed to ensure that all the stakeholders understood it clearly and were in agreement with it.
Another important issue that needed the attention of the stakeholders was addressing the problems and criticism that had been leveled on the process and looking at the associated cases in a bid to come up with solutions for the problems that had been encountered (Rose, 2000).
In determining which projects were to be given top priority in the funding process, the budget allocation for each project was considered in addition to the range to which the project will affect the business operation of the business, that is; is it at the VWoA level or at the global level. These were key determinants for the level of priority that was given to each project in the allocation of the funds.
The management team in the prioritization process put into consideration some key factors that included a look at the project, the communication process for each project as well as the dependants of the project.
The projects were considered in relation to the blueprint for the business as a whole; in this regard, therefore, it was possible to group together the similar initiatives and identify those projects that were dependent on each other; this made it possible to reschedule the dependent projects until such a time when the independent ones had been implemented.
The other important consideration included the formal requests that had been presented by the business units for funding, this determined the grouping of the project depending on the type of investment as either a project that was necessary to stay in business, the amount of return on investment associated with the project and finally the ability of the project to create and investment opportunity for the business organization.
Finally the projects, on the basis of the requests from the business units, were transformed into the portfolio goals for the business enterprise. This was done by considering the top strategic goals for the organization in line with the giving priorities to the projects. After this, the funding was allocated depending on where the projects ranked based on the ranking criteria with the top-ranked projects receiving funding first until all the funds had been exhausted (Austin, 2007).
Problems and Critiques for the Prioritization process
There were several challenges that were encountered in the process of implementing this process of prioritization of the funding process. This process that was based on the strategic goals for the business created a sense of disharmony in that some of the projects that seemed to have global importance to the business did not receive any form of funding.
There was a major challenge in bringing on board all the employees especially those from the business units that did not receive funding; this was mostly due to the independent nature of the operation of the business units. The major problem here was on the means through which the employees could be made to look at the bigger picture and consider the benefits due to the larger organization as a whole as opposed to the individual business units.
The other major problems were related to the tendency by the individual business leaders to exaggerated the ROI associated with their businesses in order to get priority in the funding process, this presented a major challenge in the validation of the strategic relevance of each project under consideration.
In this regard, there was a dire need to find alternatives in order to address all the issues that had been raised in regard to the prioritization process, this included reallocation of funding to key projects that had not received funds, leaving the unfunded projects just like that until more funds were available, sourcing the funds for the projects from other sources or alternatively beginning the prioritization process all over again.
There are various criteria that can be used to manage IT project, the criteria can be based on the financial outcomes of the project, the organizational needs associated with the project, the business environment in which the competition is taking place, the technical requirements for the business, the risks associated with the business and finally the support that the management offers to the business (Jiang & Klein, 1999).
These criteria are ranked in order of priority and they are very important in determining which projects should be given top priority, in the case of VWoA, these were very crucial considerations.
The growth initiatives that were identified for VWoA, in the coming years were a key determinant in the projects that needed to be given key priority during the allocation of funds to the various projects for the business enterprise.
Budget Control for the IT projects
It is important to have an in-depth understanding of the process of controlling the budgets that were due for the allocation of funds for the implementation of the IT projects. As aforementioned, most of the funds were allocated from the parent company for VWoA to facilitate the implementation of these projects.
The control of the budget for the funds was, therefore, the prerogative of four teams in the organization; these included the Executive Leadership Team (ELT), the IT steering committee (ITSC), the Project Management Office (PMO) and the Digital Business Council (DBC).
In this process, the major responsibility for the ELT was to execute the next round of growth, this was a key aspect in the prioritization process for the projects because it determined the projects that were in line with the attainment of these objectives; the IT governance also has a critical role to play in determining the Next round of growth in the business.
On its part, the ITSC was responsible for the guidance and approval of the selection and prioritization process for the IT projects, this was very important in determining which projects were given top priority in the budgetary allocations (Austin, 2007).
The project proposals and approval of these proposals was the responsibility of the PMO; finally the DBC had a very critical role to play in the control of the budget, it had the responsibility of going through the projects and carrying out thorough scrutiny in order to determine the projects that were in line with the business strategy for VWoA. This was a key consideration in the prioritization process and as a result, it was very important to have a competent DBC team in place that fully understands what was required in this aspect.
It is very important to ensure that all the teams understand their responsibilities properly and that they take an active role without any bias in the budgetary allocation and control process. The IT department has a critical role to play in the success of any business by making sure that the business remains relevant in the market, therefore the team responsible for the budgetary allocations should be able to carry out their responsibilities in a competent manner and ensure that all the stakeholders are satisfied with their decisions.
With the new budgetary constraint that was put by the parent company, there was a great need to reconsider the business architecture for the allocation of funds for implementing the projects; in the same way, it was very important to ensure that the overall business objectives for the organization were given top consideration as opposed to the implementation of the projects for the individual business units, in this regard therefore the achievement of the business strategies for the organization was given top priority.
The team that was given the responsibility of handling the budget allocation consisted of representatives from all the business units and they were likely to make a decision that was likely to benefit the business as a whole as opposed to setting aside a budget for the IT projects which might have benefited independent business units at the expense of the entire business enterprise.
Conclusion
Although it is important to fund all the IT projects at VWoA, with a limited budgetary allocation, this was not possible. The prioritization process, therefore, presented the best opportunity to ensure that the projects that were funded were in line with the business strategies of the organization.
In order to ensure that all the employees understand this process and that they are fully involved in the same, all the affected business units need to take part in making the funding decisions, the funding decisions for the IT projects need to be done in line with the attainment of the company strategies (Applegate, Austin & Soule, 2009).
Ultimately there should be clear communication in the business units concerning the funding, and the executive management has a responsibility to ensure that all the business units understand and are in agreement with the decisions that are made in regard to the funding of the projects. Ultimately all the employees will play an active role in ensuring that the IT projects are ranked according to priority and that VWoA will be able to achieve its business objectives as per the corporate strategy.
References
Applegate, L. M., Austin, R.D. & Soule, D.L. (2009). Corporate Information Strategy and Management, (8th edition). Burr Ridge, IL: McGraw-Hill/Irwin.
Austin, R.D. (2007). Volkswagen of America: Managing IT Priorities. Boston: Harvard Business School.
Jiang, J.J. & Klein, G. (1999). Project selection criteria by strategic orientation. Information & Management. 36:63-75
Rose, T. (2000). “Prescriptions for Managing IT Priority Pressure”. Information Strategy: The Executive’s Journal. 17(1), p.18.
Sward, D.S. (2006) Measuring the Business Value of Information Technology: Practical Strategies for IT and Business Managers. Intel Corporation, pp. 1-307.