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CIO Voices: Volkswagen’s Hofmann Explains His Principles of Digital Transformation

By

Sara Castellanos

Martin Hofmann, Volkswagen's chief information officer, who oversees information technology for Volkswagen Group's 12 brands, at Volkswagen's Digital Lab in Berlin.Photo: Jens Oellermann

BERLIN — Everything is about speed at Volkswagen AG’s Digital Lab in Berlin, one of the auto maker’s six IT labs across the world.

Software engineers here work in pairs on the same lines of code for eight hours a day under a so-called extreme programming model meant for the engineers to challenge each other, keep each other accountable and share knowledge under tighter feedback loops.

“It sounds counterintuitive, because you put two people in same position and you double your costs,” said Martin Hofmann, Volkswagen’s chief information officer, who oversees information technology for Volkswagen Group’s 12 brands. “But the speed goes up dramatically, the quality is very high, they get better code, and the products are faster and better. At the end of the day, it’s more productive.”

The new working method was implemented about three years ago with help from Pivotal Software Inc., a San Francisco software and services company. Nowadays, the time it takes to get products to market has been shortened by months and in some cases years, according to Volkswagen. For example, a team here worked for about 12 weeks to develop a system that allows DHL Parcel to deliver packages to the trunks of select Volkswagen cars.

The Digital Lab in Berlin has grown to about 70 workers since it opened in late 2015 and is one of six Volkswagen Group IT labs worldwide. Each of them specialize in areas ranging from augmented reality and smart mobility to artificial intelligence and robotics. The labs are meant to expose the corporation to “the bleeding-edge of technology,” Dr. Hofmann said.

He spoke with CIO Journal at the Berlin outpost in November about his approach to innovation, the transformation of corporate IT and software development in the auto industry, and what’s at the top of his agenda in 2018.

Edited excerpts are below.

How has corporate IT within Volkswagen AG changed over the past few years?

We’re in the middle of a tremendous transformation process. Everyone is talking about digitalization, and Volkswagen as a group is moving from being a traditional automotive producer to a digital company, with electric vehicles, autonomous vehicles, mobility services, robotics, all of that. In the past, IT was a support function, a back-end function, a cost factor. It was never seen as a big value-add. Now, (we’re) moving to the forefront. In the back office, you still want to have robust, reliable systems, technologies and vendors, but on the front end, you have to innovate. Completely new technologies are coming on the horizon where you don’t have enough time to wait it out; you have to immediately apply it. And to do this, you need different kinds of capabilities and people than in the past. Your risk is now much higher. You’re betting more on quantum computing, on artificial intelligence, on unproven technologies. The risk spectrum has changed dramatically.

How has all that change impacted you in your job as CIO?

In the past, reliability and stable systems at low cost was my objective. I was told to focus on that. Now, the role is to do that and not neglect the legacy systems, but at the same time, focus on a very different new world of technologies, to try things out, find the diamonds that we can use as a company to build new services around.

Volkswagen AG's Digital Lab in BerlinPhoto: Jens Oellermann

What’s your rationale for investing in technologies such as quantum computing, which won’t have any immediate return on investment?

With digital disruption going on, and the explosion of technologies, the game has changed. We clearly understand quantum computing is nothing that we will apply next year in broad scale to all of our customers, but in the next two or three years you’ll find commercial offerings from companies like Google where you can utilize quantum computing in the cloud. So, you have to get ready today to build your capabilities and experiment. If you don’t, it’s going to be harder and harder to catch up. We want to be at the forefront, from a research standpoint. Sometimes people think it’s crazy what we do, which is something good. You get to a point where technology is not a limiting factor. This is freeing a lot of energy and creativity with people. It’s helping us get really exciting people on board.

As Volkswagen becomes more of a digital company, how are you using the cloud to maintain competitiveness?

We’re becoming a more digital company, and a lot of that includes the cloud. We’re in the middle of migrating our entire infrastructure into what we call the hybrid cloud. We’re upgrading our on-premise data centers into cloud technology. We’re using (Pivotal) Cloud Foundry as one example, and we use public cloud services from Amazon, Google, IBM and Microsoft. The idea is we’ve always had a policy of vendor independence. We want to be the ones picking the cloud providers, so we’re investing heavily in cloud brokerage and technology that allows us to switch instantly from one provider to another. But we’ll always keep our private cloud for sensitive data. Many things wouldn’t work without the cloud, like our Internet of Things projects and connected vehicles projects, because it’s all about scalability. We have so much sensor data, and you couldn’t scale that anymore with hardware. Only cloud technology can offer us that scalability. In five years, we’ll be 100% cloud based, always with a private component and a public component with hybrid multi-cloud.

How has software development at Volkswagen AG changed over the past three years?

The way we manage people is very different than before. It’s a complete delegation of responsibility. We define boundaries and expectations, but in between, we give maximum freedom to the teams, and that’s a very different way of working compared to a traditional hierarchical organization. We’re basically taking traditional hierarchies out, and letting people be more independent. That’s a new approach to software development. We’ll find other areas of the company that can adopt that as well.

What’s at the top of your agenda in 2018?

There’s a new data protection law in Europe. Europe wants to be at the forefront of data privacy, and the idea is that you as a consumer have the right to know where your data is stored and demand that it’s deleted. We have to develop systems that allow for the tracing of the data, to make sure it’s deleted everywhere. In 2018 we’re focusing heavily on that. For a company such as Volkswagen, it’s a multi-million (Euro) project just to do that and it’s very laborious work. We’re also looking for 1,000 software experts that we want to bring on board total, in areas like machine learning and AI, intelligent robotics, cloud computing, and the gaming industry within the next few years. We are also completely renovating our after-sales and dealership systems so that (employees) only need smart tablets or iPads at the dealerships.

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