Replacing a Legacy AIS Application - Research Paper Example

?REPLACING A LEGACY AIS APPLICATION CASE STUDY Table of Contents Table of Contents 2 Introduction 3 Analysis 3 Alternatives 5 Conclusion and Recommendations 8 References 10 Introduction Information is critical to the success of any business organization. Various decision makers are required to have information that flows all throughout an organization (Hall 7). Implementation of Accounting Information System (AIS) helps in the collection of transaction data of an organization and then processing them to form useful financial information which could be utilized in a more effective way by its users. The users include any of the stakeholders of a company (Kieso, Weygandt, and Warfield 80). Like any other system AIS is also a system consisting of different components which are interrelated to each other. Each of the sub-systems that make up the whole system performs several specific tasks which get integrated to be able to perform the ultimate task. Different components of AIS include, People, Procedures, Software, Data, and infrastructure for information technology. This study is all about the requirement of the public company which needs to replace its existing AIS. The needs and requirements of such change required by the company, a detailed analysis of all the various alternatives available to the company with regards to this change and the best possible alternative that needs to be implemented by the company have all been discussed in this study. Analysis The company being a publicly traded company must be requiring lot of transactions to be carried out every day. Hence in order to increase its efficiency, new effective AIS are the necessity for the organization. New AIS, replacing the old inefficient existing AIS of the company, can prove advantageous for the organization. Well devised AIS could be beneficial for the company to effectively handle the increasing volume of information generated through different business transactions carried out every day by the company. Recently, with the advent of IFRS and its requirements, most of the organizations are required to be more cautious while preparing their financial statements. All the information represented in the financial statements is required to be relevant and realistically represented so as to facilitate proper decision making by its end users. New technologically improved AIS would help the company management to take various critical decisions which could have a significant positive impact on increasing the effectiveness of the management of the company, thereby increasing the profitability of the company. Various critical decisions that could be facilitated through the improved AIS of the company could be related to the accurate and precise information regarding the outstanding debt of the company, the sales trend, the assets possessed by the company, cash inflows and cash outflows, performance of the different product lines of the company, the trend of returns generated by the company, etc. AIS would primarily serve three purposes associated with it. They are a) It would help to effectively store the data related to all the business transactions of the company, b) The data would be then processed into useful information which would facilitate various decision making process and c) It would help in safeguarding the assets of the company through effective control mechanisms using AIS. Thus introducing improved AIS would help the company to have competitive advantage over its competitors and have a sustainable growth in future. However AIS has its demerits and risks as well. AIS are mostly computer based system. It mainly helps in automation of the various business processes done manually. This type of automation is associated with the risk of the inaccurate transaction data going undetected in the system. This could ultimately pave the way for the occurrence of accounting frauds. Since a larger number of users have the facility of accessing the data in the AIS, it is associated with control risk. The information might get edited by unauthorized persons, thereby resulting in misrepresentation of information through the AIS (T. W. Singleton, and A. J. Singleton 204). Alternatives The company has three alternatives available with regards to the replacement of its existing AIS. All those alternatives along with its merits and demerits have been discussed below: 1. Purchasing new AIS from Oracle which would be later maintained by the accounting information systems group of the company. Merits: a) The AIS bought from Oracle would have the latest technology involved in it. b) The company would get benefited from the complete installation and testing of the AIS by Oracle itself. c) It is expected that the AIS purchased from Oracle would run in the most effective way for the company. Demerits: a) Installing the whole new AIS and get it working for the company would require considerable amount of time. b) The company management may not be happy with such drastic change and might resist such change. c) It would be time consuming and costly affair for the company to get all the corresponding personnel related to the maintenance of the AIS well trained with the new system. 2. Modification of the existing AIS of the company for increased performance which would be later maintained by the information systems group of the company. Merits: a) It would be easily accepted by the company management because the change would not be drastic but gradual in nature. b) The corresponding personnel involved in the up gradation process would have the advantage of getting acquainted with the new improved system easily. c) It would require less training costs to be incurred by the company. Demerits: a) It would take a lot of time to get the system fully operational for the company. b) The company has to be dependent on the consultants for the entire testing, configuration and other functions related to the new AIS. c) It might not be that effective like the original Oracle software and some anomalies might still be present in the functionality of the system. 3. Completely outsourcing the AIS of the company to Oracle which would later be maintained by Oracle only. Merits: a) Outsourcing would result in the company being able to focus more on its business activities. b) No need to train the company personnel for working with the new AIS that has been outsourced. c) The risks associated with new AIS would no longer be the liability of the company management. Demerits: a) Outsourcing the AIS system of the company to another company would result in the loss of control over the management of the accounting functions of the company. b) It can prove a threat to the confidentiality and security of the company because various confidential data might become available to the outsourced company. c) The company would become dependent on the outsourced company and it might also give rise to various issues for the company. After properly analyzing all the advantages and disadvantages associated with each of the available alternatives the company needs to evaluate the alternatives so as to facilitate decision making regarding which alternative would be best for the company. In this regard the application of Systems Development Life Cycle (SDLC) could be beneficial to a great extent. It actually consists of seven different steps or phases. They are, planning, analysis, system designing, implementation, testing, installation and maintenance. It would be favorable for the company to take into account each of these phases one by one before making the change in AIS of the company fully functional and effective for the company. Conclusion and Recommendations After properly analyzing all the alternatives, it can be concluded that the second alternative of improving the existent AIS of the company would be best for the company. It is so because of the aforementioned advantages associated with it. In addition, it would result in bringing a gradual change in the organization which would be easily acceptable by all the officials of the company. Apart from this, the existing personnel of the company would be facilitated with in-hand training about the application of new AIS and it would not be tough for them to get acquainted with the changed system. Since, cost is not the area of concern for the company, consultancy fees paid to the outside expert personnel who would be involved in the up gradation and installation of the new AIS would not matter much for the company. Furthermore, the new improved AIS would be very much similar to the Oracle solution, hence no issue of less advanced technology being implemented by the company. Therefore, it is recommended that the company should go ahead with the option of modifying and improving the existing AIS of the company. It would be more effective for the company if it implements the changes in the AIS by following the different phases of SDLC as discussed earlier. Following all the phases would mean that the new improved AIS would be error free and would work for the company in a more effective and efficient manner. This would ensure that the company would gain competitive advantage in the market and would result in boosting the profit and revenues generated by the company. References Hall, James. Accounting Information Systems. 8th Ed. Connecticut: Cengage Learning, 2012. Print. Kieso, Donald, E., Jerry J. Weygandt, and Terry D. Warfield. Intermediate Accounting: IFRS Edition. New Jersey: John Wiley & Sons, 2010. Print. Singleton, Tommie W., and Aaron J. Singleton. Fraud Auditing and Forensic Auditing. 4th Ed. New Jersey: John Wiley & Sons, 2010. Print. Read More