"You don't have to know how to build the watch, but you had better be able to tell time."I made this statement when I acquired my first IBM personal computer. Not only has a lot happened with technology since that date, but the speed of change has increased significantly. Technology has the ability to excite you and cause you to invest too early, or the ability to lull you to sleep and resist change.
Knowing when to invest is as important as knowing what to invest in. Let's quickly look at the following important technologies, and where they had their biggest impact:
* Mainframes: Large organizations.
* Mini computers: Small and midsized organizations.
* Personal computers: Small businesses and individuals.
* Networks: Connectivity of businesses and individuals.
* Internet: Global population.
* WebTop: Filtering and content management.
For firms, it is especially important to focus on the return on investment. Emerging technology has what The Gartner Group refers to as a hype cycle. According to Gartner, from the date that the technology emerges until it matures, it goes through five stages.
2. Peak of inflated expectations.
3. Trough of disillusionment.
4. Slope of enlightenment.
5. Plateau of productivity.
If firms invest in a technology too early, they risk over-investing and experiencing results that are less than anticipated. If they wait too long, they lose their competitive advantage and miss the return on investment.
Often it is what you don't know you don't know that costs you both time and money. Education and staying apprised of new technology is very important. To stay informed, firms should have plans, people and processes in place.
Technology is an accelerator in all areas (planning, people and processes). Let's look at some areas where technology will have major impacts on firms over the next five years:
* Client creation of data;
* WebTop versus the desktop; and,
* Filters and the ability to mix and match information and knowledge with real-time presentation.
Some experts refer to these technologies as key elements in the "next net." As bandwidth increases and becomes ubiquitous, firms must focus on interaction, collaboration and teams with remote members. What does this mean to the small and large firms?
The lines between personal computers, telephones and televisions are rapidly becoming blurred. The number of documents and amount of data being stored is growing exponentially. It is no longer adequate to simply have electronic files. Firms must have content management systems to file, search, retrieve and manage content from standard documents to e-mail and instant messages. The complexity is growing as rapidly as the amount of data stored.
Another trend is the demand for real-time results (applications, searches and responses). If time is money, then real time is real money. Stock quotes are a good example of how people demand real-time results rather than delayed information. Instant messaging is just the beginning. A few firms are learning how to manage this tool in a productive environment, while the majority of firms are resisting the technology due to the belief that it is disruptive and difficult to control.
While many accountants are used to dealing with historical data, some clients are now demanding real-time knowledge that is accessible 24/7. The expectation gap is growing. Is a financial statement or tax return more valuable now or in six weeks? Most business people will say "now," while most accountants will say it is worthless "now" if it isn't correct.
While both perceptions are accurate, accountants must start thinking differently, moving toward the client's desire for timely knowledge. It won't happen overnight, but it is happening faster than many think. Banks and financial planners are already using tools that firms should consider as part of their portal strategy. Now is the time for firms to step up and control the client portal. It should be a new source of revenue, and encourage clients to utilize additional services.
Client creation of data is nothing new. How firms are capturing that data is new. Applications are now capable of automatically linking or, better yet, integrating with client applications. By doing so, errors are reduced due to the elimination of redundant data entry. XBRL is just one of the technologies being used to capture data at the source.
Other steps that can be eliminated are reconciliations and report writing. If this sounds too high level, it really isn't.
Firms are now allowing their clients to complete tax organizers and capture data from brokerage accounts online. The data is linked directly to the tax engine for preparation of a tax return, or to the financial reporting package for statement preparation.
The financial services industry has been doing this for years through open financial exchange standards. For instance, iLumen's Financial Information Network allows firms to automatically download client information and perform analytic or real-time auditing.
Having a strategy to eliminate data entry reconciliations and provide clients with knowledge and wisdom will escalate service values to a much higher level in the value chain.
Most accountants have grown accustomed to their desktop or notebook computers. "WebTop" (or something similar) will become a prevalent term in the future, with ubiquitous bandwidth and Web applications. That WebTop may be a phone, PDA, television or computer.
The initial reaction of many accountants is to say that they can't be connected when they are in a client's office or on an airplane. That is changing, but not as rapidly as it could or should in the U.S. It is already changing in some countries and cities. Singapore Airlines was one of the first to introduce Boeing's Connexion. The Federal Communications Commission approved the technology back in 2001.
The Gartner hype cycle that I mentioned earlier will apply to these technologies. What should a firm do to position itself to take advantage of the new technology without being on the "bleeding edge?" The following steps will position your firm for today and the near future (three to five years).
1. Develop an Internet plan and strategy.
2. Educate your leadership.
3. Identify a responsible person to monitor trends and best practices.
4. Implement client portals now.
5. Structure and organize your firm to take advantage of the Internet.
Based upon what we see in the industry, the top priorities in most firms during 2006 and 2007 will be:
1. Implementing a content management system that includes portals (documents, records, e-mail and knowledge management, including your firm's workflow).
2. Improving standards, policies and procedures to take advantage of the technology and increase revenue per full-time equivalent. The lack of quality personnel will continue to be a driving force.
3. Improving integration of "back office" applications (consolidation of databases) in order to increase efficiency and eliminate redundancy. This also allows for the utilization of business intelligence tools.
4. Improving the automation of financial reporting (less reliance on Microsoft Excel and Word, and more focus on a reporting system).
5. Training/learning culture - a key to the attraction and retention of quality people.
Having a vision and following the plan will ensure progress and success. Getting everyone sharing the vision and contributing to the success of the plan is critical.
Shared vision firms value leadership, relationships and creativity. The leadership provides direction, the relationships provide confidence and the creativity provides new capabilities.
L. Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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