Collection and use of information

Question 1

why should a formal IT strategy be set?

Answer 1

info system is adaptive and open

entity exists in a dynamic environment

info needs are constantly changing

entity relies upon info system in order to construct its strategic plan

info system and info tech can help entity have a competitive advantage

Question 2

what are the benefits of a formal IT strategy?

Answer 2

goal congruence of info system and corporate objectives

entity is more likely to be able to create and sustain a competitive advantage

high level of expenditure on info systems will be more focused on supporting key aspects of the business

developments can be exploited at most appropriate time - not always when first available

Question 3

what is the difference between IT, IS and IM?

Answer 3

IS = information system strategy. looks at way in which info systems are organised through org

IT = info tech, looks at tech infrastructure of the systems

IM = info mgment, looks at how systems support mgment processes

‘information systems strategy’ is used to encompass all three of these.

Question 4

how fluid should an IS strategy be?

Answer 4

unlikely strategy remains unchanged for significant periods, may need amending because of changes in org objectives, development of new tech, update of existing tech, change in number of employees and therefore scope changes.

whatever reason for change, important that some formal process is followed to ensure objectives remain aligned. in worst case, IT dept may decide that some new tech is useful and implement this, however if doesn’t support overall objectives it may not operate successfully.

Question 5

what is the general strategy to follow when info systems require amendment?

Answer 5

determine business strategy

amend IS strategy

develop and implement system

amend the system

review the strategy

Question 6

how should you determine the business strategy and amend the IS strategy when amending info systems?

Answer 6

determine business strategy

IT strategy must support this and not drive it. new systems may not be compatible with other software or hardware used in the entity. additional checks will be necessary to confirm compatibility.

amend IS strategy

may have impact on other sections. if suddenly in a new format it may no longer be accessible by other divs or branches. amendments must be checked against business plan and individual requirements across org divs

Question 7

how should you develop/implement/amend the system and then review the strategy when info systems require amending?

Answer 7

develop and implement system

having decided to go for it, plan will be developed for implementation. alternatives and methods may need to be considered. choice will be between in house development or outsourcing.

amend the system

checks may be required to ensure everyone stays informed. advertising change has taken place will be essential particularly where change will result in some competitive advantage

review the strategy

ensure objectives met. if not, further review may be required

Question 8

how should info system performance be assessed?

Answer 8

cost benefit analysis

tends to focus on costs/benefits derived from accounting system. with many of costs and benefits being intangible, may not form a suitable way of assessing the value of information.

Question 9

what are the limitations of cost-benefit analysis on info systems?

Answer 9

which tangible costs should be included?

most entities have a network of some kind so distributing info not a problem but increase in network traffic may mean bandwidth needs updating etc, so which project will pay for this?

how can intangible costs be measured?

many arise not from having info available, e.g. lack of info resulting in incorrect decisions being made. issue is how to measure cost of not having info around.

what are the limits to benefits from improving information systems?

some of benefits of enhanced info systems can be seen in terms of quality of information provision improvements, e.g. speed. hard to value this. significant diminishing returns to this provision. providing info in 0.2 seconds rather than 2 is minimal, but 2 secs rather than 20 is much more valuable.

how can intangible benefits be measured?

enhanced info may be provided by a new system. additional info may improve customer service, gain comp advantage, and these benefits may take a long time to accrue. time will be taken for historical analysis to build up to any meaningful level. traditional measures of CBA such as payback or ROI may be inappropriate.

Question 10

how can you deal with the limitations of cost-benefit analysis when assessing info system performance?

Answer 10

1. ignore the benefits - if ignore those too difficult to quantify, systems almost always appear to have negative cash flow effects. obviously misleading, so this would be meaningless
2. quantify the benefits - can attempt to take each of benefits and turn it into cash flow estimate. two issues: rationale and assumptions may be disputed and it will be difficult/impossible to post audit the system to prove the claimed benefits have been realised.
3. change the approach - best approach is to recognise and accept qualitative nature of benefits and find a reasonable non-financial way of assessing them. may lead to an evaluation such as one displayed in table. non-financial benefits could be assessed through information audit, but again must decide means of measurement in there anyway.

Question 11

how should costing a new system be split?

Answer 11

initial costs - design, development, purchase price, purchase of new hardware, testing and implementation, training

running costs - labour time to run system, materials e.g. replacement parts, service support.

Question 12

what are the costs of internal/external info?

Answer 12

costs of internal info = direct data capture costs (e.g. barcode scanners in supermarkets), processing costs (e.g. salaries paid to payroll staff), indirect costs (info collected where unneeded or duplicated)

costs of external info = direct costs (newspaper subscriptions), indirect costs (wasted time finding useful info), management costs (cost of processing info), infrastructure costs (systems enabling internet searches)

Question 13

what are the indirect costs of producing info?

Answer 13

training (most costly), loss of staff morale, delays caused to other projects, general dislocation caused by system change, upsetting customers from systems change, incompatibility with other systems, unexpected costs of software amendments, tailoring and maintenance, cost of failure due to inappropriate systems, reduced quality or poor decision making due to info overload, too many areas focused on not enough detail, focus on wrong things.

Question 14

what are the risks of info processing facilities?

Answer 14

dissatisfied employees might deliberately modify/destroy info

hacker or industrial spy might break into the system

viruses or malicious software could be introduced

accidental mistakes made on input to the system

inadequate security of hardware or data

faults in hardware system

risk of hardware theft

physical damage to hardware

damage to data

operational mistakes

fraud and industrial espionage

breaches in legislation

Question 15

what are the 5 types of viruses?

Answer 15

trojans - carry on one program and secretly another

worms - replicate themselves in system

trap doors - undocumented entry points to systems allowing normal controls to be by-passed

logic bombs - triggered on occurrence of certain event

time bombs - on certain date

Question 16

what is big data? what is the key challenge?

Answer 16

Big Data refers to volumes of data which are so large that they far exceed the normal capturing, processing, storage and analysis capacity of typical database application tools.

key challenge in dealing with big data is to identify repeatable business patters in unstructured data, significant quantities of which are in text format

Question 17

what sort of sources can big data come from?

Answer 17

Telemetry from consumer and commercially operated vehicles

Financial market data

Social network traffic

Web server logs

Traffic flow monitoring

Satellite imagery

GPS tracking

Government documentation

Web pages content

Audio downloads

Banking transactions

Streamed audio content

Question 18

what are the four vs of big data?

Answer 18

1. volume - more sources and increase data generation. data analytics software has enabled processing of these large datasets.
2. velocity - streaming at constant rate and current processing servers are unable to cope with this and generate meaningful real time analysis
3. variety - traditionally data was structured and in similar and consistent formats such as spreadsheets and standard databases. can now be generated and collected in huge range of formats
4. veracity - concerned with truthfulness of data collected. because of so many difference sources, increased risk of inaccuracies. for data to have any value when being used for decision-making, needs to be truthful. this means it must not present a bias or contain inconsistencies. use of poor quality data may have expensive and far reaching consequences for those orgs which rely on it for making strategically important decisions. an org may decide to introduce a new type of product in belief that there is sufficient customer demand for it, which may not be the case.

Question 19

what is analytics vs mgment of big data

Answer 19

analytics -

process of scrutinising big data to identify patterns, correlations, relationships and other insights. can have wide reaching effect on orgs strategy and marketing campaigns and can therefore have a direct impact on future profitability. can make detailed profiles of customers.

management -

storage, administration and control of vast quantities of both structured and unstructured data. main aim of big data is to ensure that data stored is high quality and accessible. new tech combines traditional data warehouses with big data systems in a logical data warehousing architecture. some sources may not fit into currently available data sources and big data analytics may require more advanced software tools, so open source tech such as Hadoop are increasingly utilised to manage constantly evolving data processing requirements of big data.

Question 20

what are the benefits and risks of big data?

Answer 20

benefits: driving innovation through automation, gaining competitive advantage, improving productivity

risks: rapidly developing systems result in limited availability of skilled resources who can operate them effectively. data security becomes ever more difficult and without investment in resources to manage data security, risks may arise from potential leaks/losses. meeting data protection obligations while collecting increasing amounts of data

Question 21

what is BI?

Answer 21

BI is often used to describe technical architecture of systems that extract, assemble, store and access data to provide report and analytics. can also be used to describe reporting and analysis applications or tools at top of this ‘stack’ but BI not just about hardware and software. company wide recognition that company’s data is an important strategic asset and can yield valuable mgment info to improve decision making

Question 22

what is a BI system?

Answer 22

BIsystems provide management accountants with a wider range of information in more accessible formats. In addition to reporting and monitoring, BI systems can provide more forward-looking analysis based on a combination of both financial and non-financial information.

Question 23

what is the aim of BI?

Answer 23

Business intelligence is about improving decision making. It involves developing processes and systems that collect, transform, cleanse and consolidate organisation wide and external data, usually in an accessible store (a data warehouse), for presentation on users’ desks as reports, analysis or displayed on screens as dashboards or scorecards. The term BI is sometimes used to describe this structure or ‘stack’ of software systems and applications.

Question 24

what is a typical BI ‘stack’?

Answer 24

The typical BI ‘stack’ or architecture can be represented as having a series of layers. The base is usually shown as source data systems from where data is extracted, translated and loaded by extract, transform and load (ETL) software into a data warehouse. Above this is an application layer (or BI layer) and on top of this the presentation or delivery layer which can include executive dashboards, scorecards and other tools that make it easier for managers to find and understand the information and proactively use it in decision making

Question 25

what is data analytics?

Answer 25

‘Data analytics’ is the complex analysis, data mining and predictive modelling enabled by BI applications which can access both financial and non-financial data from the business’s data warehouse and external sources. In other words, ‘data analytics’ is the process of collecting, organising and analysing large sets of data to generate trends and other information to aid decision making. Amazon, Capital One, Marriott and UPS are identified as companies that compete on analytics. These leading companies already have the right focus, culture and people, in addition to the right technology and software in place.

Question 26

what is data mining?

Answer 26

‘Data mining’ is the process of sorting through data to identify patterns and relationships within a data set between different items, usually with the use of statistical algorithms: For example, data mining could help identify a customer’s buying trends in order to send focused marketing data to each customer.

Question 27

what is structured vs unstructured data?

Answer 27

Structured data: Data that is contained within a field in a data record or file (E.g. databases, data warehouses and spreadsheets). In a data warehouse for example, everything is archived and ordered in a defined way – the products are inside containers, the containers on shelves, the shelves are in rows, and so on. This is the way that data is stored in a traditional data warehouse. Unstructured data: Data that is not easily contained within structured data fields, such as pictures, videos, webpages, PDF files, emails or blogs. Often, unstructured data is stored in ‘data lakes’. A data lake contains data in its rawest form – fresh from capture, and unadulterated by processing or analysis.

Question 28

what is a data lake?

Answer 28

In a data lake, data is just poured in, in an unstructured way. A molecule of water in the lake is equal to any other molecule and can be moved to any part of the lake, where it will feel equally at home. This means that data in a lake has a great deal of agility, in that it can be configured or reconfigured as necessary, depending on the job the users of data / information want to do with it. Data stored without structure can be more quickly shaped into whatever form it is needed.

Question 29

how can BI help new business opportunities?

Answer 29

- Sales people who are better informed about a customer’s situation and preferences, product holdings, cost to serve and profit margins should be able to achieve more profitable sales. - Greater transparency enhances performance. Internal benchmarking between individuals and divisions which are measured on a consistent basis can help to identify best practice and raise standards. - Negotiators can be better informed about the economics of current or comparable arrangements when agreeing contracts with suppliers or customers. Potentially uneconomic arrangements can be identified promptly and renegotiated at the earliest opportunity. - Advertising and promotional spend can be better focused on initiatives with a higher probability of success based on better analysis of the evidence about the performance of past campaigns. - Some data may have value outside the business. For example, supermarkets sell EPoS data to their suppliers. In turn, analysis from a financial perspective of data from EPoS (Electronic Point of Sale) and CRM systems can yield valuable insight.

Question 30

how can BI help with saving costs?

Answer 30

Activity based costing solutions are of growing interest as companies look to understand cost allocation at a granular level to be able to reduce costs and improve process efficiencies. BI tools can be used to produce management information that is already produced in-house. With the benefit of BI, it should be possible to provide this information on a more up-to-date basis, in a more user-friendly format with greater accuracy. There should be quantifiable savings in the production of this information and in the re-working of figures.

Question 31

where are the efficiency gains when using BI to help with cost savings?

Answer 31

BI tools are user-friendly. Users will be empowered to conduct ad hoc analysis which would previously have required support from the IT function. These savings will include efficiency gains, often expressed as numbers of full time equivalent (FTE) employees. To realise these as actual cost savings, for example through redundancies, can be difficult but the capacity released can be deployed to provide more valuable support to the business. The BI tools may, to some extent, replace a disparate array of tools already being used. This should yield benefits in terms of savings in software licensing and training costs. Virtualisation (bundling applications on a smaller number of servers) can save costs as fewer servers will be required.

Question 32

what are some intangible benefits of BI?

Answer 32

- The use of planning tools and the ability to identify trends early should allow a company to forecast more accurately. More prompt closing of period end accounts gives an impression of good systems. Over time, these can reduce investors’ perception of the level of risk and increase shareholder value. - Greater clarity about which products, segments and customers are most profitable and those which are uneconomic can be used to improve the retention of valuable relationships. These can be defended from competitors and business developers can focus attention on winning more relationships with similar potential. The profitability of less economic products or customer relationships might be improved through using lower cost channels, cross-selling or more appropriate pricing. - Emerging trends can be spotted earlier and improved or new products and segments developed. The challenge is to make these benefits clear so as to win buy-in from business managers and their commitment to make use of the benefits which the IT investment will enable to deliver value.

Question 33

what benefits does collecting, analysing, presenting high quality data present?

Answer 33

collaborative working customer insight - changes in behaviour, responsive inventory mgment risk mgment governance - more transparency demanded than ever. significant due diligence processes are regularly established. quality of corp governance increasingly a source of differentiation in its own right.

Question 34

what are the costs of collecting, analysing, presenting high quality data?

Answer 34

software licenses and maintenance IT training user training integration redundant infrastructure

Question 35

what problems may arise when collecting, analysing and presenting high quality data? what controls can counteract?

Answer 35

problems that may arise: duplication - reports from different areas of business may not reconcile because of extraction process. privacy/security issues - natural disasters, malfunction, viruses, hackers, electronic eavesdropping, human error, human resource risk (RSI, tripping over loose wires) controls: general - personnel/access/computer equipment/business continuity planning application - performed automatically by the system - completeness checks, validity, identification/authorisation, problem mgment facilities.