KLM’s Enterprise Governance of IT Journey:
From Managing IT Costs to Managing Business Value

The 9/11 attacks have shocked the world. These events have led to significant changes in the functioning of countries and many companies. Here is the example of KLM which began a major overhaul of its IT management. To engage this IT transformation, the company hired a CIO and gave him 3 main objectives:
- Present the interest of IT outsourcing
- Set up an IT board to control more easily business parameters
- Create simple IT governance principles to facilitate management
So as to reach these goals, the CIO, first, implemented the Surfboard Principle to determine if activities must be done within the company or outsourced. The business processes which present a competitive advantage such as CRM or Revenue management are kept unlike office support tasks which are externalized. Secondly, he applied the “Innovation-Continuity Bicycle” which illustrates how innovation costs and Continuity costs are swayed by business. Then, the CIO decided to gather all IT activities (14 different committees) into one: the BDO in order to make it more accessible to stakeholders. The BDO allows the conversion of IT inputs into the Innovative Organizer. It implies the creation of 4 decision layers: from one run every two weeks to another run every semester. Then decision is made by the Business Unit Investment Committee (BIC) or the Executive Committee, regarding its investment cost. Then, management staff gives the priority to such IT investments or to another, using pair-wised comparison technique. Moreover, the BDO’s also allows KLM to summarize major programs depending on its budget. This system provides more efficiency by reducing IT Continuity costs. Indeed, new processes such as e-Ticket and online check-in, provide KLM with more flexibility and reduced costs. As a consequence,