Volkswagen Slashes IT Costs

The German automaker has scrapped systems and reduced staff by 20%, in part to cut the time it takes to bring new models to market

Europe's biggest car manufacturer Volkswagen (VW) has ditched thousands of IT systems and reduced IT headcount by a fifth as part of a drive to overhaul the group's business processes and cut the time it takes to bring new models of car to market.

With a "feuerwerk" of new car models - 37 last year and 22 planned for 2007 - the 60-month planning cycles for new models led to rising costs and inefficiencies and forced the VW board to act.

Stefan Ostrowski, VW group CTO, speaking at the Forrester IT Forum in Edinburgh this week, said: "It started with a shift from the board. From the complexity of our business we had the pressure to go for process harmonisation... and the business decided to put IT in an active role."

IT budget cuts forced the standardisation and rationalisation of systems and VW has now gone from more than 5,000 IT systems down to around 300 worldwide.

VW has a core group IT structure that provides the technology for the VW car marque and some standard systems for the other makes such as Audi, Bentley, Buggati, Lamborghini and Skoda. But each of the other marques also has its own CIO and IT organisation.

Ostrowski told VW does regular benchmarking of its IT costs against other manufacturers such as Mercedes and Peugeot.

He said: "Per car our IT budget is a quarter of those with the highest IT spend. VW is the benchmark. They are spending four times more per car on IT."

The restructured IT department - now called IT and process organisation - has also reduced its headcount by 20 per cent over three years and there are now three times more external consultants than internal staff.

Ostrowski said: "We [internally] are really in a governance role. This makes us quite flexible."

But the overhaul isn't just about cutting IT costs and there is a programme to redesign and simplify VW's business processes.

He said: "It started with a shift from the board. IT was given the role of co-designer. IT was challenged to take an active role in the design of the business processes of the organisation. IT could only do this by speaking business language."

To do this VW trained 400 IT people in business processes and modelling and to be mediators between different functions. Ostrowski said there is also a lot of rotation for people in IT to give them new skills, with the optimal rotation time being four years.

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