Screening out technology’s hype.

Facing the Future

BY STANLEY ZAROWIN

EXECUTIVE SUMMARY

DON’T BE QUICK TO upgrade to the hot new technology. Those who rush to be at the forefront often pay a high price because the newest and hottest technology is usually the most expensive and the most vulnerable to initial design errors. AVOID GETTING LURED into buying the fastest new computers. Unless you use special applications or very large databases that need uniquely fast speeds, those economy-priced 500 megahertz (MHz) machines perform well enough. DESKTOP COMPUTERS ARE LOSING their power and price advantages over portables. As desktops wear out, consider laptops as replacements. MICROSOFT’S RECENTLY RELEASED Windows 2000 family of operating systems is robust and worth upgrading to. Keep your eye on Linux, though; it may replace Windows. THE NEXT “BIG THING” ARE ASPs (application service providers), which rent application software and provide it through the Internet. WE HAVE FINALLY REACHED a point where CPAs—or any small business, for that matter—no longer need a physical office to run their business. They can just plug in via the Internet. In fact, those who wish to maintain a physical office don’t have to bother installing wires to set up a local area network to link the firm’s computers; those connections, too, can be made via the Internet. JUST BECAUSE TECHNOLOGY is galloping ahead, that doesn’t mean you have to keep pace each step of the way. You do have to keep monitoring it, seeing how you can benefit from each new advance. But unless you have sufficient resources—and the stomach—to accept “bleeding edge” failures, it’s best to upgrade only when an advance has proven itself technologically and its adaptation is clearly cost-effective.

STANLEY ZAROWIN is a senior editor on the JofA. Mr. Zarowin is an employee of the American Institute of CPAs and his views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.

re you ready for tomorrow’s technology? Do you have the latest, fastest hardware and software? Is your network software the most current? Are you heeding the advice of your technology consultants and keeping tabs on upgrades and innovations? In short, are you making sure you won’t be caught flatfooted, as were many CPAs in the late 1980s and early 1990s when computers, fax machines and then the Internet invaded and transformed the business world?

If you’ve answered yes to these questions and you feel confident that you’re ready for the future, pause a minute to consider the experience of Charles Duell, who, as the director of the U.S. Patent Office at the dawn of the 20th century, considered himself to be in the best position to assess the future of technology. He looked ahead and confidently prophesized that “everything that can be invented has been invented.”

Oops!

What makes his error interesting and the reason CPAs today should consider it carefully is not so much that he was wrong but why he was wrong. He committed the same error then that many people who plan for future technology commit today: He viewed tomorrow as an extension—or more correctly, as an extrapolation—of today. He failed to acknowledge a basic and essential truth: The future ain’t what it used to be. And that’s because an extrapolation, if it has any value at all, usually is valid only for the short term. It’s like forecasting the weather: The farther out the prediction, the less accurate the forecast.

OBSESSED WITH THE NEW

But that obvious forecasting restraint hardly ever silences the tech-minded managers, who tend to be so energized by optimism that they become obsessed with the new and impatient with the old. As a result, they are driven to proselytize:

The sooner we leap ahead the better.…Be at the leading edge of the technology curve.…Upgrade.…Buy the newest and the fastest.

They warn that those who fail to stay ahead will be forgotten footnotes of history. However, what gets lost in their exuberance is that in the world of technology, a leading edge often morphs into a bleeding edge because the newest is usually the most expensive and the most vulnerable to initial design errors.

Equally important, “progress” rarely proceeds in spurts. Instead, it tends to move gradually—the old evolves into the new—usually, but not always, improving as it progresses. While it’s true the pace of progress today is speedy and still accelerating—shrinking the already less-than-60-second New York minute—nevertheless change remains evolutionary.

So, considering all this, how is your organization planning for tomorrow’s technology? Does it have a strategy?

Whether you’re a sole practitioner sitting behind a single computer or a CFO commanding a large organization with Web sites and a worldwide computer network, you probably feel a tug to be at the leading edge. After all, the media encourages it with articles about the latest and the fastest.

At the same time, you probably also recognize that technology has become a reign of terror for those who feel guilty for failing to keep up. The Internet is a case in point. Many organizations feel compelled to launch or expand their Web presence. But is it because they have well considered business plans on how that will enhance their operations and enrich their profits? Or is it because they’ve been prodded by anxious CEOs or boards of directors worried about appearing, in the eyes of their peers, to fall behind technologically?

We now see bottom-line troubles at businesses that leapt blindly into the Net at the expense of their brick-and mortar outlets. What they’ve discovered is that the traditional retail outlet, at least for the moment and maybe lots longer, is important to customers who want to touch the cashmere sweater and smell the leather gloves before they buy. Although there’s little doubt e-commerce has a great and expanding future, in the rush to apply it many have deployed little more than a warmed over mail-order system that takes only rudimentary advantage of Internet technology.

Equally worrisome is the oft-heard forecast that the Internet will eventually bury the conventional retail outlet and that traditional face-to-face business relationships will be replaced by virtual business-to-business (B-to-B) Internet relationships (see “The B-to-B Virtual Bazaar,” JofA, July00, page 26). If anything, e-tailing (electronic retailing) and B-to-B relationships probably will enhance each other in ways we can’t yet imagine.

Considering this assessment, let’s examine today’s technology landscape—although some would call it a jungle—and see not what’s hot, but what’s really necessary to survive, prosper and prepare for the new e-economy, and what should trigger caution.

SPEED DEMON

There was a time, only a few years ago, when computer processors slogged along far slower than the 500 megahertz (MHz) minimums available now, and users tapped their fingers impatiently as an application slowly loaded or a large spreadsheet file finished its calculation and leisurely painted data on the monitor screen. By the time the Pentium III chip was introduced, computers easily had broken the 500-MHz barrier and speed was no longer an issue; they were fast enough for most applications. In fact, speeds much above 500 MHz are a bragging point for those who insist on having the fastest toys. Even compared with today’s super chips that exceed 1 gigahertz (GHz), the relatively modest (and far less expensive) 500-MHz processor can hardly be called a slowpoke when it launches an application or refreshes a large spreadsheet calculation in a second or two.

Bottom line: Unless you use special applications or very large databases that need uniquely fast speeds, think twice before paying a premium to upgrade.

For those who want both speed and economy—there’s Citrix (see “Get Remote Computer Access and Save,” JofA, Dec.00, page 71) and the remote server application service provider (ASP) route. With a Citrix setup, network users can use old, slow workstations (as old as the 486 models) and still run applications at respectable speeds as long as they have a reasonably fast server.

We’ll talk more about ASPs later in this article. Suffice it to say that ASPs appear to be the next big thing.

Laptops: As computer chips improve (running faster, draining less electricity from batteries, sporting larger and sharper screens and packing more memory in lightweight, portable packages), the laptop is beginning to look like a reasonable replacement for the workhorse desktop machine. Desktops are losing their power and price advantage over portables. Many of the latest portables weigh in at three or four pounds and come with nearly full-size keyboards and screens.

So as desktops wear out, consider replacing them with laptops for those on the staff who need both a computer in the office and some portability.

THE OPERATING SYSTEM

It’s taken Microsoft more than a decade to come up with a Windows operating system (OS) that’s both powerful and relatively reliable. The recently released Windows 2000 family of operating systems is robust—that is, it can perform many computer duties (from handling fax and video to diagnostics and self-repair). Its critics, however, grumble that maybe Windows can do too many things, which is why it’s so fat—commanding so much geography on a hard disk—and why it runs slower than what appears to be its main, but still quite distant, competitor, Linux. (More about Linux later.)

Windows also is relatively stable—that is, it’s less likely to crash than its earlier incarnations. And when it does occasionally sputter to a halt, generating that famous blue screen, chances are it will fail gently (it’s less likely to destroy data in the process) and gracefully (upon rebooting it performs a self-diagnostic and then tries to repair whatever caused the failure).

The bottom line: Despite its shortcomings, upgrading to Windows 2000 clearly is worth the investment of time and money. The upgrade is swift (it takes about 40 minutes) and relatively automatic, picking up all your former operating system’s defaults and shortcuts and installing them.

But heed this safety tip: When you’re asked during the installation whether you want to save the old operating system, definitely click yes. With the old OS in a backup position, the computer can resort to it in the unlikely event the upgrade fails; that way you’re not left staring into a hopelessly blank, blue screen.

PUMPING THE PENGUIN

Meanwhile, keep your eye on the Penguin—the Linux symbol. It may replace Windows. Even top Microsoft executives have acknowledged that Linux has become a serious competitor. Unlike the waddling bird, Linux is agile and fleet-footed. It’s also lean (it takes far less room on a hard disk) and definitely not mean (it’s user friendly).

Linux was developed and literally gifted to the world by young Swedish software engineer Linus Torvalds and continues to be upgraded by a worldwide network of volunteers and committed software companies. As a bonus, it remains free (or, if you want a specially engineered edition, at least inexpensive) and it’s fast and very stable.

Unlike Windows, Linux is not heavily loaded with auxiliary, nonessential functions. It focuses on its main job: To run a computer or network, allowing add-on applications to do their jobs on a highly stable platform.

The major barrier to Linux is its dearth of applications—or, more accurately, a dearth of widely used Linux applications. Linux has all the basic apps—such as word processor, spreadsheet and database—and they work well. But, since Linux apps don’t work on the Windows platform and Windows apps don’t work on Linux, we have a classic Catch-22: Linux can’t become widely used unless its apps become popular, and its apps can’t become popular until Linux becomes widely used.

That’s not to say Linux is languishing. In fact, its popularity is soaring in certain circles. Because of its stability—and because the price is right—Linux is gaining among those who run operations such as enterprise-critical, high-end databases and application servers, Web storefronts and firewalls. In fact, most large server manufacturers now offer and support Linux on their hardware. Likewise, network appliance vendors make generous use of the operating system.

Linux’s pace of acceptance may accelerate soon. Recently, a group of major software companies formed a consortium to develop and popularize Linux applications. IBM, one consortium member, says it alone plans to spend $1 billion on the effort. Clearly, the group’s goal is to challenge Microsoft’s grip on the huge operating system market.

So, should you scrap Windows in favor of Linux?

In a word, no. Unless your organization has special needs, is high-tech and boasts substantial resources, it’s wiser to let the big guys duke it out and then go with the winner.

ON THE HORIZON

The irony, however, is that when the Windows-Linux match is finally decided, probably in less than a decade, it’s unlikely either will be crowned champ, because by that time the computer as we know it may be as extinct as the typewriter—making Windows and Linux obsolete for all but the old-time computers and servers.

What will replace the computer? We’re already seeing appliances wirelessly connected to each other and the Internet, and they probably won’t need a conventional computer operating system. For example, nearly a score of electronic gadget companies is rushing to compete with those little pocket-size, innovative personal digital assistants (PDAs) that were introduced several years ago by Palm. Business people, professionals and even teenagers pull them from purses, shirt pockets or little belt holsters to quickly access a wide assortment of information. Although most are still underpowered (compared with portable computers), each new version rises to a higher level. And the number of PDAs wirelessly linked to the Internet is starting to make them competitive with computers.

Then there’s the cell phone—an even more ubiquitous appliance—that’s slowly being upgraded not only to handle communications (phone and walkie-talkie functions), but also to do all the things a PDA can do and some of the things a full-size computer can do.

The Ericsson r380, shown at right, for example, has an innovative design: It hides a large (for cell phones) screen under the flip cover keypad. Keep it closed when using it as a phone but open it if you want to use its minibrowser features or PDA-like organizer tools, including address book, calendar, notepad and support for data-synchronization.

The Ericsson design is just the beginning. There are cell phones on the drawing board that do even more.

Wait a minute, you’re probably thinking, how can an appliance (whether a PDA or a cell phone) that fits in the palm of your hand replace a full-size computer with a large screen and a keyboard for inputting data?

A valid question. Because of rapidly advancing miniaturization technology, shrinking an appliance’s electronics is no problem—in fact, that’s the easiest barrier to scale. And since the bulk of a user’s data will be stored not in the appliance itself but on some remote server and connected via the Internet or direct telephone link (more on that later), data storage is no problem either.

To overcome the data input barrier, there’s voice-activative technology, which will make touch typing pass and keyboards as obsolete as 1930s automobile running boards. But until voice technology improves, there are very efficient PDA keyboards that fold neatly into a palm-size package. In fact, the next step is interactive voice response (IVR), which has long been considered arcane and expensive. However, in the past year IVR met the Web and a “language” called VoiceXML was created to help translate what a person says into instructions for a Web server.

Displays, however, remain a significant, but temporary, stumbling block. Several possible solutions are on the horizon. In one, the screen display is provided through a special pair of eyeglasses wirelessly linked to the appliance. The device projects an image that gives the wearer the illusion of seeing a large screen. Prototypes of the tiny apparatus are under test.

The second solution is a thin plastic film that not only displays a high-resolution color image generated by computer, but also can be rolled up like a miniature shade and stored inside the appliance when not in use. That, too, is in the prototype stage.

AN ASP IN YOUR FUTURE

The first solid evidence that the computer as we know it is starting to become dated surfaced several years ago when a tax software vendor invited some accountants to do their tax returns via the Internet. The accountants connected to the vendor’s remote computer, which was loaded with the tax software. Once connected, the accountants filled out the tax forms that appeared on their office computer screens. None of the tax software was on the office computers, so all the screen images and the calculations were handled by the remote computer. Except for a slight delay (which has since been virtually eliminated) as the data were exchanged, the accountants worked as if the application was installed on their own machines.

The application service provider (ASP) concept is hardly revolutionary. Technically, it’s just a natural update of the old tax service bureaus that were popular from the 1960 through the 1980s. In fact, the tax software vendors were simply copying a technique that a handful of vendors of very specialized software had inaugurated on a small scale just a few years earlier: Instead of selling their specialized product to users, they rented access to them via telephone transmission or the Internet. The tax software experiment introduced the idea for a more widely used product.
The ASP concept is spreading quickly. If its early growth is any indication of its future, it’s reasonably safe to say that we may soon see fewer people buying CD-ROMs to load word processing, spreadsheets and databases on their computers or networks. Instead, they will be paying a fee to access the applications over the Internet. A handful of ASP servers are already operating.

What makes ASP software so attractive is that users do not need to worry about things such as software conflicts and periodic upgrading. The software has all the latest updates and bug fixes.

In addition, ASPs are offering more than just use of a program; they also create a safe place to store data. Since data are stored on the remote computers and accessible via the Internet, they can be retrieved from any location with an Internet connection—no need to carry the data in a laptop or on disks.

This year, the ASP concept expanded even more: Intuit, a leading low-end accounting and tax software vendor, is inviting CPA firms to open a complete virtual office—everything except the furniture, walls, carpets and water coolers—on its Web site. The office includes accounting software and all the other necessary software applications; all are accessible via the Net. In addition, a CPA firm’s clients can “enter” the virtual office, drop off applicable data and communicate with its professional advisers. For more information go to www.intuitadvisor.com.

Without exaggeration, we have finally reached a point where CPAs—or any small business, for that matter—no longer need a physical office to run their business. Even more important, they don’t need to be technical experts to set up a virtual office. They can just plug in via the Internet and presto! In fact, those who wish to maintain a physical office don’t have to bother installing wires to set up a local area network to link the firm’s computers; those connections, too, can be made via the Internet. The partners can be physically situated anywhere—in one office or at opposite ends of the continent.

XM WHAT?

If you’ve never heard of XML and XBRL, or if you just vaguely recall hearing something about them, you’ve got some homework to do.

XML stands for extensible markup language—a generalized script for tagging any Internet data with identification markers. XBRL stands for extensible business reporting language—the reporting language that is being built into accounting and financial reporting software.

Once XBRL is added to the software, it automatically and transparently translates all business information—numbers and words—so each data segment is identified when viewed with a Web browser or sent to a spreadsheet application for calculation or examination. See “Finally, Business Talks the Same Language,” JofA, Aug.00, page 24, and go to www.xml.org and www.xbrl.org.

Not only will clients and employers expect you to know how it works, but they will also expect you to make their accounting systems XBRL-ready.

XBRL will expand professional opportunities for CPAs and other financial executives and add value to financial information for all users: auditors, preparers, bankers, shareholders—in short, anyone who creates, uses or accesses an organization’s business data.

HANG UP ON DIAL-UP

To appreciate the full use of the Internet, your connection has to be instant and constant. Using the typical dial-up connection is like choosing Morse code rather than the telephone. A high-speed (broadband) connection is an improvement, too, but it can’t compare with instant access.

For the moment at least, the alternatives to dial-up are either expensive, not always available or, depending on the provider, still of questionable stability. The costly—but very reliable—fast connections are ISDN (Integrated Services Digital Network) or a T1 or a 30-times-faster T3 phone line. The lower-cost options (if they are available in your area) are cable and DSL (digital subscriber line) connections.

Caution: Before ordering DSL check out the experience of users in your geographical area. Some local providers are still not up on the technology and service in those areas can be spotty.

CUTTING THE WIRE

Most small businesses still don’t have a computer network, which means it’s difficult for the staff to work together on projects and share files. Many still use the so-called sneaker net—in which they share files by carrying floppy disks from computer to computer. Their main objection to setting up a network usually is the cost and inconvenience of running wires or cables throughout the office. They also recognize that if they move or expand, much of that expensive setup will have to be replaced.

Of course, if the office uses an ASP, there is no need for a network. For those who don’t want to use “rented” software or don’t trust the ASP utility with their proprietary data, an alternative economic approach will soon be available: a wireless network that uses radio-frequency transmissions to link the computers. Wireless is not new, but what is new is its cost (lower), speed (faster) and equipment compatibility (all the major networking vendors have finally agreed on a standard). With a wireless system, if an organization moves, it just packs up the network and takes it to the new location.

THE RIGHT CHOICES

As you can see, technology is galloping ahead—maybe even accelerating as it goes. But that doesn’t mean you have to keep pace each step of the way. You do have to keep monitoring it, seeing how you can benefit from each new advance. But unless you have sufficient resources—and the stomach—to accept “bleeding edge” failures, it’s best to upgrade only when an advance has proven itself technologically and its adaptation is cost efficient.