ERP is pas`se´, ERC – for GenNext – Governance@best.simplest
Autocoder to ERP
1967 the year of 1401 with about three machines one at ESSO, one at BSES Santacruz, and a showcase IBM office at Ballard Estate in Mumbai, was a far cry from the statement in 1943 of Thomas Watson, IBM Chairman, “I think there is a world market for maybe five computers.” . BSES had a 4k machine supported by punch/reader and printer. There were two guys – a system engineer with an IBM Template and a software engineer trying to squeeze in the characters limited to 4k to make the output – payroll and inventory a workable monolith. Both belonged to the company and the machine was an outsider.
Ten years later the events in 1977 were: Inauguration of NAVSTAR Global Positioning System GPS by US; First commercial Concorde flight from London to New York; Successful NASA Space shuttle test flight; Apple II the first mass-marketed personal computer; Microsoft a two-year old start up company; Federal Reserve year-end Interest rates stood at 7.75%; Dow Jones Industry Average at 831; Oil prices after yam Kippur war jumped to $14.95 in 1977 four times of 1973; Downsizing programs involving billions of dollars in re-engineering efforts ever undertaken in auto industry; Governmental pressure on fuel-efficient cars. The year also witnessed the emergence of Foreign Corrupt Practices Act of 1977 (FCPA) after turbulent years on account of Lockheed scandal; these scandals and many of them during the early 70’s triggered Peat Marwick, the audit firm who were auditors with some of those companies and the biggest of the eight big accounting firms of that time, to initiate a peer review of their auditing methods by another major accounting firm Arthur Young.
Corporate continued to tally their trial balance manually, but every MNC had a 6 quarter forecasting of Investment, Headcount, Balance Sheet, Inventory etc. to the last detail, using extensively the calculators that have already poured in but supported by Material Requirement Planning [MRP].
In the year 1995 technology was at the forefront, as the most reliable investment opportunities – AOL – Internet, Micron Technology – semiconductors, Motorola – Hardware, and Microsoft – Software were topping the list. Windows 95 opened a vision of the future – Technology vs Technology right on the desktop. The year also saw a Dutch firm ING, buying up Baring plc for a nominal amount of $1.60, after one single individual Nick Leeson aged 28 brought down the bank with reckless gambling, speculating on the Tokyo Stock Exchange losing $1.3 billion, making the 220 year old bank insolvent. Paul Allen invested $500 million in Dreamworks, the film studio founded by Steven Spielberg, and two others. The tussle between technology and technology had begun, for good or bad. During the year there were disturbing reports on brand related IPOs with several warnings filed with SEC but hidden from private placement memorandum. Offshore tax havens were used liberally to establish companies without disclosing the ownership information while filing the court papers. The erosion of Balance Sheet assets had already begun in 1995.
Baring Bros sitting at London had no clue whatsoever what Nick was upto. There was a complete disconnect between Technology and the bosses looking through the windows. Accounting packages have started pouring in and with confidence corporate started interpreting the brand values through sophisticated presentations. Stock markets were booming with fresh IPOs. Application money was collected from all over India through banks. Banks followed a numbering system of collection and the share registrars different control numbers. Bunches of 100 applications were outsourced for collating the applications and preparing the allotment procedures. With the consent of the Bombay Stock Exchange shares were allotted. Refunds took place, those who paid application money of Rs.10,000 were refunded with the bonanza of Rs.75,000 and those who paid in Rs. 150,000 were allotted a token share of 100 and were refunded a pittance of amount that they sued the Registrars. This amounted to the irreconcilable differences of about 35% of the application money received. Manual ledgers posting would have solved the problem ab initio.
ERP started its foray into the market.
Stock market was booming and so were the manipulators. Bombay Stock Exchange was reconciling the transactions between each stock broker within three days. The delivery of shares were done every fortnight. Harshad Mehta took Rs.5 Mazda Industries to Rs.1500. Played on ACC, buying at any price. Within three days the accounts were reconciled between brokers. On the settlement day everyone thought Harshad Mehta wouldn’t be in a position to pay for the shares he bought but he did settle. Not having shares to deliver, brokers had to buy at any cost and deliver them on the settlement day. Prices jumped further. Harshad Mehta was ready to pick up paying the cash on delivery escalating the prices to astronomical figures. At the same time there was a debt market in vogue. Harshad Mehta bought the Banker’s Receipt at multiples of Rs.100 crores and delivered from one bank to the other, State Bank of India, Citibank, Standard Chartered, Barclays and name it were there, carrying with him credit facilities at each stop. The volume was about 10-15 times the turnover of Bombay Stock Exchange. RBI was the central point of reconciliation of these transactions between one bank and the other. These transactions were being posted in a manual ledger at RBI by one individual. He had two pens, one in Red and another Black. For credit entry he used the red and for debits the black pen. Harshad Mehta hijacked this guy to a riviera for a few days delaying the entries. It was sufficient for him to manipulate the stock market.
MSOffice95 gave the feeling of computer revolution and the confidence of tallying the trial balance, barring the hiccups. One of the users of the accounting package around that time had a unique experience of a party who was a supplier as well a customer and was allotted the same code. There was a trial balance difference as the subsidiary ledger was not posted by the machine and every transaction of nearly 9 months till that day had to be reposted after allotting separate codes.
Accounting Packages have started creeping in.
The new millennium saw the culmination of the efforts to consolidate all that had been attempted since 1967 with a 1401 machine – ERP for Finance, Projects, Contracts, HR – with multi-layer implementation program to the end user with the vendor distinctly at the other end and an able implementation Partner in between. The system and software engineers have left the organization to be part of the vendor for years now to create a buffer between ever growing memory chips and the insatiable data storage. Implementation Partners tried to justify the enormous cost and time it took them to implement the ready-made modules already so successful in very many countries across the globe. For once RoI calculation for the investment in ERP was abandoned. Production Planning Module, Sales Module, Purchasing Module, Inventory Control Module, Marketing Module, Financial Module – were all tested and approved modules since the days of Autocoder – ensured the continuity of Business for ever – excepting for the hiccups during the implementation of ERP that took more than a year and in many cases hiccups continued for a longer period. Having accomplished the task of ERP, the IT industry proudly looked at the Corporate and reflected what Charles Duell, commissioner of the U.S. Office of Patents, said in 1899: “Everything that can be invented has been invented.”
Is that all the computer technology can do for Corporate or for that matter Government? Is there a market for a win-win situation – IT industry’s showcase of capability vis-a-vis Corporate-Government showcase of energies and skills? Where does the fault line exist – in the Corporate side or computer technology side?
There is a general consensus among the ERP Implementation Partners that the average usage of computer technology is just about 8% by the Corporate. At the same time IT solutions are offered to almost every cross section of Industry – automative, banking, Building Technologies, Public Sector, Pharmaceuticals, Insurance, Cargo etc. The basic model however remains ERP and the extension of it in each field of intensive activity be it supply-chain management or CRM.
There is a major disconnect at this spot to the detriment of the IT Industry which is, the data created becomes the proprietary data of the individual companies and extra care is taken to the confidentiality of the data. Hence the usage of computer technology other than what ERP so far has provided, rests with the company despite the immense capability of the IT Industry. IT Industry’s capability is limited to Corporate utilization of its capability. But why Corporate had not made use of IT Capability, that had collectively brought to knees the whole World Economy, by mis-governance? Could better usage of IT capability have averted the Inside Job, articulated by Charles Ferguson?
The need arises for Corporate by compulsion from outside forces. A Ralph Nader, FCPA, an Enron, Sarbans-Oxley, BP, Lehman Bros, Inside Job are all the external drivers that force the industry to look inwards for Business Ethics, Corporate Governance or Corporate Social Responsibility. Left to themselves they would not prepare a Balance Sheet and get it certified by external auditors. It takes a major financial crisis as we see today for the Corporate and the Government to realize that they are not the owners and they have only fiscal responsibility to account for the use or misuse of the resources entrusted to their care. The compulsion from outside forces emerges only when the enterprise fails to govern.
ERP is a creative process, strictly speaking, planning to do what the company intends to do. The Action Process merely undertakes to operate under the strict supervision of the planning process. The tasks are accomplished on a routine basis, recorded and dealt with accordingly. Period. This is the cut-off point where the owners’ delegation of authority assures a non-interference in the affairs of the company. Here ends the service provider’s responsibility too. But this is the beginning of the evaluation of Fiscal Responsibility and Accountability. There is a complete vacuum at this juncture.
Fiscal Responsibility and Accountability ~ To the owners
Who owns the Government and who owns the Corporate? Free enterprise is an expression of freedom whereas Ethical Responsibility is an expression of liberty, that threshold values emanate to bridge Ethical and Fiscal Responsibility.’ Government, all three wings inclusive and Corporate have to report back to the people who are the owners of all resources and who are the only one to have the privilege of assuming Ethical Responsibility. Threshold values are the Corporate Governance, Corporate Social Responsibility, Business Ethics, Government Governance. Resources of an entire nation is handed over to the management of Corporate or duly elected representatives of the Government who collectively have the Fiscal Responsibility to report back to the owners. It is the Ethical Responsibility of the people therefore to ask for and get the Public Reporting on the management of the resources from the Fiscal Responsibility group, be it Corporate or Government in every field of activity be it Agriculture or Space exploration.
Ask for and get the Public Reporting
140 countries as signatories of UNCAC who are the Member States have the privilege of asking for the Public Reporting of the management of resources per Article 10 of UNCAC. Many countries have ratified the Treaty meaning Public Reporting becomes mandatory in these countries. UNCAC – United Nations Convention Against Corruption is an extensive resource identification and controls applicable in all cases. Chapter II Preventive Measures of UNCAC is the central focal point of optimization of skills and energies of the resources without a tinge of corruption. Corporate and Government shall discharge their Fiscal Responsibility by Public Reporting of their Governance of these resources.
Governance – IBCM
Inactivity Based Cost Management [IBCM] measures by resource area and by process area Governance by defining intangible. IBCM is a measuring tool, that measures what is measurable and make measurable what is not so, such as Business Ethics, Corporate Social Responsibility, Governance by a uniform methodology applicable around the globe. For more information please see reference to the availability of the book and for the synopsis of the book please link to: Angel’s Advocate Measuring National Grid of Governance http://wp.me/p18MVb-6h
“But what is it good for?” – An IBM engineer, remarking on the microchip, in 1968
ERP to ERC
Public Reporting is the very essence of Enterprise Resource Controls. Corporate Governance of resources entrusted to the care of the management with threshold values applied per Business Ethics ensures the commitment to Corporate Social Responsibility by way of Article 10 of UNCAC- Public Reporting. IBCM measures as a case-study UNCAC Chapter II that can be applied to Corporate and Government alike. UNCAC having been already adopted by the Member States, the measurement facilitates comparison from one country to the other from one corporate to the other in a unique fashion so vast its power and compass that the benefits would be a challenge that every organization will out of sheer necessity adopt for optimizing their capabilities.
ERP to ERC is an opportunity, denied to IT Industry so far that can now easily be rectified, by showcasing their capabilities. Ken Olson would find a perfect reason, for his statement in 1977:“There is no reason anyone would want a computer in their home.”
What is the canvas of output?
For the Governments:
[What Ashoka Practiced 2300 years back]
How long would it take to implement UNCAC?
The ERP package can be traced to 1967 and in 2011 we stand before the same having the same type and content like `old wine, in an old bottle with a new label’. IBCM propounds the theory of Inactivity by its theme, `Activity has a cost incidence whereas Inactivity has a cost consequence’. IBCM is the study of cost consequence. It studies systematically creative process from conceptual stage becoming a substance and then traces the Action Process towards its accomplishment with the statement: `The Quality of a substance cannot be separated from it nor the work associated with it’. There are six stages of development. Illustratively Economic Theories start from the conceptual stage, then moves on to Communication stage in the form of a book and then travels to Stockholm to get the prize and moves back to conceptual stage for another cycle of theory. Economic Theory will ever remain at stage of communication and is ranked 2 in the Creative Process of Quality of substance, like an Intangible Asset. US or Indian Constitution, for example, is a fully formed substance. So is the case of UNCAC, is a substance of Quality but is in the stage of insentience, meaning the Action Process is yet to begin.
It will certainly take lesser time than creating a common credit or debit card for the whole world. It will certainly not be as long as plodding the same content since 1967. If OpenOffice could throw it to the public domain for using it free, so can ERP packages to the Corporate. IT Industry can afford it by creating the UNCAC implementation program with the help of IBCM.
Quote from the book, Epilogue:`Imagine President of United States of America declaring emergency, abolishing both the Congress and the Senate, canceling the democratic process altogether, human rights suspended, keeping everything to oneself and the selected coterie, claiming part of Canada as belonging to USA, threatening those countries with punitive action should they issue any visa to the Prime Minister of Canada, all in the name of tuppence of an ideology bereft of human dignity?’ Unquote
NOTE: IT Industry alone can bring about control systems uniformly around the globe, from preventing the corruption in offices to empowering a citizen the right to use his/her liberty. A billion people go hungry in this world and the rest expects a corruption-free society an assurance IT industry must provide for restoring their faith on Technological advancement in financial dealings. In turn IBCM gives an assurance that there would be no non-performing assets or financial scams that have become a daily occurrence, if implemented with UNCAC preventive measures. Bill Gates in particular can hand over his concern for polio vaccines that can be handled by several organizations and work on what this article exhorts. That is the creative challenge the Author requests the IT Industry echoing Kennedy’s words: “not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win”
Arise and awake and stop not till the goal is reached.
The book is available:
Printed version: https://www.createspace.com/3488434
Kindle Amazon: http://www.amazon.com/dp/B003Z9JQWQ
Welcome to get in touch with the author jayar.ibcm(atthe)gmail.com
Jayaraman Rajah Iyer