Harvard Case Study – Volkswagon It Budget

Volkswagen AG is the parent company to Volkswagen of America (VWoA) and therefore sets the budget from which IT projects are funded by. Managing which IT projects are given funds and when is a very important business decision because only projects linked to the corporations’ strategy and goals should be given any support.

An important process in judging which projects are funded is by prioritizing them into specific categories; however all the more important “Stay in Business” (SIB) investments should follow the same judgment process as the other, less important projects.

The Stay In Business projects are usually categorized as the essential processes helping to maintain business continuity and are mandated by VWAG to fund them as there is no question whether or not to do so. Although these processes are necessary for the company to advance and continue to move forward, I think it would be a good idea if Dr. Matulovic sent these particular investment projects through the same review process as the other projects.

This would be a major improvement in the perception of how he is trying to not control the company’s strategy in the eyes of the other business unit manager’s perceptions. Dr. Matulovic should also request more money for the IT budget from global corporate headquarters. Under the current budget, the SAP Project requires about $60 million while it has a global impact and should not be funded under just the VWoA IT budget. Asking corporate headquarters for additional funds would have less of an impact on the company than if he had to use money from other parts of the budget.

By requesting these funds he will have a better relationship with the Executive Leadership Team (ELT) because even if headquarters decides to refuse his request, at least he can say he tried to receive additional money. The traditional IT management style is usually exemplified by a decentralized process due to the company being divided by departments such as sales, accounting and marketing.

This is not a very effective way for communication in the eyes of IT management. This structure will only work if there is an efficient exchange of data among all levels and departments; the IT department’s budget is often the key effort driving the corporation’s strategic goals. This is not the case for VWoA, many of the ELT members would bring Dr. Matulovic their projects asking him to make an exception in order to get funding for their projects. This created a dilemma for him because by allowing these exceptions he was afraid he might be showing favoritism or risk revolt from his peers on the ELT.