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“Because we live in a highly competitive and ever-changing world, at any given time most organizations are improving or replacing their information systems” (Romney & Steinbart, 2012, p. 579). As an organization needs change due to increase competition, regulations, business growth and other reason and company needs to respond by also changing its system in order to meet the needs of the business. The need for changing to a new system helps the business because the new system has much more capabilities then the older system allowing the company to be able to perform business more efficient and effectively.
The need for changing to a new system helps to eliminate flaws and system incompatibilities created by the old system. “A reliable information system is a necessity for all companies. Companies must properly maintain accounts and detailed records or face unnecessary costs. A well-devised accounting information system, which ensures relevant and reliable information is reported in financial statements, benefits every type of company” (Pettir – Accounting, 2013). I believe that a company should change to new systems in order to keep up with technology and their competition.
An updated “accounting information system can help businesses run better by providing timely information on internal operations” (Small Business-Chron, 2013). A company should consider their budget and because accounting information systems can be very expensive to purchase and maintain. Firms should make sure that they can afford purchasing an accounting information system and set realistic expectations. Firms should also make sure that they accounting information system has been through tested by performing simulation before the system goes live to avoid any potential problems that could cause firm time and money.
Firms should also make sure that employees have been properly trained on how to use the new and/or updated accounting information system. (1) Potential Benefits One of the potential benefits associated with changing a new system is that its help increases a company’s competitive advantage. As technology increases and changes companies will need change its system in order improve and increase the quantity, quality, speed and accuracy of information. Also companies need to stay ahead of their competitor so any upgrade in technology that will provide a competitive edge is crucial for a company.
This will also help to improve products and services, lower cost and to provide other competitive advantages. Secondly, another potential benefit associated with changing a new system is that is provides productivity gains. By having a system that can perform certain employee tasks reduces money spent on hiring and paying employees and also increases performance time. This also helps relieve employees of certain clerical tasks allowing them to focus on other important issues. Thirdly another benefit associated with changing a new system is it eliminates outdated systems”.
System become old and need to be updated constantly in order for them to remain effective. The benefit of updating an outdated system results in better system capabilities and faster processing time. (1) Potential Risks One of the potential risks associated with changing a new system is how the employee will react to the change. Employee will either view the changes being made as good or bad depending on the individuals being affect by the system change. “Management view changes positively if it increases profits or reduces costs.
Employees view the same change as bad if their jobs are terminated or adversely affected” (Romney & Steinbart, 2012, p. 588). Employees who view the changes as bad will act out displaying aggression, projection or avoidance. All of these forms of resistance can result in decrease company performance, low morale and sabotage. Resistance usually takes places because of: fear, lack of top management support, negative experience with prior changes, lack of communication, disruptive nature of change, manner in which the change is introduced, person biases and emotions and personal characteristic and background.
Managers can help minimize the risk of behavioral problems by electing a manager who can help rally, boost employee’s moral and encourage coworker to help and cooperate with the systems development. Secondly, the manager needs to involve anyone that is affected by the change in the development of the new system. Management should let employees offer suggestions and help in the decision making. Management needs to let employees know which feedbacks will be used and which will not be used and why.
By doing this employees become more “knowledgeable, better trained, and more committed to using the system” (Romney & Steinbart, 2012, p. 90). Thirdly management should effectively communicate with anyone who is going to be affected by the system change immediately. The employee should be told of the changes that are going to be made and the benefits the changes will provide to them. Lastly, management should help ease employee fears and stress by “addressing their concerns and provide assurance (to the extent possible) that job losses and responsibility shift will not occur” (Romney & Steinbart, 2012, p. 590). Management should also reassure employees that they will be properly trained on how to use the system.
Secondly, another potential risk associated with changing a new system is “employees are not properly trained”. Companies will sometimes take short-cut because of time and cost associated with training employee. This however can result in the company not being able to reach its expected benefits and return on its investments. Lack of employee training can also result in employees having to ask other employees who are experts in using the system for help thereby “decreasing productivity of coworkers and increasing company costs”(Romney & Steinbart, 2012, p. 49). This threat however, can be reduced my companies providing employees with proper training, system documentation and procedural manuals for employees to use. Thirdly, another potential risk associated with changing a new system is “poor system planning”. Management sometimes may have unrealistic goals and expectations of what they want the system to do or the system may be too complex to understand which can result in the system failing. In order to mitigate this threat management should set realistic goals and expectations.
Management should prepare a feasibility analysis were they address the five aspects (economic, technical, legal, scheduling, and operational feasibility). Management should also prepare a system analysis in order to address the “current problems, the reason for the change, the proposed system’s objectives, and its anticipated benefits and costs” (Romney & Steinbart, 2012, p. 590). Management should evaluate design alternative and have the steering committee to evaluate and chose the best decision that will meet the organization’s needs.
Lastly, another potential risk associated with changing a new system is “not testing the system properly”. Poor system testing can be very costly for a company. Testing should be done in order to discover and eliminate problems as early on in the development process as possible. “The Gartner Group estimates that bugs discovered later in the SDLC cost 80% to 1,000% more to fix than those discovered earlier” (Romney & Steinbart, 2012, p. 646). In order to reduce this threat companies should use debugging techniques in order to discover and eliminated problems.
Companies should also test the system by using system testing techniques such as; walk-through, processing test data and acceptance tests. (2a) Purchase Software One of the advantages of the company choosing to purchase the software from Oracle and having it maintained by the company’s information system group is the company doesn’t have to worry about the risk of “loss of control” that could result from outsourcing its AIS system. The company is able to manage its system and data without the threat of having to worry about their losing its system and data.
Secondly, another advantage of the company choosing to purchase the software from Oracle and having it maintained by the company’s information system group is increased service. Poor service can result if the company chose to outsource its AIS to Oracle. By the company housing its own AIS will result in the company be able to better respond to changes in organization. Lastly, another advantage of the company choosing to purchase the software from Oracle and having it maintained by the company’s information system group is flexibility.
The company is under no contractual agreement so if at any time the company becomes dissatisfied with the product or needs to change products because of structural changes, the company can do so without consequences. If the company would have chosen to outsource its AIS to Oracle then the company would have to follow the terms and agreements stated in the contract or risk legal and costly consequences. One of the disadvantages of the company choosing to purchase the software from Oracle is risk of the software “not being flexible, easily maintained and user friendly-software.
This can result in the company having to spend money in order to maintain the system and to keep it running efficiently. By purchasing a system that is not user friend will result in employee who will be resistance to use the system and time wasted trying to train employees on how to use the system. This threat can reduce by the company investigating and researching other companies that use the software and their feedback on the program. Secondly, another disadvantage of the company choosing to purchase the software from Oracle is the risk of the software not having adequate control capabilities.
Software that doesn’t have adequate control capabilities can result in internal control threats that can cause the company money in time in order to correct. An example is the software the companies purchase for Oracle should not give accounts payable employees access to accounts receivables duties and vice versa. This threat can be reduce by the company performing tests on the software in order to make sure that the software is error free and that the controls are working properly. Lastly, another disadvantage of the company choosing to purchase the software from Oracle is the risk of the software not meeting all mandatory specifications.
By the software not being able to meet all of the companies need will result in the company having to waste money in order to modify the software or to purchase software that will meet the company’s needs. This threat can be reduced by the company evaluating all system proposals and selecting the best system. The company should compare the software with the “system requirements in order to determine if all mandatory requirements are met and how many desirable requirements are met” (Romney & Steinbart, 2012, p. 614). (2b) Modifying Current AIS One of the advantages of the company choosing to modify its AIS with the help of consultants is “freeing up systems resources”.
According to the information provided the information system group will rely on the consultants to assist in the development, configuration, and testing of the system. This will help free up systems resources and “reduce both the invisible and the invisible backlog of systems development projects” (Romney & Steinbart, 2012, p. 618). Secondly another advantage of the company choosing to modify its AIS with the help of consultants is “versatility and ease of use”.
The software developed by the consultant will easy to understand and use because the consultants can modify the information they produce or change application at any time the company needs them to be changed. This is helpful work employee who work from home or employees on business trip and employees on airplane for business meetings. Lastly, another advantage of the company choosing to modify its AIS with the help of consultant is timeliness. Consultants are able to develop the software more quickly and with little ease than the company would be able to.
This due to the company having to get budget approval, provide detailed requirement definitions, cost/benefit analysis, and other political requirements that may halt or slow the development process. One of the disadvantages of the company choosing to modify its AIS is “poorly controlled and documented systems”. According to the information given the company’s information system group is going to rely on consultants to assist in the development, configuration, and testing of the system.
The company runs into problems this way because the consultants may not install controls in order to protect the system. Also because the consultants may view documenting the system as boring and unimportant, this may result in them not creating very good system documentations. By consultant not creating or creating poor system documentation will lead to the employees not fully understanding how to operate the system. Secondly another disadvantage of the company choosing to modify its AIS with the help of consultant is “inexperienced consultants”.
This can result in the company hiring consultants who have little understanding about the business environment and how it operates result in poorly written software that does not meet the company’s strategic plans and goals. In order to mitigate this threat the company should evaluate each consulting group that has experience in the company’s industry and an in-depth understanding of how the company conducts its business. Lastly, another disadvantage of the company choosing to modify its AIS with the help of consultant is “poorly written and vague contracts”.
This can result contracts having to be rewritten causing the company money for having to reimburse contractors. This can also result in the consultants not creating systems that didn’t specify system requirements and performance criteria. In order to mitigate this threat the company should “sign a contract that rigorously defines the relation between the company and the developer, places responsibility for meeting system requirements on the developers and allows the project to be discontinued if key conditions are not met” (Romney & Steinbart, 2012, p. 617). (2c)
Outsourcing is hiring an outside company to handle all part of an organizations data processing activities” (Romney & Steinbart, 2012, p. 619). The company is considering hiring an outside company in order to do the installation because this will involve very little work on the company’s information system side. One of the benefits of the company choosing to outsource its AIS system to Oracle and have them to maintain the system is the “development time is lesser”. According to the information given if the company chooses to outsource it will take no more than 15 months to complete the project.
If the company decided not to outsource, it may result in the development of the system taking longer than 15 months to complete and the company only has 18 months to complete the project. It would also take Oracle less time to develop the system then the company, because Oracle is the maker of the application “PeopleSoft Enterprise Financial Management”, because of this Oracle would be able to “develop and implement the system faster and more efficiently than in-house staff” (Romney & Steinbart, 2012, p. 620).
Oracle will be able to cut through the development politics unlike the company which may have to follow stringent guidelines when developing the AIS. Secondly, another benefit of the company choosing to outsource its AIS system to Oracle and have them to maintain the system is the “access to greater expertise and better technology”. By the company letting Oracle install, configure and maintain the AIS application, this greatly reduces the cost and time that would be wasted by the company “in staying at the cutting edge of technology were rising significantly” (Romney & Steinbart, 2012, p. 20). Since Oracle already know the system it would be more logical to let them be responsible for upgrading and keeping the system maintain because they would have a better understanding and knowledge of how the system functions.
Lastly, another benefit of the company choosing to outsource its AIS system to Oracle and have them to maintain the system is, it is an “Excellent strategic and economic business solution. By allowing Oracle to handle the AIS this will give the company a chance to focus on other important areas of the business. “Outsourcing is a viable strategic and economic business solution that allows companies to concentrate on core competencies” (Romney & Steinbart, 2012, p. 620). The company is able to work on the areas that is does successful in and leave the AIS application “PeopleSoft Enterprise Financial Management” to people who understand and know how to maintain and handle the system.
The company will need to treat Oracle as a partner and work side-by-side with them in order for the company to meet its strategic and operational objective. One of the disadvantages of the company choosing to outsource its AIS system to Oracle and have them to maintain the system is because of the “inflexibility in contracts”. If the company becomes unhappy or decides to change its AIS it will be extremely difficult or costly to break the contract.
For example the contract between the company and Oracle may stipulate a 10 year contract with a cost of $5 million dollars if the contract has been breached. If the company changes its mind whether because being unhappy with Oracles performances or structural changes and decide to cancel the contract at year five, this will result in the company having to pay $5 million dollars because they breached the contract which was for 10 years.