1 Electronic Business (E-Business) Systems

Learning Objectives Appreciate the possible changes to organizational processes that occur when e- business introduced Understand major approaches to transfer of electronic data during business events processing Recognize the complexities that are introduced as electronic document management moves us steadily toward the paperless office Understand the complexities surrounding EDI that are introduced when linking two different organizations’ computer systems for joint business event data processing Appreciate the challenges faced by organizations when they pursue direct business links with customers via the Internet or other networks Appreciate the business advantages gained through effective use of electronic business Electronic Business (E-Business) Systems

3 Electronic Business Electronically exchanging information and linking business processes, individuals and organizations Transactions completed more quickly, more efficiently, and more effectively Eliminates paper trail (eventually)

4 E-business Record electronic business events –Interconnects back-office processes and/or front office processes of two or more organizations –elimination of sales staff, normally intermediary between two parties to transactions Is this a good idea? –Save costs, but... –Efficiency gains Including price efficiencies –Ease at which purchasing agents get access prices

5 Recording Business Events (Accounting for Events) Technology (E-business) –New processes –New business events Reengineering –Hugely Increased Efficiency –Hugely Increased Effectiveness

6 Modes of Accounting for Events Periodic –Delay between event and recording that event –Batch processing Aggregation of multiple business events over a period of time for later processing –the only time the master data are up to date is right after the processing has been completed. –As soon as the next business event occurs, the master data are no longer up to date. Immediate –Little or no delay occurs business event and recording that event

7 Methods of Accounting Automated Manual System Online Transaction Entry (OLTE) Online Real-Time (OLRT)

8 Automated Manual System Four Sub-processes –Business Event Occurs Recorded on Source Document –Record Business Event Batch Processed and Input by data-entry clerk –Event Data Store (Sales, Purchases, etc.) Data Store = Table –Update Master Data –Generate Output

9 Automated Equivalent to a Manual System

10 Online Transaction Entry (OLTE) Entering business events at time and place the business event occurs –Computer input device used to enter data at source at time of business event Merging Step 1 & 2 of Automated Manual System –Input/Source document is eliminated –Price data is retrieved from the system –Source documents are printed by the system –Event information in accumulated on tape or disk

11 Online Transaction Entry (Batch)

12 Online Real-time (OLRT) Three Sub-processes –Business event occurs and is recorded Transactions saved –Update Master data Immediate mode –Generate Reports and Support Queries Reports periodically or on an as needed basis Support queries to generate unique reports for key decisions on demand

13 Online real-time processing

14 Methods of Conducting E-Business –Electronic communication of non-Standardized messages via communication network Requires human interpretation Electronic Document Management –capture and storage of document images instead of paper Electronic Data Interchange –computer-to-computer exchange of business data in structured formats that allow direct processing of those electronic documents by the receiving computer system.

15 Electronic Document Management Document Storage and Retrieval Business Event Data Processing –Workflow Management Route documents to appropriate people and appropriate time AND Manage the flow of documents

16 #9 AICPA Technology 2006 Paperless Digital Technologies –process of capturing, indexing, storing, retrieving, searching, and managing documents electronically including database management –Knowledge management then brings structure and control to this information, allowing organizations to harness the intellectual capital contained in the underlying data.

17 Document Mgmt Demo Lotus Notes Demo

18 Electronic Data Interchange (EDI) Computer-Computer Business Data Direct processing Standardized –ANSI X12ANSI X12 US and Canada –EDIFACT International

19 EDI Components 1. An originating application prepares an electronic business document, such as a purchase order (PO). 7. At the destination organization, an application processes the business data.

20 EDI Components 2 and 6. An application’s electronic business document must be translated from standard message format to the structured EDI format that will be recognized by the receiving computer.

21 Electronic Data Interchange Set

22 ANSI X12 Document Types EDI Service Bureau

23 EDI Components 3 and 5. Establish a method to communicate electronic message. EDI service bureaus or the Internet are may be used, saving time and money over other methods.

24 EDI Components 4. Rather than connecting each trading partner, an organization can use a VAN. An organization can connect to the VAN when it wants, leave its outgoing messages and, at the same time, pick up incoming messages from its “mailbox.”

25 EDI Process Changes Significant reduction in human interaction (Purchaser & Salespeople) Elimination of erroneous data Online Real Time Processing Forces organization to change processes as a result of instantaneous information flows –Business Process Reengineering

26 Control Considerations Proper Authorization –Authenticate EDI transmission Prevent rather then Detect errors in data Program changes & Security over IS VAN vs. direct communication –Prevent compromise of data

27 Controls Needed All transactions are sent/received All transactions are recorded only once Accuracy of data (sent/received/translated) Authenticate Senders Messages are not intercepted/altered

28 Control Plans EDI has built in controls –Batch, Counts, Control #’s, Headers/Footers Reasonableness checks Access Data Encryption Digital Signatures Continuous Audition –Integrated Tests Dummy Data is tested –Imbedded Audit Modules Alerts auditor to suspect data –Hmmm, sounds like a use of Complex Event Processing

29 Internet Commerce Computer-Computer Exchange of Business Data Structured and semi-structured Via Internet Forms XML possible replacement of EDI

30 XML eXtensible Markup Language –Describes Data –Use of Tags –Facilitates sharing of data across systems

31 XML Example – – Basic bread – Flour – Yeast – Water – Salt – Mix all ingredients together, and knead thoroughly. – Cover with a cloth, and leave for one hour in warm room. – Knead again, place in a tin, and then bake in the oven. –

32 Typical Internet Connection Client/Server 1 and 7. Customer connects to vendor in client-server configuration. Customer is Client (secure), Vendor is Server (receive and translate data)

33 Typical Internet Connection Network Providers 2 and 5. Connection to Internet through direct connection or service provider

34 Typical Internet Connection Assurance Providers 4 and 6. Assurance services provide limited assurance that web site reliable and secure: WebTrust; Verisign

35 Typical Internet Connection Internet Connection 3. The Internet (public network) E-business is open to all Revolutionizes Business