FREE online courses on Information Technology - Chapter 8 NETWORK &
COMMUNICATIONS IN I T - THE IMPACT OF NETWORKS
The existence of networks has the potential to transform the
way organization work. Networks facilitate the development of new kinds of
business, business which uses the networks to implement the IT-design variables
discussed here. Kambil and Short (1994) have studied the impact of electronic
filing on the tax preparation industry.
In 1990s, the Internal Revenue Service (IRS) began an
electronic tax return filing program nationwide. Return prepares or files
authorized by the IRS could transmit an individual return to the IRS
electronically. The system returns a receipt and the filer can arrange for a
direct deposit of any refund. Eventually this system has the potential to affect
100 million individual taxpayers. Some 75 million of payers receive an average
refund check of $900.
About 40 million people use professional tax preparation
services. H&R Block has over a third market and is considered a “commodity”
prepare. There are also individual or small CPA firms and large amounting firms
who do tax preparation work. Finally there are investment services firms who
will prepare returns for high-income individuals. The initiative by the Internal
Revenue Service has created new roles in the tax preparation industry. There are
now electronic filers, I communications network providers, software vendors,
consumer credit providers, to name a few. An example of a new initiative
promoted by electronic filling is the instant refund. An electronic filer, the
tax preparer, and credit provider create a refund anticipation loan. When the
electronic return is transmitted, the IRS checks its accuracy. Given this
verification, the credit provider issues a loan against the security of the
anticipated IRS refund. The return can even mandate that the refund goes
directly to the credit provider. One New York bank offers a three-to five-day
no-interest refund advance along with electronic filing to its customers for a
$45 fee.
By stimulating electronic linking, new relationships can be
formed in the industry. Information on a tax return gathered by the tax preparer
can be communicated to a tax planner. The planner creates customized investment
portfolios to reduce future tax liabilities. These portfolio recommendations can
be sent electronically to an investment broker. Another possibility enabled by
electronically linking the tax preparer with the IRS is for a retailer to
provide consumer credit through an instant refund linked to a store credit card.
The retailer, in partnership with a tax prepare, might arrange for a discount on
tax preparation or for store discounts if the refund is directed to the
customer's store credit card amount.
This networking initiative by the IRS, undertaken the try and
improve its capabilities for processing returns, creates new opportunities for a
variety of businesses. It encourages electronic communications and linking among
those involved in tax preparation and electronic customer/supplier relations
(the IRS considered us to be its “customers”. This example illustrate some of
the benefits that accrue from networks.
Networks and electronic commerce may also have a dramatic
impact on a number of industries. What would happen to companies in wholesaling
and retailing if manufacturers and customers could establish direct electronic
links with each other? What would the impact be of driving transactions costs in
markets to almost zero through commerce on the Internet? Will there be a need
for publishers in the future, or will we pay a small per page “usage” fee to
access books on the Net. The emergence of the Net and WWW offer tremendous
opportunities for as well as threats to traditional businesses.
