Information Technology and the Firm 545provide most of the necessary functional modules for small and medium size
companies, respectively. The more advanced packages, like Macola and Acc-
Pac, are equipped with interfaces to bar-code scanners and scales, which, to-
gether, track inventory and work in process and weigh packages as they are
shipped, producing not only invoices but also shipping documents for most of
the popular freight companies such as FedEx and UPS. These packages range
in price from $100 for the entire suite of accounting applications for the small-
est packages to approximately $800 per module for the larger packages, which,
of course, have more robust features. While some of the smaller packages are
available through computer stores and software retailers, the larger packages
are acquired through independent software vendors (ISV), who, for a consult-
ing fee, will sell, install, and service the software. The practice of using third
party ISVs began in the 1980s, when large hardware and software manufactur-
ers realized that they were incapable of servicing all of the smaller companies
that would be installing their products, many of whom required a lot of hand-
holding. Consequently, a cottage industry of distributors and value added deal-
ers developed, in which companies earn profits on the sale of hardware and
software and the ensuing consulting services.
Larger companies are following a trend toward large, integrated packages
from companies like SAP and Oracle. These packages integrate not only the ac-
counting functions but also the manufacturing, warehousing, sales, marketing,
and distribution functions. These systems are referred to as enterprise re-
source planning (ERP) systems. Many of these ERP systems, available from
companies such as SAP, Oracle, and BAAN, also interface with Web applica-
tions to enable electronic commerce transactions. SAP has spawned an entire
industry of consulting companies that assist large companies in implementing
its software, a process that may take several years to complete. As in any soft-
ware implementation, one must always factor into the timetable the process’s
cost and the distraction it causes the organization. In today’s lean business en-
vironment, people have little extra time for new tasks. Implementing a major
new system or, for that matter, any system, requires a major time and effort
commitment.
INFORMATION TECHNOLOGY IN
BANKING AND FINANCE
The financial services industry is the leading industry in its use of information
technology. As shown in Exhibit 16.4, according to a survey conducted in 1999
by the Computer Sciences Corporation, this sector has spent 5.0% of its annual
revenue on IT, almost more than double that of any other industry, except the
technology driven telecommunications industry.
This graph also illustrates how integral a role real-time information plays
in the financial services industry, whether it be for accessing stock quotes or
processing bank deposits. The industry has become a transaction processing