The Role of Ethics and Professionalism in Information Technology
Ethics and professionalism involve the moral issues that arise due to the specialist knowledge attained by professionals and how the professionals should govern the use of this knowledge in a particular organization which they work for. The aspect of ethics and professionalism is comprised of what should or should not be done at work. It also consumes a better part of a professional’s life (Becher, 2018, pp. 74). Ethics and professionalism are not only crucial in the field of information technology, but it is also as well a critical aspect in other fields. Ethical and professional behavior, competence in IT, software skills, certification, and knowledge are some of the fundamental aspects of ethics and professionalism in IT (Stichler, and Hauptman, 2009, pp. 36-67).
A professional is considered to have ethics and professionalism if he or she adopts the conducts of all his dealings in the workplace as well as another environment. This document seeks to explore ethics and professionalism and how they are applicable in the field of information technology with the help of “Whistle-blower Claims Accounting Shenanigans at SuccessFactors” scenario in “Ethics in Information Technology.”
Professionalism applies to the manner in which an individual conducts himself or herself in the workplace and demonstrates loyalty to the organization which he or she works for. This is a crucial aspect of any organization and has been a cornerstone of Intel’s business (Reynolds 2015). In professionalism, members of the organization must understand and adhere to rules and regulations and laws of the organization and professional associations governing their professional activities. For instance, on the off chance that conflict occurs, the members of the organization must adhere to the more strict laws as well as rules and regulations pertaining to conflicts.
Professionalism laws guide organizations members in market manipulations as well as material nonpublic information among other areas concerning integrities of capital markets (Murphy, and Sampson, 2016, pp. 309-328; Quinn, 2010, pp.12-15). In general, codes of ethics and professional practices are there to provide members of an organization with broad ethical statements for guiding their professional lives and identify appropriate consideration if in any case, an ethical uncertainty arise.
Case
According to the scenario script, SuccessFactors, an American multinational company which offers services concerning cloud-based software solution services using the model of Software as a Service SaaS is compromised accounting shenanigans. The scenario source further cite that the organization has not been profitable as anticipated as SuccessFactor have been incurring losses every financial year since it came to be in the year 2001; the company has made a loss of 12.5 million dollars in 2010 with 231.3 million dollars as an accumulated deficit. Endeavoring to gain a significant market share in the fast pacing Software as a Service SaaS technology, the organization release 3.4 million dollars in order to acquire success in its business.
SuccessFactors showed a significant increase in its backlog in the year 2007. The organization had a backlog of 90 million dollars in 2007 compared to a backlog of 43 million dollars in the year 2006, resulting to an increase of 47 million dollars which was considered the good move by the organization according. However, this significant increase in backlog stopped showing up in the year 2009, upon inquiry of why the organization stopped generating the figure, the agency responded that its investors did not consider the figure significant.
The Applicable Principles and Guidelines
Despite the implementation of a 2009 SEC rule that governs the process by which revenue could be reported on a multiyear contract as claimed by SuccessFactors, in the agency’s 2011 annual report, the organization admits that its accounting controls surfers from a material weakness. Next, to this, the agency’s internal control was no longer effective as of date 31st 2011. This was further confirmed by the organization’s salesperson, the whistleblower who equally admitted that surely SuccessFactors had some weakness in its internal control since the year 2009 to 2011.
Information technology has changed people’s living standards. In information technology, professionals play a critical role in bringing a change to the company and humanity as a whole. As such, it can be used as a benefit or as a destruction. While cloud computing has completely changed the manner in which industries buy software, it can be a threat to investors as some SaaS companies could be tempted to dupe their investors. Determining the right use of technology is the major role played by ethics (Goodman et al., 2010, pp.77-81). It is required that IT professionals show a proper code of conduct, good moral, the right attitude and should not misuse technology. A professional should have self-respect, treat his colleagues and clients with respect, honesty, perform his or her duties, good communicator, the right attitude, sound character, and a team player (Dorney, 2012, pp. 12-16).
Analyzing the SuccessFactor’s scenario, the whistle-blower’s ethics and professionalism attribute, honesty, has helped to identify the weakness in its control system. According to the scenario, SuccessFactor agency was accused of misleading the accounting procedures by the whistle-blower. This is not, however, the first time this case is experienced in the organization. As the scenario script further cites, from 2009 to 2011, the agency’s sales personnel were writing contracts in an improper way to make the organization look like it has been developing faster than before.
This stems from how SaaS organizations book revenue. When a new customer is assigned by a SaaS organization, the customer normally signs for a multiyear deal which is normally three years. According to Graham, Hanlon, and Shevlin (2011, pp. 137-185), GAAP accounting rules allow the organization to recognize its revenue only after performing the services. Companies offering cloud-based services, however, want to show investors that for any new client sign in, much more money is generated under the length of the contract which is reported as a non-GAAP backlog figure (Isidro, and Marques, 2013, pp.289-317). As evident in the case study, the accounting controls of SuccessFactors were so slack that salespersons could write existing multiyear contract every year which made them to a commission on new contract every year, despite the customer being a regular client. This also meant that when the agency filed documents to the SEC, big backlog was reported and many new clients that the organization did not have initially.
Why SuccessFactors was not hurt by the alleged improper accounting
Through the acquisition, the agency made a significant step to “cloudify” software portfolio with the 3.4 million dollars acquisition of the darling human resource software. This portrays the significant roles of IT professionals in the agency’s IT department which is required of professionals. Given the fact that SuccessFactors is an information technology organization that provide software services to customers. The organization has to keep the pace of information technology. Along with this rationale, the agency needs a professionalism in order to provide the best quality services to its consumers and satisfy their customers’ needs (Avery et al., 2012, pp.1310-1319). It is professionalism that will provide a platform for ethical trade which in return incline profit, productivity and high market value in a business organization.
The Impact on Business Practices
The purchase of SuccessFactors was premium to the agency’s closing stock. According to the organization, a considerable increase was recorded in the number of customers across over 168 countries that the organization served. As such, the company recorded growth in its revenue in the third quarter of the year 2011. Moreover, while the organization makes an attempt to prosper in cloud-based services organically, the agency cannot as well afford to miss the opportunity to buy its way into the market at the same time. This is because SuccessFactors is cognizant that Software as a Service is not just meant for small business.
SuccessFactor’s rival Oracle had just acquired another cloud-based software organization and advanced its technology which cost the organization 1.5 billion dollars (Marston, Li, Bandyopadhyay, Zhang, and Ghalsasi, 2011, pp.176-189). The trend of buying a way into Software as a Service market that is associated with big organizations is a trend that won’t end soon as its outcome is handy. SuccessFactors was not big on the acquisition by SuccessFactors in the past as stated in the case study. However, the company has to take a new move into the digital world to get the organization into mobile, social and cloud; the cloud is the core of future growth of the organization. Therefore I can say that no one was hurt by the acquisition but instead, the organization benefited from the acquisition.
Why the organization should encourage the non-GAAP financial measures
The non-GAAP measures are essential as they help in understanding and comparison of the result in the accounting to calculate bonus payment for evaluating the financial performance of an organization (Kraft, 2014, pp.641-674; Doyle, Jennings, and Soliman, 2013, pp.40-56). Due to the fact that organizations review cash flow generated from its operations, the non-GAAP measures are meaningful to the investors as it is a necessary component of the company’s operation.
Like anything, the use of non-GAAP measure also has its limitations. All items of income and expenses are not reflected by the non-GAAP measures (Seetharaman, Wang, and Zhang, 2013, pp.17-37). As such various organizations have prepared the non-GAAP measures according to GAAP. Therefore, it is important that SAP implement the non-GAAP financial measures but not as a substitute but rather to complement the GAAP measures.
The measures management team should consider dealing with improper accounting of multiplier contracts.
From the year 2009 to 2011, SAP’s salespersons were improperly writing contracts in order to make the organization to look like its growth increase at a faster rate than it was. These irregularities can be eliminated by the organization taking appropriate measures including but not limited to do a periodic check of all contracts, revenues, customer numbers as well as other important factors to avoid any miswriting or fraud.
The company can also uphold IT ethics and professionalism for not only its employees but also clients to avoid the misuse of information technology and ensure that rules and regulations are followed by employees. SAP should also consider random sampling to avoid frauds. Most importantly, the company should encourage periodic training and structure other measures to strengthen the ethics and professionalism of its employees.
Conclusion
In conclusion, this document has analyzed ethics and professional practice with the help of “Whistle-Blower Claims Accounting Shenanigans at SuccessFactors” case study in “Ethics in Information Technology.” It can be concluded that ethics and professional practice is a fundamental aspect of the organization’s operations. It can be noted that the whistle-blower does not engage himself in improper writing of contracts like fellow organization’s salespersons, and it is through him that it is known that the organization is under a serious threat..
Recommendation
On basis of the above analysis, recommendations can be made:
- SuccessFactors should be careful when it comes to revenues and customer numbers.
- The agency should also consider training its employees to strengthen the professionalism and ethics of the employees (Board, 2014, pp. 3-9).
Reference list
Avery, A.J., Rodgers, S., Cantrill, J.A., Armstrong, S., Cresswell, K., Eden, M., Elliott, R.A., Howard, R., Kendrick, D., Morris, C.J. and Prescott, R.J., 2012. A pharmacist-led information technology intervention for medication errors (PINCER): a multicentre, cluster randomised, controlled trial and cost-effectiveness analysis. The Lancet, 379(9823), pp.1310-1319.
Becher, T., 2018. Professional practices: Commitment and capability in a changing environment. Routledge, pp.74
Board, B.A.C., 2014. Professional and ethical compliance code for behavior analysts, pp.3-9.
Dorney, R.S., 2012. The professional practice of environmental management. Springer Science & Business Media, pp. 12-16.
Doyle, J.T., Jennings, J.N. and Soliman, M.T., 2013. Do managers define non-GAAP earnings to meet or beat analyst forecasts?. Journal of Accounting and Economics, 56(1), pp.40-56.
Goodman, K.W., Berner, E.S., Dente, M.A., Kaplan, B., Koppel, R., Rucker, D., Sands, D.Z., Winkelstein, P. and AMIA Board of Directors, 2010. Challenges in ethics, safety, best practices, and oversight regarding HIT vendors, their customers, and patients: a report of an AMIA special task force. Journal of the American Medical Informatics Association, 18(1), pp.77-81.
Graham, J.R., Hanlon, M. and Shevlin, T., 2011. Real effects of accounting rules: Evidence from multinational firms’ investment location and profit repatriation decisions. Journal of Accounting Research, 49(1), pp.137-185.
Isidro, H. and Marques, A., 2013. The effects of compensation and board quality on non-GAAP disclosures in Europe. The International Journal of Accounting, 48(3), pp.289-317.
Kraft, P., 2014. Rating agency adjustments to GAAP financial statements and their effect on ratings and credit spreads. The Accounting Review, 90(2), pp.641-674.
Marston, S., Li, Z., Bandyopadhyay, S., Zhang, J. and Ghalsasi, A., 2011. Cloud computing—The business perspective. Decision support systems, 51(1), pp.176-189.
Murphy, M.J. and Sampson, A., 2016. Ethics of Professionalism. In Ethics and Professional Issues in Couple and Family Therapy (pp. 309-328). Routledge.
Quinn, M.J., 2010. Ethics for the information age. Addison-Wesley Publishing Company, pp.12-15.
Reynolds, G. W. (2015). Ethics in information technology (5th ed.), Cengage Learning, Boston.Bottom of Form
Seetharaman, A., Wang, X. and Zhang, S., 2013. An empirical analysis of the effects of
Stichler, R.N. and Hauptman, R., 2009. Ethics, information and technology: readings. McFarland & Company, Inc. Publishers, pp. 36-67.
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