Does IT add value? At the passenger business of €22.4 billion German airline Lufthansa, CIO Christoph Ganswindt is in the midst of a global project that proves that it does. Launched in 2005 by Lufthansa and other members of the Star Alliance industry network, the common IT platform imitative (CITP) is in the process of delivering a range of benefits to the airlines, including updating antiquated systems and lowering maintenance costs. (See “Tech takes off”.) As Ganswindt explains here how CITP is a flying example of how IT’s value-enhancing capabilities and his view about navigating the often tense relationship between IT and finance.
Is there more pressure today for CIOs to get involved with other areas of the business?
I think so. Development, systems operation and technology provision are things you can get from almost any kind of service provider today. As a CIO, you certainly need to understand what all that means. But it’s more important to understand the business and identify improvement and productivity gains. Then the CIO needs to translate that into technology and manage that translation.
What’s the relationship between finance and IT like at Lufthansa Passenger Airlines?
I’m a CIO who is very much focused on business value creation and business processes. It’s why my relationship with the finance function for Lufthansa Passenger Airlines is quite smooth. That might not be the case for CIOs in other companies who are very tech oriented, who sometimes have problems getting the rest of the company to understand where the value creation proposition of IT is.
“Whatever I propose to the board in terms of IT projects, the value proposition is key. If we don’t meet the hurdle rate, we simply can’t do it.”- Christoph Ganswindt
How does that focus affect projects?
Whatever I propose to the board in terms of IT projects, the value proposition is key. If we don’t meet the hurdle rate, we simply can’t do it.
The business case for CITP was purely about cost. As with any other carrier in the world, Lufthansa is still using systems that in some cases are up to 30 years old. It’s not easy finding people who know how to maintain these systems, while the flexibility and the cost structure of these systems are growingly inefficient. CITP basically replaces the core business systems that Passenger Airlines is running—inventory, ticketing, departure control systems and reservation systems.
Do you have any advice for CFOs who want to foster a better relationship between finance and IT?
Unlike investing in an ad campaign or a product, IT tends to be something you don’t see. Sometimes that makes it very hard for finance people to grasp that there is a significant investment required in IT to make things happen. Finance needs to work on gaining a better understanding of that. On the other hand, the job of IT is to make finance understand—to get away from technical terms and translate that into something the business and finance people can follow.
What are the finance-related challenges for you in 2008?
Looking at the world economy and high oil prices, the International Air Transport Association (IATA) just recently revised its industry financial forecast for 2008 significantly downwards for its member carriers.. That requires our IT division to focus once more on cost management. Finding the right mix of cost reduction, innovation and replacing what has to be replaced—that’s the challenge.