The effects of the IT (r)evolution which we are living through are reflected in the activities of companies and in many aspects of our lives, both personal and professional. More and more parts of our lives involve the use of computers, smartphones, and the internet.
This article details the phases of computerization in businesses starting in the 1970s, with emphasis on their impact and transformative effect on the business world. Our working assumption is that the application of new information technologies are a catalyst for the changes taking place in companies and society.
From the broad perspective of human history these changes are revolutionary, however, from the perspective of a person’s daily life they happen gradually, in small evolutionary steps. As a society, we are usually skeptical, and sometimes fearful, of new ideas, things, and changing customs. However, there comes a day when we suddenly realize that we can no longer imagine a ‘normal’ life without these innovations. For hundreds of years now society has gone through cycles where new technologies have become ubiquitous and then foundational. A recent example is the combination of smartphones and social media which has changed the way people establish and maintain relationships. Which stages of IT (r)evolution are behind us and how have they formed the foundation for the business operation of modern companies? What challenges are we facing today?
Fear of adopting innovations
From time immemorial, humanity has felt, and continues to feel, fear of new things, and of changing customs. It is a little known fact, but some people wanted to treat the first automobiles, or “horseless carriages”, like horse-drawn carriages. The idea was to gradually reduce discomfort and shock for the driver/coachman, an artificial horse head was to be mounted in front.
Returning to the topic at hand though, it is important to recall a selection of innovations that have changed the way companies operate. For young people it is difficult to imagine how companies operated before computerization. Of course they did operate, only more slowly and less efficiently. For example, typewriters were used to transcribe documents from handwritten notes and these messages had to be sent by regular mail. If a typo or mistake was made you had to rewrite the entire page. Large offices had many full-time employees solely to copy documents. The introduction of photocopiers and faxes resulted in significant changes to these business operations. Copying and distributing documents became quicker and cheaper. This significantly accelerated the flow of information and documents, and resulted in businesses restructuring their operations.
While photocopiers and faxes were a big change, the introduction of personal computers was a revolution. Companies were not sure how to use them in business, and initially they were used as more advanced typewriters when combined with printers. Gradually new office applications began to appear, some of which, for example spreadsheets, have become ubiquitous. At the time many companies were very cautious about introducing such “innovations”, and the truism “If it ain’t broke don’t fix it!” was a mantra for some. Their anxiety was in direct proportion to the change faced by users. For many people using computers seemed too complicated, and storing documents on digital media was too uncertain. Today it sounds like an absurd anecdote, sort of like mounting an artificial horse head on a “horseless carriage”.
While transferring information ‘traditionally’ in paper form was still standard practice, another physical media, floppy disks, began to be more widely accepted. Inside companies, however, it was just a small conceptual step for computer networks to emerge and the use of physical digital media to be ‘eliminated’. (We all still seem to have that colleague who still needs thumb drives delivered via the ‘sneaker net’, don’t we?) This worked well, at least inside a single company office, but larger companies and institutions clearly needed something more. These companies and institutions needed something to go between (“inter”) their networks (“net”). The internet, which is now a vital part of financial transactions, supply chains and daily life, was once a radical new idea.
At that time, the word “server” was an innovative idea. The idea that one computer is selected to “serve” other computers was something completely new. Now “client-server” architecture is standard, but it has not always been this way.
The existence of computer networks in turn enabled systems which supported company operations to emerge. Systems to support warehouse management, invoicing, accounting, etc. were created. Ultimately, these internal systems were combined into integrated ERP (Enterprise Resource Planning) systems. Simultaneously, CRM (Customer Relationship Management) systems were created for external interactions. Today, especially in large companies, it is almost unimaginable do warehouse management or accounting on paper. This is despite the fact that not so long ago accountants were using computers for doing their calculations, but keeping their results on paper. Without computers and ERP systems, many companies would be too inefficient to grow.
Initially, the Internet was treated with caution by many companies. Sometimes as a curiosity, but more often it was seen as either a threat or unnecessary. Certainly, security levels were very low at that time, and hackers had easy targets. Slowly however, companies began to use e-mail for both internal and external communication. By being able to quickly find a document and forward it the flow of information was dramatically accelerated. This was a breakthrough and the Internet became widely accepted and more and more applications began to appear. However, paper still had power. Every document had to be printed and delivered to be valid. This included every sales contract, invoice, and order. Even now, some companies require that sales contacts be printed, signed, and stamped. However, these days most people expect to receive documents electronically, and an example of an area where the revolution has fully taken place is bank transfers. Even just 20 years ago transfer orders required a completed paper form and a visit to your branch office. The idea of using the Internet for this was greeted with skepticism and disbelief, mainly due to security concerns. Presently, going in person to the bank to check your account balance or send a transfer is possible but almost completely unnecessary. This is because confidence in banking on the internet has risen as security measures have improved.
An interesting topic is the evolution in invoice handling. Many of us still remember the days when invoices had to be printed, signed, and delivered. To do otherwise would invite questions from the Tax Offices. Later, when the regulations allowed for unsigned invoices, there still had to be an “original” version, i.e. paper. At that time, most companies already wanted to use an electronic version because it was, of course, more convenient and cheaper. However, to mitigate risk, invoices sent as PDFs were printed and then folded so that they looked like they had been taken out of an envelope. This, of course, sounds absurd now, but it shows how changes continue to be introduced gradually because of fears and legal uncertainties. Also, it provides another example of how technical possibilities and “business practice” determine the direction of legal changes.
Currently, while most invoices are generated and sent electronically, they are most often in locked PDFs. This necessitates the use of OCR systems which are expensive and error prone. This is obviously our next absurdity, our next “artificial horse head”. Large retail chains, which send huge amounts of invoices, have been using EDI (Electronic Data Interchange) solutions, which eliminate the need for OCR, for a long time.
It is worth pointing out that since April 18, 2019, every company subject to the Act on Public Procurement is obliged to issue and receive electronic invoices. This results from European Directive 2014/55/EU regarding public procurement, namely electronic invoicing. Thus, structured electronic invoices has become a hot topic.
The advantages of structured electronic invoices far outweigh their disadvantages. First of all, they enable your systems to process data independently, which is a step towards process automation. Entrepreneurs always benefit from such activities through cost reductions. Additionally, automatic data processing enables quicker and more accurate analysis. Reaction times for decision making are reduced and a competitive advantage is achieved.
Structured electronic invoices will be uses sooner or later in every business. This phase of the (r)evolution is underway; companies that use XML invoices are being treated as pioneers, companies that use PDFs + OCR for invoices are “mainstream”, and companies that use paper invoices are “stragglers”.
The era of paper documents is over: what’s next?
The digitization of documents is progressing throughout all the various departments in companies at varying rates. There are many reasons for this disparity but the inefficiencies are obvious; almost as obvious as “an artificial horse head”. It’s just a matter of time until paper documents are replaced with electronic documents. The disadvantages of paper documents are obvious to everyone:
- copying costs/efforts (photocopying, printing),
- storage costs/efforts (space in warehouses, transportation),
- search costs/efforts (skilled labor costs and time for the search itself),
- security+archiving costs/efforts (against fire, flooding, or other dangers).
However, the costs of “artificial horse heads” are less obvious, except in retrospect. Perhaps more importantly, these “artificial horse heads” are the result of decisions that somehow made sense at some time. For example, many companies store paper documents but also use the digital source version in Office. The costs of the working in each medium are well known and fairly predictable, but the cost of working both mediums are not known and therefore not predictable. What does it mean here, ‘each’ and ‘both’? In this case, scanning: a completely paper process doesn’t need scanning, and a completely digital process doesn’t need scanning (or printing). Only when you use both mediums at once do these needs occur along with all of the hidden costs and complexities. In evolutionary terms these transitionary adaptations, but while a business may ‘grow’ and ‘evolve’ a business is also capable of revolution.
While mentioning evolution it is worth adding a few words about the environment. Initially, the electronic revolution was predicted to reduce the need for paper. This, however, did not happen and the demand for paper is actually expected to double by 2030. (Statistics source: https://www.theworldcounts.com/stories/Paper-Waste-Facts) The explanation for this change is very simple if you think in terms of “artificial horse heads”; our hybrid process not only required hidden scanning costs but a hidden increase in printing costs as our ability to produce and modify documents increases. Here in Poland the per capita use of paper is roughly 100 kg per year, which equates to at least 2 mature trees per year. While much of it might be packaging, a significant proportion of it is in the form of documents, invoices, contracts, etc. The production of these documents has both environmental and business costs and the best solution is the same from both perspectives: reduce paper usage.
One of the last bastions of paper documents are legal departments, especially in relation to contracts. It will probably be no surprise to you at this point to learn that this is more a problem with mentality than of any technological or legal restrictions. While it is true that some contracts have a restrictions on signing (e.g. to be notarized), most contracts do not have such strict criteria. For many years regulations have allowed remote electronic contracts to be concluded. Amendments to the Civil Procedure Code and the European Union eIDAS Regulation have reduced legal barriers and laid out the framework for equivalence between electronic and paper documents. Similar regulations have been enacted in many countries around the world and together these countries represent the vast majority of all global economic activity.
Focusing on the EU context though, the eIDAS regulation introduces several levels of electronic signatures (ES): simple (SES), advanced (AES), and qualified (QES). The most secure is the qualified signature, however, it is the most expensive and the most difficult to use. Additionally, it cannot currently be assumed that every contractor or employee has such a signature. Fortunately, the technical requirements are part of the definition of what distinguishes a QES from an AES. For example: a QES requires a special certified device and an AES can be done with a computer or smartphone. Documents signed with an Advanced Electronic Signature have legal force and are easy to use. Also, using blockchain technology to record your advanced signature ensures that the documents and the signatures associated with them remain unchanged. This is a legal requirement laid out in the EU eIDAS regulations which enables such documents and signatures to be used as evidence in legal proceedings. AMODIT e-signatures, for example, use blockchain technology and meet EU eIDAS regulations.
Concerns about security and legal enforceability are mostly psychological in nature. For example, a robot from the Bond company can copy handwriting and handwritten signatures. There is nothing inherently secure about handwriting.
What are the benefits of e-signatures and electronic contract workflows?
There are many benefits to deploying electronic contract workflows and e-signatures. The main one from a business perspective is cost reductions: in printing, transporting, storage, archiving, and search as outlined above. But the secondary benefits are just as attractive: the ability to track the fulfillment of contract terms in real time, faster turnarounds from customer contact to signed contract, automatic reminders about contract milestones, and renewal reminders. Using e-signatures adds even more benefits: for example certainty about the date, or that the person in your organization with the proper legal authority is the signatory.
Signatures on paper documents are burdensome and error prone because several copies of the documents usually must be initialed and signed. Usually this must be done by company representatives whose time is expensive. Add to this the travel times and costs for the both the documents and the signers. Finally, consider the ‘ooops’ moment; the moment when you have gathered to sign, and then someone says something like, “Have you considered…?”, and they haven’t. It’s always so obvious in retrospect, almost like a giant artificial horse head. At this point, it is also very obvious that using e-signatures along with an electronic contract workflow process eliminates or mitigates most of these issues. Some companies are estimating a 30% cost saving with creating and signing contracts, without even considering the other future benefits.
It was mentioned above that per capita paper usage in Poland is about 100kg. For a business though usage, and all the associated costs, generally scales with the amount. As an example, one company saved 0.5 million pages of printing per year. This is 200 boxes of A4 paper: i.e. 2400kg or roughly 38 to 48 mature trees (depending on efficiency etc.). How much paper does your company use?
It’s as obvious as a “Patent No. 30551”, what is best for both your company and the environment. (Yes, they got a patent for that.)
Finally, three more benefits that e-signatures and electronic contract workflows give are something new, something only possible with this technology: device, location, and time independence. Device independence is possible because of Internet standards and its role in reducing costs and ensuring access is critical. Secondly, many companies offer remote working or ‘location independence’: the possibility of working from home or wherever you want. This allows companies to hire the right people even if they are in the wrong place. This comes with a hidden costs though, and among them are travel costs and document delivery expenses. As we’ve noted above these can be reduced or eliminated by going fully digital. Time independence is the ability to get things done when they need to be done, whether you are working in a different time zone, on a different shift, or simply not at the office that day.
The combination of mobile devices, the internet, electronic workflows, and e-signatures all adds up to a bright new future. It’s as obvious as a…
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