Information Systems Report

Executive Summary

Information system (IS) has become an integral part of a business, particularly for large business having operation in more than one location with numerous business segment and subsidiaries. Volkswagen is German automaker which produces autos since 1937 and sells the products nationally and internationally. The company belongs to automotive industry which is featured by rapid technological changes. Efficient, flexible, sustained and durability are the areas which are the focus of changes here in terms of increase in efficiency of fuel usage, speed, safety and soundness are the root reasons why new brands or new version of existing products are introduced in this industry. Predictive technology, automatic beam control, backup cameras, smart home integration, autonomous driving, GPS tracking, car to car communication and networking, versatile crush control, cars as a servicing, automatic liftgates and biometric seat technologies are the technological trends affecting the automotive industry significantly.

Annual report of Volkswagen has been searched but no evidence is found in any of the published sources regarding the preparation and compliance of IT budget by the company. But it incurs a significant amount of resources on information system each year and there is no doubt that the company prepares at least a semi-structured budget to expend the resources on IT although it remains undisclosed. Return on investment and cost savings are the two widely used quantitative measures while speed of communication, business collaboration, time taken to make decision, quickness in information extraction, time reduced to serve customer with demanded information and effectiveness of internal communication are some qualitative measures to be used to measure IS investment.

Volkswagen has a formal ethical code of conduct, Protected Customer program and performs regular basis IT audit to ensure better IT governance. Overall business objective of Volkswagen is meet by IT system in terms of financial and social perspective not environmental and thereby formal structured IT budget compliance and environmental focus is suggested here.

The systematic collection, classification, sorting, storing and communication of information on different functional and strategic areas of a business is known as information system (IS). Information system of an organization consists of a number of components like hardware, software, network, storage and so on. Technologies used in information system for smooth operation is known as information technology (IT) which is a part of information system. This assignment intends to study the IT evolution affecting competitiveness and success of automotive industry to which Volkswagen belongs to, recent technological trends in the industry, compliance of IT budget at Volkswagen, measurement and evolution of IT investments and governance to enhance business performance along with some examples. These topics will be covered from the perspective of Volkswagen which is German automaker founded in 1937 by Labor Front of German headquartered in Wolfsburg (Volkswagen, 2019).

Rapid change is the key feature of automotive industry where each and every year a number of new auto brands are introduced because existing brands lose appeal within a very short time (Becker, 2014). Efficient, flexible, sustained and durability are the areas which are the focus of changes here. For example, increase in efficiency of fuel usage, speed, safety and soundness are the root reasons why new brands or new version of existing products are introduced in this industry (Becker, 2014). Considering this, automakers including Volkswagen are keen to innovate their autos and this requires a significant amount of resources to be employed on research and development. Without evolution or introduction of new and innovative technology, automotive industry will surely suffer to attract the customers and retain the industry attractiveness (Becker, 2014). The industry has seen very quick changes over the time. According automotive industry expert Becker (2014), this industry is featured by self-driving and innovative designs and features, parking feature, energy savings, Wi-Fi, interactive computer systems, night-vision assist, 360-degree cameras, collision protective technology, and attention assistance.

These features are directly linked to technological innovation. For example, customers are nowadays demanding and preferring energy efficient autos due to rise in fuel cost and other issues. All the automakers try to concentrate here and make innovation. Electric car is the output of such a concentration which saves the fuel cost. Similarly, the demand for collision protective autos result in more and more research and development on how to avoid it and offer a safe and secure journey (Katare, 2019). Therefore, the focus of Volkswagen needs to be on innovation and addition of new features demanded by customers in its autos that will enhance competitive advantage leading to success. The technological innovation should in the area of energy savings, flexibility, parking, durability, safety, model, internet and entertainment facilities (Katare, 2019).

Automotive industry has undergone and seen many technological trends in recent years which are impacting the success of the firms belonging to this industry. Predictive technology such as artificial intelligence and machine learning are the first trend which demands for algorithms to set up and run autos and fix-up problems without human assistance (Dayal, 2019). Automatic beam control is another trend which demands for mechanized control of headlights and high-beam in correlation with traffic movement (Dayal, 2019). Backup cameras, smart home integration are two other trends in technological arena which forces automakers to include high resolution camera and technology to integrate smart home while driving. Self-driven auto is another most influential trend which means driving a car without driver just by the camera, sensors. Scanners and other technologies. This trend changes and will change the industry a lot.

GPS tracking, car to car communication and networking, versatile crush control, cars as a servicing, automatic liftgates and biometric seat technologies are the other technological trends occurring here which are affecting the industry significantly. For example, there is a high concern among the passengers regarding the identity, motive and mental condition of the driver while driving because an abnormal and drunk driver is most likely to have an accident because of his mental unrest and disorder (Dayal, 2019). Therefore, passengers want to be sure about the identify of driver before and during the driving. Automakers are helping here by introducing biometric seat technology, GPS technology and other means which in turn affect the whole industry to be more updated, innovative and customer friendly then those offered by competitors.

Allocation of resources to acquire, operate, and maintain information systems and technology of an organization to meet the organizationally set IT objective is known as IT budget which is similar to operational budget to achieve operational objective of a business (Laudon and Laudon, 2015). The quantity, quality and timing of the resources to ensure proper functioning of the IT ecosystem is outlined in the budget which makes it easy to implement and maintain an effective and efficient IT system by an organization.

Annual report of Volkswagen has been searched regarding the allocation of resources on IT or IS. The company has been expanding its IT investment and investment to develop its information systems to connect all the business segments and units over the world. The company has a core focus on cloud-based long-term sustained viable IT system that leads to business development along with investment in continuous product development and innovation (Annual report, 2018). But no evidence is found in any of the published sources regarding the preparation and compliance of IT budget of the company. Being a technology company, it incurs a significant amount of resources on information system each year and there is no doubt that the company prepares at least a semi-formal budget to expend the resources on IT although it remains undisclosed.

The company needs to focus on development and maintenance of its information system for its success. It has operation in many countries of the world including US, China, Brazil, Kenya, South Africa, Spain, Malaysia, Russia, Mexico, India and other countries with the help of a number of subsidiaries. A centralized communication network is maintained among them which needs to be protected from external threat, updated to meet the business needs and developed technical infrastructural facilities and automotive functionalities of the system (Reuters, 2019). IT expenditure and investment are made in these areas by Volkswagen.

As the investment on IT is significant, so it is significant to know the outcome of such an investment which is done by measure of IT investment that tries to measure the effectiveness and rationale of IT investment. Moreover, IT budget is approved by non-technical and non-IT executives whom the IT officer needs to convince to get the budget approved and thereby it also important for IT officer to know the outcome of IT investment and expenditure so that he or she can convince the boss for further budget to develop and update the system for better functionalities (Laudon and Laudon, 2015). There are some qualitative and quantitative measures to assist IT officer in this regard. Return on investment and cost savings are the two widely used quantitative measures that can be used by Volkswagen Chief Information Officer (CIO) to ensure outcome are achieved compared to investment in IT. Besides these, speed of communication, business collaboration, time taken to make decision, quickness in information extraction, time reduced to serve customer with demanded information and effectiveness of internal communication are some qualitative measures to be used by CIO of Volkswagen to measure IS investment (Laudon and Laudon, 2015).

Information regarding IT budget is not available for Volkswagen which makes it difficult to measure the IT investment and its outcomes by means of quantitative measures. However, some sort of assumptions can be made here in case of qualitative measures. For example, the effectiveness accuracy, and timeliness of the information provided by the information system can be measure of the IT investment. Time taken to connect with suppliers and customers, subsidiaries and other stakeholders as well as the ease of getting the accurate information by the system can be another measure. The update record of sales of each brand autos, price, trade receivables, payables, cost incurred, trend of these variables over the time are also provided by the information system and accordingly time, accuracy and understandable reports provided by the system can be the measure of IT investment for Volkswagen (Laudon and Laudon, 2015). Here measures should be focused on the area of financial, competitive advantage and strategic benefits. Financial benefits are easy to measure by means of quantitative assessment. But competitive advantage and strategic benefits need to be measured by qualitative assessment.

IT governance is a significant aspect for any sort of organization to protect its information system from external attract and leak of competitively sensitive business information by any other means. The practice of proper management, maintenance, budgeting, performance measurement, assessment of effectiveness and efficiency of information system to meet business objectives is known as IT governance (Lindros, 2017). It includes the way to prepare, approve, manage and control IT budget also.

Volkswagen has a formal ethical code of conduct which states the expected behavior of its employees in terms of safety, soundness and security of the information handled by them and fair treatment of all issues protecting misrepresentation, fraud and wastage of organizational resources (Annual report, 2018). But there is no separate IT governance manual for the company as far it is known from the published sources. Corporate and ethical code of conduct include a part regarding the IT governance in terms of management of information. The company has a focus on safeguarding data and IT system, protect customers from cyber-attacks. It has a separate Protected Customer program which monitors, investigates and handles the issues regarding the safety and security of customer database (Annual report, 2019). This system and IT system of the company are audited at a regular interval to ensure transparency, accountability, fairness and accuracy of the people involved in the system and the system itself (Annual report, 2018).

The IT system of Volkswagen is headed by a Chief Information Officer who is authorized to ensure the overall management and control of the IT system and he is directly bound to report to the board of directors and CEO for his functions and budget allocation system is not known publicly. But it can be assumed that may be budget is approved by chief financial officer but controlled and expensed by the information officer. There should have a more focused and clear governance regarding information system who is authorized and to who he is bound to report for overall IT related functions.

The judgement needs to be made in two ways, efficiency and innovation, for the three areas of performance which are financial, social and environmental performance that are linked to the overall performance of the business. Financial performance is the most important aspect related to the overall objective of Volkswagen. In absence of precise IT budget and expenditure of Volkswagen, it is not possible to concretely mesmerize the overall effectiveness of the IT system of Volkswagen. If theoretical explanation made by the company in annual report is assumed to be sufficient appropriate disclose, then it can be said that Volkswagen has serious concern and concentration towards the management of its information system that supports business objective achievement as said in the annual report (2019). Net profit of the company goes on year by year which can be used as the proxy of outcome of IT investment as IT investment is also increasing over the years. Thus, overall effectiveness of IT system of Volkswagen can be assumed to be moderately effective to support financial objective in absence of reliable information.

Social perspective of IS is ensured when it fulfills the overall objectives and demand of the social stakeholders. Volkswagen has some social responsibilities which involves customers, suppliers, employees, media, communities and other social groups. Whether interest of these groups is served by the system or not defines the effectiveness of IT system. Volkswagen has separate Protected Customer program, a part of the corporate governance and ethical code of conducts cover the safety, security and protection of customers, suppliers and employees. This implies that IT system of Volkswagen is appropriate in meeting social objectives.

IT system effectiveness is also measured from environmental perspective. Volkswagen had accused by US government in violation of Clean Air Act in USA in 2015 which states that the company had intentionally controlled its emissions of NOx during the laboratory test which in reality emits more than 40 times NOx. This scandal can be taken here as an example that IT system of the company was not fair at least in the area of environmental perspective (BBCm 2019). However, this scandal leads to a robust initiative taken by the company to meet its environmental objectives of long-term sustainable development and viable fuel-efficient auto production.

IT budget is an emerging but useful tool for organization. This becomes much more important for technology-based firm like Volkswagen. Whether the company prepares and follows IT budget is not publicly disclosed. Some external sources disclose variant amount of IT investment in different years by Volkswagen which contradicts with the assumption of IT budget preparation and supports the random IT investment. If the company doesn’t really follow any IT budget, then firstly the company is suggested to prepare and apply it from the next periods.

Secondly, Volkswagen is suggested to appraise IT investment at a regular interval to ensure that the investment was right yielding the expected benefits in terms of financial, social and environmental objectives. Moreover, it will help the company to learn from previous mistakes regarding the issue of IT investment that will help in further improvement. Thirdly, there are a number of trends identified here which are affecting the automotive industry. Volkswagen needs to consider these trends and innovate itself in these areas to make the market position competitively attractive and secure the long-term success. Final recommendation is regarding the objective of IT system of the company from environmental perspective. The company has less focus on environmental perspective of its IT system and this area should be considered careful to avoid regulatory burden and protest of environmentalist in future.

Volkswagen belongs to automotive industry which is shaped by raid technological changes. Security, safety, autonomous driving, artificial and machine intelligence, camera record, protection from collision, efficiency in fuel usage, and so many technological trends are going on in this industry where Volkswagen needs to focus to enhance competitiveness and success likelihood. Available public sources said that the company follows no structured IT budget. Overall measurement of IT investment can be assessed by both qualitative and quantitative tools like return on investment, cost savings, reduced time, accurate and timely information provided by the system. IT governance of the system should be more focused. Overall business objective of Volkswagen is meet by IT system in terms of financial and social perspective not environmental and thereby formal structured IT budget compliance and environmental focus is suggested here.

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Becker, S. (2014). 10 Awesome New Features in the Auto Industry. [online] Motorbiscuit.com. Available at: https://www.motorbiscuit.com/autos/10-awesome-new-features-in-the-auto-industry/ [Accessed 25 Apr. 2019].

Dayal, P. (2019). Top 11 Tech Trends and Solutions in the Automobile Industry. [online] Newgenapps.com. Available at: https://www.newgenapps.com/blog/tech-trends-solutions-in-automobile-industry [Accessed 25 Apr. 2019].

Katare, L. (2019). 6 Major Automotive Industry Trends That May Surprise You. [online] Blog.marketresearch.com. Available at: https://blog.marketresearch.com/6-major-automotive-industry-trends-that-may-surprise-you [Accessed 25 Apr. 2019].

Lindros. K., (2019), what is IT governance? A formal way to align IT & business strategy, [online] Retrieved from <https://www.cio.com/article/2438931/governance/governanceit-governance-definition-and-solutions.html>

Loundon, K. C., &Laundon, J. P. (2013). Management Information System. McGraw Hill

Reuters. (2019). Volkswagen to invest $4 billion to build digital businesses, software. [online] Available at: https://www.reuters.com/article/us-volkswagen-software-investments/volkswagen-to-invest-4-billion-to-build-digital-businesses-software-idUSKCN1L80VA [Accessed 25 Apr. 2019].

Volkswagen. (2019). Volkswagen Group: History. [online] Available at: https://www.volkswagenag.com/en/group.html [Accessed 25 Apr. 2019].

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