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INFORMATION
TECHNOLOGY
AND THE FIRM
Theodore Grossman
INTRODUCTION
The personal use of information technology was discussed in an earlier chapter.
This chapter will discuss the firm’s use of information technology.
Of all the chapters in this book, the two dealing with information tech-
nology will have the shortest half-life. Because of the constant f low of new
technology, what is written about today will have changed somewhat by tomor-
row. This chapter presents a snapshot of how technology is used todayin in-
dustry finance and accounting. By the time you compare your experiences with
the contents of this chapter, some of the information will no longer be applica-
ble. Change means progress. Unfortunately, many companies will not have
adapted; consequently, they will have lost opportunity and threatened their
own futures.
HISTORICAL PERSPECTIVE
To understand the present and future of information technology, it is impor-
tant to understand its past. In the 1960s and 1970s, most companies’ informa-
tion systems were enclosed in the “glass house.” If you entered any company
that had its own computer, it was located behind a glass wall with a security
system that allowed only those with access rights to enter the facility. One
computer controlled all of a company’s data processing functions. Referred to
as a host centric environment, the computer was initially used for accounting
purposes—accounts payable, accounts receivable, order entry, payroll, and
so on. In the late 1970s and 1980s, most companies purchased in-house