Reference no: EM131480460

Case Study: KLM Airlines

KLM Airlines, headquartered in the Netherlands, is one of the world's leading international airlines. Following its merger with Air France in 2004, KLM employs 33,000 people worldwide (1,000 of whom work in the I function) and operates about 200 planes.

Following the 9/11 terrorist attack in 2001, the challenging business environment for airlines caused KLM's CEO to appoint a new CIO from the operations area, clearly outside of the IT area, to make a structural break from the past. Three priorities included examining outsourcing IT, creating a board of business and IT representatives, and fashioning a process for governance of IT that is shared between the IT function and business un its.

The result of ensuing efforts over several years was to create four levels of committee governance: An executive committee kept an eye on matching the business strategy with IT strategies; A business/IT board, which was composed of the CEO, CIO, and all business unit executive vice presidents, was formed to manage the portfolio and budget; an IT management team worked on tactical planning for the business/IT board; and finally, the CIO/information

services management team planned and managed IT operations, KLM also established a set of key principles and practices and developed a standard business case template that had to be used whenever requesting an investment greater than 150,000 euros.

KLM experienced five benefits attributed to the governance structure: reduced IT costs per kilometer flown, increased capacity for IT innovation, better alignment of investments to business goals, increased trust between functional units and the IT organization, and a mind-set of the value of IT.

Questions:

• What is likely to have led to increased trust for the IT organization?
• What might explain an item that is seemingly quite unrelated to IT (costs per kilometer flown) decreased as a result of the new CIO structure?
• What maturity level did KLM appear to exhibit (a) in 2000 and (b) in 2011? Why?
• Why do you think that KLM requires its employees to use a standard business case template when they want to make an investment?