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Accounting Information system is one of the most vital elements of an organization. Every organization, whether it is a profit or non- profit one, should maintain an accounting information system. An accounting information system can be termed as a way of keeping track of all the accounting activities in an organization (Dull & Gelinas, 2009). This tracking of accounting activities is done through the computer-based methods of accounting. An accounting system comprises of six components. The components include users, procedures and instructions, data, and software application. It also comprises of information technology infrastructure and internal controls and measures. When a firm wants to put into place a new accounting information system, the above named factors should be considered in depth. Failure to consider one or more of the above perspectives of an accounting information system is detrimental to a system put or being put in place. This paper aims at looking into some of the factors that concern an accounting information system in the perspective of change.
The world is a dynamic place; it changes with each day that passes. In this perspective, the world is continuously growing smaller by the day. Markets are constantly becoming unified throughout the whole world. The merging of markets tends to create uncertainty all over the world. Technology, in an explosive manner, tends to accompany the changes. Technology, in its own way, tends to accelerate the imparting and diffusion of knowledge at speeds never perceived before. This diffusion of knowledge by technology further contributes to the shrinking of the marketplace. Based on these changes, speed becomes an invaluable component of competition. In addition, flexibility is required. As such, businesses are left with a very small margin for error and even lesser time to react to situations. The ignoring or delaying to react to an arising situation can, thus, lead to one being driven out of business or incur enormous losses.
This change enables a firm to compete with other firms in the market. An old system can hinder a firm’s capability to react to situations. In this manner, there is a need to upgrade to a new system. Another benefit as to the change of an accounting system is about improved security. The old system in place may be susceptible to security issues. The reason for this is that it might be using computer software that is outdated (Hall, 2010).
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However, implementing a new system can at times be risky. One of the problems that an organization can experience is implementing an obsolete system. An obsolete system is one that is not compatible with the firm’s needs. This incompatibility can lead to the losses. Another problem can be the issue of usability. The system put in place can at times fail to be user friendly. This beats all the reasons for the new system. The situation arises whereby it is complicated for organization’s employees to be able to use a new system. In addition, an organization might fail to have the needed technical know-how to run the system. In this perspective, the system ends up being a liability and burden instead of simplifying a firm’s activities (Wheeler, Dull, & Gelinas, 2011).
There are three major ways in which a firm can make a change in their accounting system. A firm can buy, upgrade or outsource the necessary services. Each of the methods of change tends to have their own advantages and disadvantages. In this case, a firm should look into all aspects of available options. The firms should then proceed to choose an option that best fits their needs. Discussed below are some advantages and disadvantages associated with the above options.
Purchase of the AIS from Oracle
Purchasing an accounting information system and then maintaining the system using own employees are one of the options that the company can explore. This option has various advantages. One of the advantages is that the company’s information system group will obtain necessary information on the system purchased. In this case, the company’s information system group will be able to familiarize with the information systems. Familiarizing will aid the company in minimizing costs in case the company would need to change the system in the future.
Another advantage is that the company will avoid incurring preliminary costs, designing costs, and testing costs. The reason for this is that the company selling the information system will have already covered the cost in concern. In this case, the purchasing company only incurs maintenance cost for the information system. The designing of the information system that is in line with the needs of the company is also another advantage that the company will enjoy (Norman, Simkin, & Bagranoff, 2007). This is due to the fact that the designing company, Oracle Company, has technology that the company does not have. Oracle Company has specialized in the creation of information systems and is, thus, bound to have superior technology in this field.
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However, purchasing of a new system also has its own disadvantages. One of the disadvantages is the system design. The systems are intended to fit the general population of companies. Therefore, a company that has individual, specific needs cannot find the system helpful. Another issue associated with buying a new system is that of compatibility. The company’s systems group may lack the needed skills in maintaining the purchased system. Oracle Company is the one that is fit in maintaining the information system. In addition, it is generally expensive to purchase, install and implement an information system. Therefore, the company in concern ends up incurring high costs, since the information system may not be designed in a way that would fit the company’s requirements (Dull & Gelinas, 2009).
Modification of the Company’s Current AIS Application
Modification of the existing system is also another option that the company can explore. The company can opt to take the already available system and strengthen areas that are perceived to weigh down the system. This modification has various advantages that are related to using the option. One of the advantages of upgrading is that the company’s information systems group usually has in depth knowledge regarding the information system. Therefore, the information group can be able to identify any problem when it occurs.
Another advantage in upgrading the system in place is the cost involved. It is generally cheaper to maintain an information system compared to the buying of a new system. In addition, the systems information group can ensure a silky transition of effecting changes. Besides, an organization’s organizational structure and database in place are not disrupted. Also, an organization’s records are not lost; they are left intact (Wheeler, Dull, & Gelinas, 2011).
However, despite this option having the above advantages, it also has some disadvantages. One of the shortcomings is that the same inherent weaknesses in a system may be overlooked. Thus, the company will continue to suffer from the same inherent weakness even after the implementation of the upgraded system. Another disadvantage related to modifying or upgrading is that the system does not always solve persistent problems in an information system. The modification only contributes to the complication of the problems experienced. In addition, the modification of an information system does not eliminate the issue of monotony. Most of the times, employees get used to the usage of one information system. Once in a while, employees crave for change and flexibility. The modification of the system in place does not usually aid in this perspective, but rather worsens the situation (Hall, 2010).
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Outsourcing of the AIS to Oracle
In the case of change in the information system of a company, the company may decide to outsource the needed services from outside. In this case, the company is not involved in any way in the development of the needed system, but rather gives the mandate to a company specializing in these matters. There are various advantages that accrue to outsourcing of services from outside the company. One of the advantages is that the company is able to instill complete change of the information system. The overhauling of the whole system ensures that weaknesses from the old system are completely eliminated. Another advantage is that the company is able to gain access to a specific technology. The company providing the services could be the one having this technology. This is due to the company being specialized in the provision of the needed services. In addition, outsourcing of an information system can ensure that an information system is intact and operates in full capacity. The reason for this is that the outsourced company also maintains the system (Norman, Simkin, & Bagranoff, 2007).
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However, complete outsourcing of services also has its own disadvantages. One of the negative aspects related to outsourcing is the issue of overreliance. The company outsourcing might end up relying completely on the company providing the services. In this case, the company’s information systems group becomes redundant; they cannot correct small errors. Another disadvantage is the cost involved in outsourcing. Of all methods, outsourcing is the most expensive one. An entity is supposed to be cost minimizing; in this case, a company should carry out a thorough analysis. In addition, the outsourcing of services may not always meet the requirements of a company. Therefore, there occurs a clash in terms of duty specification and performance by the company outsourced and the outsourcing company.
Recommendation to the CEO
In my opinion, I would recommend that the company purchases an Accounting Information System from Oracle, but have it maintained by its own technicians. The reason for this is that the company’s information system group is able to gain hands-on experience regarding new systems. In this perspective, they can be able to save the company’s expenses in the future. In addition, the company will have a system tailored to their needs at a much lesser cost, if compared to the cost associated with the outsourcing of services. In addition, in the case of security, purchase and maintenance by the company, it provides the best option. The company’s information is protected, while, at the same time, optimality in service provision is ensured. The other options tend to pay no heed to one or more of these factors (Hall, 2010).
System Development Life Cycle (SDLC) Approach
A system’s development life cycle can be termed as a conceptual model that describes the various stages that are involved in an information development project. The description takes into consideration all the steps from the initial feasibility study, maintenance and up to the complication of the whole system (Norman, Simkin, & Bagranoff, 2007). Below is a proposed system for the company. The approach is based on the fact that the company will buy the system and then endeavor to maintain it itself.
In conclusion, an accounting information system is a sensitive part of a company’s structure. A good system information structure should be able to meet an organization’s needs to the optimal. In the case that an organization seeks to change an accounting system, extreme care should be taken, since even a small mistake can lead to excessive loss.