The Finance Function and IT PDF

The Finance Function and IT BSCI121: study unit 06 Chapter:12 Study Unit Learning Outcomes Finance function’s relationship to IT Main role of IT Areas of interface with finance Key performance indicators Introduction:  Supporting operations through: proc...

The Finance Function and IT BSCI121: study unit 06 Chapter:12 Study Unit Learning Outcomes Finance function’s relationship to IT Main role of IT Areas of interface with finance Key performance indicators Introduction:  Supporting operations through: processing and storing transactions The role of Supporting managerial activities through: information Planning: available resources, possible timescales, and likely outcomes systems Controlling: to assess whether activities are proceeding as planned and to take corrective action if required Performance measurement: comparisons against budget or plan Decision making Information system is used to capture and generate information that managers need. Information systems also improve communications Knowledge management uses These roles are known collectively as knowledge information systems to help management. organisation collect and share knowledge, such that it changes from tacit to explicit.  Data, information and Knowledge Data: Raw facts and figures Information: Processed organised data that has some value Knowledge: An application of cognitive process such that is becomes useful (something that you know and understand) Tacit Knowledge: Knowledge that the organisation has but is unaware of or unable to use Explicit knowledge: Knowledge that an organisation has, is aware of and is able to exploit IT systems that create IT systems that share information and information and knowledge between business knowledge functions Examples: Examples: IT systems that Transaction processing Management information systems enable knowledge systems Decision support systems management Knowledge work systems Executive information systems Office automation Expert systems IT systems fall into two categories: systems Enterprise-wide systems Knowledge management systems Customer relationship management systems  Transaction Processing System (TPS) Perform and record routine transactions. Sales/Marketing Operations systems Finance Systems HR Systems Major Sales Management Scheduling Budgeting Personnel records functions of Market research Purchasing General ledger Benefits systems Promotion pricing Shipping/ receiving Billing Salaries New products Engineering Management Labour relations Operations accounting Training Major Sales orders Materials resource planning General ledger Payroll application Market research Purchase order control Accounts Employee records systems Pricing system Quality control receivable/ Employee benefits payable Career path systems Budgeting Funds management  Knowledge Work Systems (KWS) Systems that create and integrate new knowledge into an organisation. Knowledge workers perform jobs that create new information and knowledge. Professions like doctors, engineers, lawyers and scientists. Examples of KWSs include: Computer Aided Design (CAD) Computer Aided Manufacturing (CAM) Specialised financial software that analyses trading situations  Office Automation Systems (OAS) Office Automation Systems (OAS) are computer systems designed to increase the productivity of data and information workers. OASs support the major activities performed in a typical office, such as document management, facilitating communication and managing data.  Management Information Systems (MIS) Converts data into information mainly from internal sources into information, e.g. summary reports, exception reports. This enables managers to make timely decisions for planning, directing and controlling activities they are responsible for. MIS has the following characteristics Support structured decisions at operational and management control levels Designed to report on existing operations Have little analytical capability Relative inflexibility Have internal focus  Decision Support Systems (DSS) Combines data models and analytical models or data analysis tools to support semi-structured and unstructured decision making. Used by managers to assist in making decisions on issues which are subject to high levels of uncertainty Helps provide a wide range of alternative information gathering and analytical tools with a major emphasis on flexibility and user friendliness Has more analytical power than other systems, enabling managers to analyse and condense large volumes of data into a form that helps manager’s decision making. Objective: allow manager to consider a number od alternatives and evaluate then under a variety of potential conditions  Executive Information Systems (EIS) Pools data from internal and external sources and make information available to senior management in an easy-to-use form. EIS helps senior management to make strategic, unstructured decisions. The system summarises and tracks strategically critical information, possibly from internal MISs and DSSs, but also includes data from external sources, e.g. competitors, legislation and external databases like Reuters EIS aka Executive Support System (ESS), is likely to have the following features: Flexibility Quick response time Sophisticated data analysis and modelling tools Expert systems A form of DSS that allow users to benefit from expert knowledge and information Consist of a database holding specialist data and rules about how to handle and interpret it, given a set of circumstances. An organisation can use an expert system when a number of conditions are not met: The problem is reasonably well defined The problem cannot be solved by conventional transaction processing or data handling The expert could be released to more difficult problems. Experts are often highly paid, meaning the value of even small time savings is likely to be significant The investment in an expert system is cost-justified. Enterprise- They are designed to coordinate all wide business functions, resources and information wherever they are systems geographically. The central database allows each business area to access and update information in real-time, making it easy to share, available to all business areas and, above all, reliable. Knowledge Knowledge Management Systems (KMS): record and store all knowledge held within an organisation Management KMS is primarily of benefit to knowledge-based organisations, Systems such as those involved in research development or providing services such as legal advise. This is because their information (KMS) is best suited to storing and sharing by a database Benefits Valuable data is preserved for the future and not lost, e.g. when an employee leaves Data is easily shared Data duplication (or data redundancy) is avoided Allows employees to “get up to speed” on knowledge quickly and easily, which may reduce training time  Customer Relationship Management Systems (CRMSs) These are software applications which specialise in providing information concerning an organisation’s products, services and customers. Benefits of CRM Personalised service to provide to the customer Swift reply to customer queries Increased motivation of customer-facing staff who feel they are properly equipped to do their job Customer retention and loyalty due to a better understanding of the customer, and being able to deal with them as individual Better targeted marketing material  IT as an enabler of transformation IT may be the driving force or trigger of organisational change. Even when IT is not a significant factor in the actual change, it can play an important part in the change management process. Benefits of an IT strategy on the organisation Develop business opportunities Improve organisational productivity and performance Create a competitive advantage Enable structural change, e.g. employees working from home Bring congruency to corporate goals Role of IT in change Type of products/services made and sold (e.g. downloads) Way in which products are made (e.g. computer-controlled production) Way in which employees are mobilised (e.g. home working) Way in which services are provided (e.g. web-based) Enable changes in businesses and industries (e.g. price comparison) Aid communication and coordination (e.g. groupware) Source of unity and structure (e.g. Intranets) IT and external relationships Porter’s Five Forces model can be used to analyse the impact of Information Systems (IS) on an organisation’s external relationships. Potential entrants Threat of new entrants Bargaining Bargaining power of Industry competitors power of suppliers customers Suppliers Rivalry among Customers existing firms Threat of substitute products or services Substitutes Virtual Virtual companies: a collection of separate companies companies that work together to compete for bigger contracts/projects than would be possible if and virtual they worked alone. supply Virtual supply chains: supply chains that are chains enabled through e-business links (e.g. the web and Extranets)  A review of the literature on ethical and social issues surrounding systems identifies five moral dimensions of the information age: (1) Information rights and obligations Ethical (2) Property rights and social (3) Accountability and control issues (4) System quality (5) Quality of life  Types of Cyber Attacks Phishing Pharming Hacking Webcam manager File hijacker/ransomware Keylogging Screenshot manager Data Ad clicker security: Types of cyber security Access control Boundary firewalls and internet gateways Malware protection and virus protection Patch management Secure configuration  Finance Function Examples of assistance Assembling Collection of information regarding IT costs information Preparation of KPIs to identify equipment that might need replacing Analysing for Analysing of information regarding equipment breakdown and help Business partnering insights desk support provided and KPIs Cost and benefit analysis of information systems information to impact framework Advising to Reporting of the age of information systems and prospect of future influence breakdown Analysis of effect of potential IT failure on business functions Applying for impact Creation of business cases to support investment in new technology Strategic review of the potential use of technology within the business to improve processes or product sold Key Performance Indicator (KPIs) It cost as a percentage of revenue IT project cost variance Number of IT security breaches System downtime Help desk first call resolution IT maintenance ratio Average age of IT infrastructure