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Governance Change in the IT Department: KLM Case Study

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Updated: Jun 29th, 2022

Due to the changes in the governance of the IT structure of KLM, the IT department became more suited for a business-oriented approach. The person who was appointed as the chief information officer (CIO) had more experience in real business than in information technologies. This decision enabled the company to establish a beneficial relationship with the IT department by engaging a business manager in its governance (De Haes et al., 2011). The case of KLM provides essential data on the effectiveness of such an approach. The openness for discussion provided both sides with an opportunity to express their concerns on both business and IT needs, such as expensiveness, outsourcing potential, and security threats.

The interconnectedness of all departments within the company implies that the improved integrity of one of its parts will lead to an overall increase in its efficiency. Therefore, costs per kilometer flown is a standard measure of airline production and represents all involved spendings, including internal IT operations and developments. De Haes et al. (2011) state that, although “business investments involving IT services resulted in a year-on-year increase in the total IT budget,” the costs per kilometer flown “decreased by more than 20%” (p. 33). By accurately assessing the need and importance of IT investments and reformations, companies can increase their revenue or find additional grounds for expansion.

In 2000, KLM appeared to exhibit 1st level of maturity due to its organization, which was used as an order taker, or generally reactive. The IT infrastructure of KLM before the September 11, 2001 attacks was deemed to be unwieldy and expensive, and it was described as working in response to demands from different departments (De Haes et al., 2011).

However, there were multiple reforms in the IT organization of KLM, which brought the maturity level from 1st to 3rd. KLM’s IT department had a budget of approximately €300 million and consisted of almost 1000 full-time employees (De Haes et al., 2011). Its function was no longer straightforward maintenance and control over IT aspects of the company. The IT department was split into two subdivisions: IT operations and IT development. Their line of work now includes developing new business strategies, building an infrastructure that supports the company’s growth, and generally adding value to the business.

The point of building a business case is to provide the employee’s vision of how the proposed investment will increase business profits and what opportunities and risks it will create. The business development office’s (BDO) job is to give an adequate assessment of each business case, rank them by their contribution to the company, and create a business plan based on priorities given to each case (De Haes et al., 2011). I think this requirement creates a strict, yet efficient structure that allows the company to plan for steady growth, and weigh in every next potential step.

The growing popularity of the case method in management signifies its efficiency and simplicity of use. Case building and analysis provide a substantial improvement in critical thinking on a personal level, potentially create new knowledge, and could reveal better ways of solving problems (Aithal, 2017). KLM governs the investment management process through BDO, who is responsible for turning employee’s initiatives into business cases that would be easier to decide upon. The level of involvement of each department of KLM in case studying guarantees that no opportunity will be left unnoticed, and no decision will be rushed.

References

  1. Aithal, P.S. (2017). An effective method of developing business case studies based on company analysis. International Journal of Engineering Research and Modern Education, 2(1), 16–27.
  2. De Haes, S., Gemke, D., Thorp, J., & Van Grembergen, W. (2011). Analyzing IT value management at KLM through the lens of Val IT. ISAKA Journal, 5, 27–34.
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IvyPanda. 2022. "Governance Change in the IT Department: KLM." June 29, 2022. https://ivypanda.com/essays/klm-case-study/.

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