Chapter 3 – Electronic Business (E-Business) Systems Accounting Information Systems 8e Ulric J. Gelinas and Richard Dull © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use

Learning Objectives Appreciate the possible changes to organizational processes that occur when e-business is introduced. Understand major approaches to transfer electronic data during business events processing. Understand 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 e-business. 2

Electronic Business Electronically linking business processes among individuals and organizations. Byproduct: elimination of sales staff, normally intermediary between two parties to transactions. Transactions completed quicker, more efficiently and more effectively.

Comparison of Manual and Automated Systems

Journalizing, Posting, and Summarizing in a Manual Accounting System

Automated Accounting System

Batch Processing Known as periodic mode because master data is updated periodically (e.g., nightly). Delay occurs between business event and updating master data Business event occurs Record business event data Update master data Generate outputs The disadvantage of periodic mode systems is that 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.

Batch Processing of Accounting Data

Online Transaction Entry Enter business events at the time and place the event occurs. Computer input device used to enter data at source. Input 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.

Online Transaction Entry (Batch)

Online Real-Time Processing Transaction occurrence/recording in transaction files. Update master files instantaneously. Also known as “immediate mode”. Generate reports periodically or on an as needed basis. Supports queries to generate unique reports for key decisions.

Online Real-Time Processing

Communication Networks Client server technology Local area networks (LAN’s) Wide area networks (WAN’s) Internet Web browsers Intranet Extranet

Methods of Conducting E-business E-mail - generally requires human translation and data entry. 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. Internet Commerce - computer-to-computer exchange of business event data in structured or semi-structured formats via Internet communication that allows the initiation and consummation of business events.

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.

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.

Electronic Data Interchange Set

EDI Components 3 and 5. Establish a method to communicate electronic message. EDI service bureaus or the Internet may be used for cost effectiveness.

EDI Components 4. Instead of connecting to each trading partner, an organization can use a VAN. The organization can connect to the VAN, leave outgoing messages and pick up incoming messages from its “mailbox.”

Web Services Implementation of an SOA Architecture

Typical Connection for Internet Commerce

Internet Commerce Circles 1 and 7 Customer connects to vendor in client-server configuration Circles 2 and 5 Connection to Internet through direct connection or service provider Circles 4 and 6 Assurance services provide limited assurance that web site is reliable and secure Circle 3 The Internet