INTRODUCTION

Information technology (IT) has become a vital and integral part of every
business plan. From multi-national corporations who maintain mainframe
systems and databases to small businesses that own a single computer, IT plays
a role. The reasons for the omnipresent use of computer technology in business
can best be determined by looking at how it is being used across the business
world.

Technology plays a key role in today's business environment. Many companies

greatly rely on computers and software to provide accurate information to
effectively manage their business. It is becoming increasingly necessary for all
businesses to incorporate information technology solutions to operate
successfully. One way that many corporations have adopted information
technology on a large scale is by installing Enterprise Resource Planning (ERP)
systems to accomplish their business transaction and data processing needs. The
company named SAP Aktiengesellschaft (commonly known as SAP AG in the
business press) is currently the world market and technology leader in providing
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ERP systems. As such, this paper primarily discusses information technology

implications based on the SAP system.

The role of information technology systems in a business environment can be

classified into four broad categories. These categories include function
performance, communication through networking, management and enterprise
roles.
Information technology provides commercial and industrial systems for
businesses. These systems enable businesses to function effectively and
efficiently.

FUNCTION IT SYSTEMS
Function IT systems are applications that allow individuals to function
effectively in the workplace. Examples of common IT systems that enhance
workplace functions are word processor applications, spreadsheet applications,
statistical analysis software and computer aided design (CAD) programs.
Employees can work and perform their task individually or collectively using
these specialized software technologies.

NETWORK IT SYSTEMS
Network IT systems allow effective communication within and outside an
organisation. Examples range from simple e-mail (electronic mail) to blogs,
wiki sites, IM (instant messaging) and electronic conferencing systems. These
types of technologies promote interaction and collaboration among working
groups and also facilitate quick information flow at all levels.
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MANAGEMENT IT SYSTEMS
Management IT systems (MITS) can be defined as planned applications that are
designed to process data and transform the processed data into useful
information for management decision making.
It should be noted that Management Information systems (MIS) are subsets of
Enterprise IT systems (this is explained later on in this article). However,
because of the vital role MIS play in a business environment, it is considered
here as a major information technology for businesses.
In a typical scenario, management operates at different levels and so it is
possible to apply management information systems at these varied levels.
Basic examples of management information systems are human resources
management systems, financial management information systems and
marketing management information systems.

ENTERPRISE IT SYSTEMS
Enterprise IT systems are technologies designed to integrate and manage entire
business processes for large organisations. Typically, enterprise application
software is hosted on large servers over a computer network. Transmission of
information can either be internal or external.
Examples of enterprise information systems may be accounting software, health
care specific software or Electronic Data Interchange (EDI). Another good
example of software application within this category is Customer relationship
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management software (CRM).

The role of Information technology in business is wide and varied. It can be said
that IT provides a huge range of capabilities that enhance management
performance at all levels. It is therefore important to understand the four major
categories of IT systems and their functions and roles in a business
environment.

Despite companies now recognizing the importance of their enterprise data,

they still have a difficult time effectively managing it as an asset. Some of those
challenges arise from a lack of business involvement and sponsorship, an
inability to identify data owners and encourage accountability, or a reluctance to
share data. Although it is imperative for business to lead and sponsor data
governance, it is equally important to align business and IT in order for
organizations to fully benefit in a significant and persistent way from data
management.
The importance of aligning business and IT is compounded by the trend to
centralize information systems, resources and integration points. Many
organizations are moving to centralize IT and with that the recognition that data
can also be managed centrally to achieve economies of scale, improve
productivity and effectively manage information.
Consequently, the IT organization sees issues that span lines of business and
geography including enterprise data issues. As such, IT may be the first to
recognize and often times are the initial advocates of the need for data
governance before the business. For example, IT can identify where data issues
start in a source system and the changes that are made as data flows through
different systems. However, the impact of the changes to the data is not always
obvious to IT, nor is IT in a position to recommend changes to business
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processes to improve data quality either at the source or over its lifecycle.
Challenges arise when it is time to assign resources to be accountable for data
quality and fix data issues, which is precisely when IT needs to transfer
ownership of data governance to the business while continuing with oversight
and the essential role IT plays in data governance success.

While information technology obviously sounds familiar to most of us, still we

only take it for granted without realizing its crucial role in every aspect of our
life. In business for example, there are increasing trends that companies
leverage on information technology to stay ahead of competition and increase
their productivity and efficiency in business. But again, what role does exactly
information technology play in business all these times? Even if it does have
beneficial impacts on your business, is it the same for everyone else and will it
continues in the future? Only time can tell. For the meantime, let's travel back in
time and find out what kind of role does information technology have for us.
The term information technology only comes to use after its first appearance at
later years in Harvard Business Review. Despite the fact, the core concept
of information technology has actually been applied since prehistoric period
where people have started using symbols and drawings as a means of
communication. After all the basic idea of information technology itself is to
use technology and information to make your life easier and communications
are certainly part of it. You may also want to note that technology we are talking
here include any inventions to help do something or solve problems. Earlier
information technology applications include numbering systems and calculator.
So guess what, it really has something to do with numbers (and of course
business and money) in the first place. After the invention of first computer on
1948, information technology starts to gain its momentum and keeps evolving
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until present time. Since computers can be considered as the key innovations to
the development in information technology, from that time on information
technology is literally defined as tool, application, systems or simply products
which are based on computer-processed information.

In general, information technology whatever it takes form, has one thing in

common - they enhance our life in any aspects including in business. However,
in business and organization context, it takes central role especially thanks to
seamless flow of information between parties involved. Among others, it allows
us to better connect with other people from anywhere, anytime and thus faster
decision making process. But again, as any other things, these benefits in
business also comes with price. The application of information technology,
depends on the its flexibility and scalability, needs a substantial capital to start
with. Usually, the greater size of your organization, the greater investment you
need. The investment itself will not only consist of the technology itself but also
time and human resources. If you think it worths, then go ahead. Only, make
sure to spend wisely and effectively. After all, the information technology exists
in the first place to help making money not wasting it right? Above all things,
there is no doubt that information technology play a very important role in
business in that it creates more opportunity while saving more money and time.
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Information Technology (IT) refers to techniques used in business for

transmitting, storing, manipulating and retrieving all kinds of data, including
speech, text, movie, graphics and reports of events such as equipment
malfunction, intrusion etc. Typically, Information Technology relates to the
hardware and software that businesses use to manage and operate a range of
business processes. Most businesses network their computers so that
information

can

be

shared.

Examples of the use of IT in business include:

Storing information about products such as stock control using

sophisticated databases.

Making business calculations such as costing and profit calculations

using spreadsheets.

Providing advertising and promotional literature using computer graphics

packages.

Processing information, writing letters, and other documents using word

processing packages.

Internal communication using fax, e-mail and other methods of

communication including telephone linking.

Using presentation software such as Power Point to make colourful

presentations.

Creating websites as a promotional and informational tool for an

organisation.

COMMUNICATION

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For many companies, email is the principal means of communication between

employees, suppliers and customers. Email was one of the early drivers of the
Internet, providing a simple and inexpensive means to communicate. Over the
years, a number of other communications tools have also evolved, allowing staff
to communicate using live chat systems, online meeting tools and videoconferencing systems. Voice over internet protocol (VOIP) telephones and
smart-phones offer even more high-tech ways for employees to communicate.

INVENTORY MANAGEMENT

When it comes to managing inventory, organizations need to maintain enough

stock to meet demand without investing in more than they require. Inventory
management systems track the quantity of each item a company maintains,
triggering an order of additional stock when the quantities fall below a predetermined amount. These systems are best used when the inventory
management system is connected to the point-of-sale (POS) system. The POS
system ensures that each time an item is sold, one of that item is removed from
the inventory count, creating a closed information loop between all departments.

DATA MANAGEMENT

The days of large file rooms, rows of filing cabinets and the mailing of
documents is fading fast. Today, most companies store digital versions of
documents on servers and storage devices. These documents become instantly
available to everyone in the company, regardless of their geographical location.
Companies are able to store and maintain a tremendous amount of historical
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data economically, and employees benefit from immediate access to the

documents they need.

MANAGEMENT INFORMATION SYSTEMS

Storing data is only a benefit if that data can be used effectively. Progressive
companies use that data as part of their strategic planning process as well as the
tactical execution of that strategy. Management Information Systems (MIS)
enable companies to track sales data, expenses and productivity levels. The
information can be used to track profitability over time, maximize return on
investment and identify areas of improvement. Managers can track sales on a
daily basis, allowing them to immediately react to lower-than-expected numbers
by boosting employee productivity or reducing the cost of an item.

CUSTOMER RELATIONSHIP MANAGEMENT

Companies are using IT to improve the way they design and manage customer
relationships. Customer Relationship Management (CRM) systems capture
every interaction a company has with a customer, so that a more enriching
experience is possible. If a customer calls a call center with an issue, the
customer support representative will be able to see what the customer has
purchased, view shipping information, call up the training manual for that item
and effectively respond to the issue. The entire interaction is stored in the CRM
system, ready to be recalled if the customer calls again. The customer has a
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better, more focused experience and the company benefits from improved
productivity.

DEFINITION (INFORMATION
TECHNOLOGY)
Information

technology (IT)

is

the

application

of computers and telecommunications equipment to store, retrieve, transmit and

manipulate data, often in the context of a business or other enterprise. The term
is commonly used as a synonym for computers and computer networks, but it
also encompasses other information distribution technologies such as television
and telephones. Several industries are associated with information technology,
such

as computer

hardware, software, electronics, semiconductors, internet, telecom

equipment, e-commerce and computer services.

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BUSINESS/IT ALLIGNMENT
Business-IT alignment is a dynamic state in which a business organization is
able to use information technology (IT) effectively to achieve business
objectives - typically improved financial performance or marketplace
competitiveness. Some definitions focus more on outcomes (the ability of IT to
produce business value) than means (the harmony between IT and business
decision-makers within the organizations)

This alignment is in contrast to what is often experienced in organizations: IT

and business professionals unable to bridge the gap between themselves because
of differences in objectives, culture, and incentives and a mutual ignorance for
the other group's body of knowledge. This rift generally results in expensive IT
systems that do not provide adequate return on investment. For this reason, the
search for Business / IT Alignment is closely associated with attempts to
improve the business value of IT investments.

Business-information technology alignment, the "holy grail" of organizations,

integrates the information technology to the strategy, mission, and goals of the
organization. There are six key characteristics in order to achieve this
alignment. First, the organization must view information technology as an
instrument to transform the business. This includes exploring other revenue
streams and integrating other facets of their business into each other. For
example, using one central database warehouse to combine two separate, but
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partnering businesses. Next, an organization must hold customer service, both

externally and internally, at the utmost importance. This communication
between the organization and their customers must not be lost. Thirdly, an
organization must rotate both IT and business professionals across different
departments and job functions. They must have the knowledge and experience
of both sides of the business so that understanding and communication is
achieved. Once those three characteristics are achieved, then an organization
must provide clear and specific goals to both the IT and business employees.
This will create and integration of both entities to achieve a common goal. The
fifth characteristic ensures that IT and business employees understand how the
company makes or loses money. This is important so that money is not
carelessly poured into the IT department and there is no return on that
investment. Lastly, organizations must create and vibrant and inclusive
company culture. There must not only be informational unity, but a company as
whole.

It is not unusual for business and IT professionals within an organization to

experience conflict and in-fighting as lack of mutual understanding and the
failure to produce desired results leads to blaming and mistrust. The search for
B/I alignment often includes efforts to establish trust between these two groups
and a mechanism for consensus decision-making.

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THE VALUE OF INFORMATION

TECHNOLOGY IN BUSINESS
INCREASED PRODUCTIVITY

If anything, the role that information technology takes up in your business is to

make everything run faster. Compare if you count wages manually, just how
many days it will take, not to mention if there is miscalculation. Machines,
computers, and any other artificial entities obviously win over manual method
and human being when it comes to accuracy and calculation. The reason is
because they use programmed algorithm and exact data. In many ways,
automation with information technology in business help us to cut down stages
in work flow because technologically advanced machines/computers are
capable of handling and processing a lot of data or tasks at once without a hitch.
Also, unlike human, they are less susceptible to ambient interruptions and thus
be able to work more effectively and efficiently in shorter time.
With so many amazing innovations in information technology for the past
decades, there are simply a lot of different ways to become more competitive in
your business. You can send and get information in every way possible. Internet,
smartphones, tablets, notebooks, video conference, TVs, video call and many
more. In the case of cloud computing technology, you can retrieve, process,
store, and access data and information faster and more efficient thanks to cloud
computing technology. As such, important documents and credentials related to
your business will also be safer since everything is kept on the cloud. You will
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also need less or perhaps no more physical space and resources to manage all
the data and information related to your business.
Another role of information technology in business which is no less crucial is to
minimize costs. In the first place, automation will reduce even eliminate the
need for human power to do certain tasks. On different occasion, information
technology application in business can help alleviate overall operating costs
because you do not have to make frequent close or distant trip to see and talk
with customers, clients, business partners, or even your own colleagues. In the
same way, you can also make the most of your time thanks to mobile devices.
You can practically work from anywhere, anytime. Sending emails, editing
documents, and doing presentations while on the go. Now your office can tag
along wherever you go. You no longer have to be confined to the office and still
become more productive in business.

BETTER COMMUNICATION

Along with faster flow of information from and to diverse communication

channels, you can easily distribute and retrieve important information as well as
receiving responses in real-time. For instance, you want to launch new products
but not sure if they will sell. One possible solution with information technology
is to create social media-based campaign or post video on YouTube before it
really gets into the market to drive buzz and interest among prospective
customers. This way, you can more or less analyse how the market will respond
to your products and make necessary actions. Or if your superior is away for
business trips and the client need to close the deal, you can simply use video
conference system to settle things. Thanks to the advance of information
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technology, you can accelerate decision making process and most importantly,
brings money into your business.
Previously, your products and services are only exposed to certain group of
people within your network. However, with the advance of information
technology, you now can reach a wider audience than you ever expected.
Instead of words of mouth, recent information technology products such as
social media or social games promotes viral marketing where messages are
passed like domino effects to unidentifiable amount of audience which may or
may not be your target audience. In one way, you can deliver messages of your
business to greater amount of audience without making much effort. However,
it is argued that most of the time this method just does not work due to its
anonymous nature.
Last but not least, information technology also assume a role in improving your
business because of the insight and understanding it offers. Like previous
example of creating buzz prior to new product launch, you can actually gain
significant data of your target audience buying behavior as well as general
market insight. By better understanding market demand and consumer buying
behavior, you will be able to tailor a more specific, if not well-suited solutions
and hopefully, boosting sales or performance.

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THE BUSINESS ADVANTAGES OF

INFORMATION TECHNOLOGY
To get ahead in todays business world, a company must utilize the right
resources. One of the most effective, of course, is information technology (IT),
which has become an essential tool for businesses across many industries.
Talking about Globalization, IT has not only brought the world closer together,
but it has allowed the world's economy to become a single interdependent
system. This means that we can not only share information quickly and
efficiently, but we can also bring down barriers of linguistic and geographic
boundaries. The world has developed into a global village due to the help of
information technology allowing countries like who are not only separated by
distance but also by language to shares ideas and information with each other.
In communication, IT has helped to make communication cheaper, quicker, and
more efficient. We can now communicate with anyone around the globe by
simply text messaging them or sending them an email for an almost
instantaneous response. The internet has also opened up face to face direct
communication from different parts of the world thanks to the helps of video
conferencing.
IT has also brought about Cost Effectiveness by helping to computerize
business processes thus streamlining business to make them extremely cost
effective money making machines. This in turn increases productivity which
ultimately gives rise to profits that means better pay and less strenuous working
conditions.

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IT has also helped to bridge the cultural gap by helping people from different
cultures to communicate with one another, and allow for the exchange of views
and ideas, thus increasing awareness and reducing prejudice.
IT has also made it possible for businesses to be open 24 x7 all over the globe.
This means that a business can be open anytime anywhere, making purchases
from different countries easier and more convenient. It also means that you can
have your goods delivered right to your doorstep with having to move a single
muscle.
Lastly, IT has helped in the creation of new and interesting jobs like Computer
programming, Systems analyzing, Hardware and Software developing and Web
designing.
Now that business has become very competitive, there is the need to use IT to
remain ahead and in business. Good IT use can get you ahead of competitors.
In terms of Functionality and Flexibility, internally IT can help improve
infrastructure performance thus increasing functionality and the range of
options that can be pursued. Externally, it can help create an efficient, flexible
online/offline platform for doing business with customers, suppliers and
partners.
In commerce, IT can internally help improve internal operating efficiency and
quality. Externally, it can help streamline and integrate channels to market,
create new channels and integrate multiple online/offline channels.
IT can also help improve the performance of knowledge workers and enhance
organizational learning. Externally, it can improve the performance of
knowledge workers in customer, supplier and partner organizations; add

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information value to existing products and services; create new informationbased products and services.
IT can also help attract and retain top talent; increase satisfaction, engagement
and loyalty; create a culture of involvement, motivation, trust and shared
purpose. Externally, can help attract and retain high quality customers,
suppliers, partners and investors; increase external stakeholders satisfaction,
engagement and loyalty.
The combination of computers, the Internet, servers, and other high-tech
equipment can have a profound impact on daily operations. Here are some
specific advantages of IT and why its worth implementing in your business.

SAFEGUARDING CRITICAL INFORMATION

Whether its customer contact info, inventory, or finances, you need to back up
sensitive data and keep it out of the hands of the wrong parties. In the past, this
was typically limited to saving information on a computer, disc, or USB, where
it could be compromised or destroyed.
IT offers a significant improvement because it provides more comprehensive
security for electronic information so you can have greater peace of mind that it
wont be lost.
When you store data on multiple servers and allow access only to a small
number of authorized individuals, it becomes extremely difficult for hackers to
get a hold of it, or for a technological disaster to destroy it. Important

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information will remain in safe hands and your business will experience
minimal downtime, even in a worst-case scenario.

STREAMLINED COMMUNICATION AND COLLABORATION

One of the main factors that determines productivity is how efficiently team
members can work with others. In an increasingly globalized world, its more
and more common for companies to employ a dispersed workforce with people
working in different states and even different countries.
Outdated systems can inhibit communication and collaboration, but information
technology greatly improves it and allows team members to work side by side
throughout all stages of a project, even if theyre not in the same location.
Since its just as easy to work remotely as it is from a central office, you can get
more done in less time. By taking it one step further and utilizing mobile
devices like smartphones and tablets, tasks can be completed even on the go and
deadlines will more often be met.
This also minimizes the potential for mistakes, which should ultimately improve
the customer experience.

TOP-TIER TALENT

With outsourcing made easier, information technology allows your company to

attract some of the brightest minds in your industry. Since youre not relegated

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to a small geographical area, youre free to hire team members from all over the
world.
This makes it ideal for companies in smaller towns that simply dont have the
talent pool of larger cities. It can also help attract highly skilled individuals
because of your businesss efficiency. With an organized infrastructure acting
like a well-oiled machine, employee retention and minimal turnover should
become more the rule for your company rather than the exception.

FINANCIAL SAVINGS

When it comes to costs, initial implementation of IT can be fairly high.

However, the long-term savings usually justify those costs because the overall
operating expenses tend to diminish.
One example would be effective employee training via a software program with
which a neuropathy clinic could instruct a new employee on patient treatments,
company policies, and responsibilities. Another example would be using a
digital calendar and time tracking tools to ensure that shifts are always covered.

EXPERT SUPPORT

By investing in IT infrastructure, youre typically covered whenever a techrelated issue arises. Whether you experience a software glitch or a network goes
down, having quick access to professionals ensures that your business will get
the help it needs to stay functional.
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This allows your regular employees to perform their jobs and focus on whats
really important, with little disruption to daily operations.

BUSINESS OBJECTIVES OF
INFORMATION TECHNOLOGY
PRODUCT DEVELOPMENT

Information technology can speed up the time it takes new products to reach the
market. Companies can write product requirement documents by gathering
market intelligence from proprietary databases, customers and sales
representatives. Computer-assisted design and manufacturing software speed up
decision making, while collaborative technologies allow global teams to work
on different components of a product simultaneously. From innovations in
microprocessors to efficient drug delivery systems, information technology
helps businesses respond quickly to changing customer requirements.

STAKEHOLDER INTEGRATION

Stakeholder integration is another important objective of information

technology. Using global 24/7 interconnectivity, a customer service call
originating in Des Moines, Iowa, ends up in a call center in Manila, Philippines,
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where a service agent could look up the relevant information on severs based in
corporate headquarters in Dallas, Texas, or in Frankfurt, Germany. Public
companies use their investor relations websites to communicate with
shareholders, research analysts and other market participants.

PROCESS IMPROVEMENT

Process improvement is another key IT business objective. Enterprise resource

planning (ERP) systems allow managers to review sales, costs and other
operating metrics on one integrated software platform, usually in real time. An
ERP system may replace dozens of legacy systems for finance, human resources
and other functional areas, thus making internal processes more efficient and
cost-effective.

COST EFFICIENCIES

Although the initial IT implementation costs can be substantial, the resulting

long-term cost savings are usually worth the investment. IT allows companies to
reduce transaction and implementation costs. For example, the cost of a desktop
computer today is a fraction of what it was in the early 1980s, and yet the
computers are considerably more powerful. IT-based productivity solutions,
from word processing to email, have allowed companies to save on the costs of
duplication and postage, while maintaining and improving product quality and
customer service.

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COMPETITIVE ADVANTAGE

Cost savings, rapid product development and process improvements help

companies gain and maintain a competitive advantage in the marketplace. If a
smartphone competitor announces a new device with innovative touch-screen
features, the competitors must quickly follow suit with similar products or risk
losing market share. Companies can use rapid prototyping, software simulations
and other IT-based systems to bring a product to market cost effectively and
quickly.

GLOBALIZATION

Companies that survive in a competitive environment usually have the

operational and financial flexibility to grow locally and then internationally. IT
is at the core of operating models essential for globalization, such as
telecommuting and outsourcing. A company can outsource most of its noncore
functions, such as human resources and finances, to offshore companies and use
network technologies to stay in contact with its overseas employees, customers
and suppliers.

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THE ROLE OF INFORMATION

TECHNOLOGY

A.

BUSINESS

TECHNOLOGY

IS

CONTINUOUSLY

CHANGING NAMES AND CHANGING ROLES.

1.

In the 1970s, business technology was known as DATA

PROCESSING (DP).
a.

DATA are raw, unanalyzed, and unsummarized facts

and figures.

b.

INFORMATION is the processed and summarized

data that can be used for managerial decision making.

c.

Its role was to SUPPORT existing business through

improving the flow of financial information.

d.

It was primarily used to improve the flow of financial

information.

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2.

In

the

1980s,

business

technology

became

known

as INFORMATION SYSTEMS (IS).

a.

Its role was changed from supporting business

to DOING business (for example ATMs and voice
mail).

b.

As business used technology more, it became more

dependent on it.

3.

In the late 1980s, business technology became known

as INFORMATION TECHNOLOGY (IT).
a.

Business shifted from using new technology on old

methods, to using it on NEW METHODS.

b.

Information

technologys

role

became

to CHANGE business.

B.

HOW INFORMATION TECHNOLOGY CHANGES

BUSINESS
1.

Time and place have always been at the center of business.

a.

Today IT allows businesses to delivery products and

services whenever and wherever it is convenient for
the CUSTOMER.

b.

As IT breaks time and location barriers, it creates

organizations and services that are INDEPENDENT
OF LOCATION.

c.

NASDAQ

and SOFFEX are

electronic

stock

exchanges without trading floors.

2.

IT also creates organizations and services that are

independent of location.

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3.

VIRTUALIZATION means accessibility through technology

that allows business to be conducted independent of
location.
a.

The technology allows you to access people and

information as if you were in an actual office.

b.

Virtual

communities

are

forming

as

people

communicate over computer networks.

4.

Doing business dramatically changes when companies

increase their technological capabilities.

C.

MOVING

FROM

INFORMATION

TECHNOLOGY

TOWARD KNOWLEDGE TECHNOLOGY

1.

In the mid-1990s, we started moving from information

technology toward KNOWLEDGE TECHNOLOGY (KT)
information charged with enough intelligence to make it
relevant and useful.

2.

KNOWLEDGE TECHNOLOGY adds a layer of intelligence

to filter appropriate information and deliver it when it is
needed.

3.

KT changes the traditional flow of information from an

individual GOING to the database to the data COMING to
the individual.

4.

KT "thinks" about the facts based on an individuals needs so

businesspeople can spend more time DECIDING about how
to react to problems and opportunities.

5.

With technology as the key to growth, the new economy is

based on brains, not brawn.

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II.

THE

ROAD

TO

KNOWLEDGE:

THE

INTERNET,

INTRANETS, EXTRANETS, AND VIRTUAL PRIVATE

NETWORKS
A.

KNOWLEDGE, MORE THAN PHYSICAL ASSETS, IS

NOW THE KEY TO SUCCESSFUL COMPETITION.
1.

Knowledge has become one of the more important factors of

production.

2.

Business is realizing that it needs to manage knowledge like

any other asset.

3.

This is leading to new technologies that support contact

among staff, suppliers, and customers.

B.

INTERNETS AND INTRANETS

1.

The INTERNET is a network of computer networks.

2.

An INTRANET is a company-wide network closed to public

access, which uses Internet-type technology.
a.

Some companies use intranets only to publish

information for employees.

b.

Others

create

interactive

intranets,

allowing

employees to input information.

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3.

Intranets are the fastest-growing segments of the Internet.

a.

By 2002 between a half and two-thirds of all

businesses will be running intranets.

b.

To limit access, companies can construct a "firewall"

between themselves and the outside world to protect
corporate information from unauthorized users.

4.

An EXTRANET is a semiprivate network that uses Internet

technology so more than one company can access the same
information.

5.

Since it does use public lines, hackers can gain unauthorized

access.

6.

One solution is to use dedicated lines, but this is expensive

and limits use to computer directly to those lines.

7.

A VIRTUAL PRIVATE NETWORK (VPN) is a private data

network that creates secure connections, or "tunnels," over
regular Internet lines.
a.

Companies no longer need to own leased lines, but

can use the public lines securely.

b.

VPNs provide secure sharing of public resources for

data.

C.

BROADBAND TECHNOLOGY.
1.

As traffic on the Internet increases, the slower the

connection becomes.

2.

BROADBAND TECHNOLOGY offers users a continuous

connection to the Internet and allows them to send and
receive data much faster than before.
a.

Bandwidth connection is by cable modem, digital

subscriber lines (DSL), satellite, or fixed wireless.

28 | P a g e

b.

Data can reach users more than 50 times faster than

traditional 56k modems.

3.

The traffic on the Internet has become so intense that early

Net users have been squeezed off the crowded Internet.
a.

Their answer is to create another Internet, reserved for

research purposes only.

b.

The new system, INTERNET 2, will run up to 22,000

times faster and will support heavy-duty applications.

4.

A key element is a network called vBNS, or VERY HIGH

SPEED BACKBONE NETWORK SERVICE, set up in
1995 to link government supercomputer centers and a select
group of universities.
a.

Users who pay more can use more bandwidth.

b.

The designers of Internet 2 are planning to filter

Internet 2 technology out in such a way that there is
plenty of room for everyone.

29 | P a g e

III.

MANAGING INFORMATION.
A.

MANAGERS

HAVE

ALWAYS

HAD

TO

SIFT

THROUGH MOUNTAINS OF INFORMATION TO

FIND WHAT THEY NEED.
1.

Today businesspeople also have voice mail, the Internet,

faxes, e-mail, and instant messaging.

2.

Businesspeople

refer

to

this

information

overload

as "INFOGLUT."
3.

IDENTIFYING THE FOUR OR FIVE KEY GOALS helps

eliminate unnecessary information.

4.

USEFULNESS of management information depends on four

characteristics:
a.

QUALITY: The information must be accurate and

reliable.

b.

COMPLETENESS: There must be enough data to

make a decision, but not too much to confuse.

30 | P a g e

c.

TIMELINESS: Information must reach managers

quickly.

d.

RELEVANCE: Managers must know the questions to

ask to get the answers they need.

5.

Sorting out the useful information and getting it to the right

people is the goal in solving information overload.
a.

Software programs can filter information so that users

can get the customized information they need.

b.

Known as "PUSH TECHNOLOGY," they push the

information to you, delivering customized news to
your computer.

B.

MANAGING KNOWLEDGE.
1.

KNOWLEDGE

MANAGEMENT means

sharing,

organizing, and disseminating information in the simplest

and most relevant way possible for the users of the
information.
2.

Knowledge-mail sorts through e-mail messages on a

companys system and tracks users work.
a.

Such monitoring of e-mail is seen by some as an

invasion of privacy.

b.
3.

Some e-mail systems let you "opt-out."

Knowledge management requires organizing information so

that its clean, accurate, and consistent.

31 | P a g e

IV.

THE ENABLING TECHNOLOGY: HARDWARE

A.

WHAT IS POWERFUL TODAY IN COMPUTER

HARDWARE MAY BE OBSOLETE BY THE TIME
YOU STUDY THIS.
1.

Chairman of Intel Corp., Gordon Moore, has remarked that

the capacity of computer chips doubles every year or
so (MOORES LAW.)

2.

Moore has recently revised his law by saying that his

prediction cannot hold good for much longer because the
finite size of atomic particles will prevent infinite
miniaturization.

3.

This will be a simple overview of the kind of computer

technology available now, at the start of the new millennium.

B.

HARDWARE
Hardware includes computers, pagers, cellular phones, scanners,
printers, fax machines, and personal digital assistants.
32 | P a g e

1.

All-in-one devices that address all your communications

needs are now available.

2.

Researchers are working on a human computer interface that

combines a video camera and computer

C.

CUTTING THE CORD: WIRELESS INFORMATION

APPLIANCES.
1.

Internet appliances, including gaming devices, are designed

to connect people to the Internet and to e-mail.

2.

The biggest trends is to wireless handhelds like the Palm and

two-way paging devices.

3.

People are taking the Internet with then, and this has
changed the way information is delivered.

4.

Information must be available in small bits, using brief lines

and small icons.

D.

COMPUTER NETWORKS.
1.

The most dynamic change in recent years is the

move AWAY

FROM

PROCESSING TOWARD

MAINFRAME
NETWORK

COMPUTER
SYSTEMS that

allow many users top access information at the same time.

a.

In

the

SYSTEM (also

new NETWORK

COMPUTING

called CLIENT/SERVER

COMPUTING), the tasks such as searching sales

records are handled by personal computers ("clients").
b.

The information needed to complete the tasks is stored

in huge databases controlled by the "server."

2.

The major BENEFITS OF NETWORKS are:

a.

SAVING TIME AND MONEY.

33 | P a g e

b.

NETWORKS PROVIDE EASY LINKS ACROSS

FUNCTIONAL BOUNDARIES.

c.

ALLOWING EMPLOYEES TO SEE COMPLETE

INFORMATION.
i.

In traditional organizations, information is

summarized so many times that it often loses its
meaning.

ii.
3.

Networks catch raw information.

The text uses the example of Lotus Developments

information database.

4.

Networks have their drawbacks also.

a.

Maintaining a system of PCS can be expensive.

b.

System and hardware upgrades can be disruptive and

expensive.

c.

Using networks requires so many organizational

changes that some companies are moving away from
computer networks to other options.

5.

In a new hybrid of mainframe and network computing,

called THIN-CLIENT NETWORKS, applications and data
reside on a server.

6.

Another option is to lease specific software applications

from an APPLICATION SERVICE PROVIDER (ASP), who
maintains and upgrades the software on its servers.

7.

Companies such as Everdream offer services including a PC,

unlimited Internet access, daily data backup, e-mail,
software, training, and 24/7 support.

8.

Using thin-client computing or ASP frees up more time for

actually running the business.

34 | P a g e

V.

SOFTWARE.
A.

COMPUTER

SOFTWARE PROVIDE THE

INSTRUCTIONS THAT ENABLE YOU TO TELL THE

COMPUTER WHAT TO DO.
1.

It is important to find the right SOFTWARE to do the job

you have BEFORE finding the right HARDWARE
a.

Some programs are easier to use than others.

b.

Other programs are more sophisticated with more

functions.

c.

A business person must decide what functions he or

she wants performed then choose the appropriate
software.

2.

Most software is distributed commercially through suppliers.

a.

There is some software, called SHAREWARE, that is

copyrighted but distributed to potential customers free
of charge.

35 | P a g e

b.

PUBLIC DOMAIN SOFTWARE is software that is

free for the taking.

B.

BUSINESSPEOPLE

MOST

FREQUENTLY

USE SOFTWARE FOR SIX MAJOR PURPOSES:

C.

1.

WRITING (word processors.)

2.

MANIPULATING NUMBERS (spreadsheets.)

3.

FILING AND RETRIEVING DATA (databases.)

4.

PRESENTING INFORMATION VISUALLY (graphics.)

5.

COMMUNICATING (e-mail and instant messaging).

6.

ACCOUNTING.

MANY FUNCTIONS HAVE BEEN COMBINED IN

ONE KIND OF PROGRAM KNOWN AS INTEGRATED
SOFTWARE OR SUITES.

D.

NEW

CLASS

OF

SOFTWARE

PROGRAM,

CALLED GROUPWARE, HAS EMERGED FOR USE

ON NETWORKS.

36 | P a g e

VI.

EFFECTS

OF

INFORMATION

TECHNOLOGY

ON

MANAGEMENT.
A.

HUMAN RESOURCE ISSUES.

1.

Technology makes the work process more efficient as it

replaces many bureaucratic functions.
a.

One challenge is to recruit employees who know how

to use the new technology.

b.
2.

Some companies outsource technical training.

Computers and the increased use of the Internet and intranets

will allow employees to stay home and do their work from
there (TELECOMMUTING.)

3.

ADVANTAGES OF TELECOMMUTING:
a.

Telecommuting involves LESS TRAVEL TIME AND

COSTS, and often increases productivity.

b.

It helps companies save money by RETAINING

VALUABLE

EMPLOYEES and

EXPERIENCED

EMPLOYEES

by TEMPTING
OUT

OF

RETIREMENT.

37 | P a g e

c.

Companies can get by with SMALLER, LESS

EXPENSIVE OFFICE SPACE.

d.

Telecommuting enables men and women TO STAY

HOME

WITH

SMALL

CHILDREN and

is

tremendous BOON FOR DISABLED WORKERS.

e.

Studies show that it is more SUCCESSFUL AMONG

SELF-STARTERS and those whose work doesnt
require face-to-face interaction with co-workers.

4.

DISADVANTAGES OF TELECOMMUTING:
a.

Long-distance

work

can

give

workers

a DISLOCATED FEELING of being left out of the

office loop.
b.

Some feel a LOSS OF ENERGY people can get

through social interaction.

c.

Often people working from home dont know WHEN

TO TURN THE WORK OFF.

d.

Some companies are using telecommuting as a PARTTIME ALTERNATIVE.

5.

Electronic

communication CAN

NEVER

REPLACE

HUMAN COMMUNICATION for creating enthusiasm and

esprit de corps.
a.

Efficiency and productivity can result in people being

treated like robots.

b.

Computers are a tool, not a replacement for managers

and workers.

c.

Computers should aid creativity by giving people

more freedom and more time.

d.

The technology also allows people to work at home, in

the car, or any time of the day.
38 | P a g e

e.

The result is that U.S. workers work longer hours than

people in any other nation.

B.

SECURITY ISSUES.
1.

HACKERS, people who break into computer systems for

illegal purposes, are an increasing problem.

2.

Computer security today is more complicated than in the

past.
a.

When information was processed in a mainframe

environment, the single data center was easier to
control.

b.

Today computers are not only accessible in all areas of

the company, but also with other companies.

c.

It takes skill and knowledge to keep systems clean and

hackers at bay.

3.

A VIRUS is a piece of programming code inserted into other

programming to cause some unexpected and undesirable
event.
a.

Viruses

are

spread

by

downloading

infected

programming over the Internet or by sharing an

infected diskette.
b.

Some viruses are playful, but some can erase data or

crash a hard drive.

c.

Software

programs

such

as

Nortons AntiVirus "inoculate" the computer so that it

doesnt catch a known virus.
d.

It is important to keep your antivirus protection

program up-to-date and practice "safe computing."

4.

Existing laws do not address some Internet issues such as:

a.

Copyright and pornography laws.

39 | P a g e

C.

b.

Intellectual property and contract disputes.

c.

Online sexual and racial harassment.

d.

Crooked sales schemes.

PRIVACY ISSUES.
1.

Your e-mail is no more private than a postcard.

a.

More than a fourth of U.S. companies scan employee

e-mail regularly and legally.

b.

Most e-mail travels over the Internet in unencrypted

plain text.

2.

A major problem with privacy has developed as more

and MORE PERSONAL INFORMATION IS STORED IN
COMPUTERS and people are able to access that data
illegally.
a.

The Internet allows Web surfers to access all sorts of

information about you.

b.

One of the key issues is: Isnt this personal

information already public anyway?

3.

Web sites have gotten downright nosy by secretly tracking

users movements online.
a.

Web surfers seem willing to swap personal details for

free access to online information.

b.

Web sites often send COOKIES to your computer that

stay on your hard drive.

c.

These often simply contain your name and password.

d.

Others track your movements around the Web and

then blend that information with their databases and
tailor the ads you receive accordingly.

e.

You need to decide how much information about

yourself you are willing to give away.
40 | P a g e

D.

STABILITY ISSUES.
1.

Instability in technology also has a significant impact on

business.

2.

The text uses the example of Hershey and its Halloween

candy delivery.

3.

The blame for such problems is a combination of computer

error, human error, malfunctioning software, and overly
complex systems.

41 | P a g e

VII.

TECHNOLOGY AND YOU.

A.

IT MAY BE OCCUPATIONAL SUICIDE TO BE

COMPUTER ILLITERATE SINCE MOST WORKERS
COME IN CONTACT WITH COMPUTERS TO SOME
DEGREE.
1.

By 2006 half of all American workers will be employed in

information technology positions.

2.

In 2000 there was a shortage of almost 850,000 skilled

information technology workers.

B.

RESEARCHERS

WHO

STUDIED COMPUTERPHOBIA (FEAR

HAVE
OF

COMPUTERS) FOUND THAT 55% OF AMERICANS

HAVE THE DISORDER.
1.

Gender, age, and income level dont appear to lead

to computerphobiathe key variable is exposure.

2.

As information technology eliminates old jobs while

creating new ones, it is up to you to learn the skills you need
to be certain you arent left behind.

42 | P a g e

THE USE OF INFORMATION

TECHNOLOGY IN BUSINESS
In its practical sense, Information Technology involves the use of computer
applications and equipment to development, design, manipulate, and implement
the storing and the transmission of data. Basically every endeavor requires the
storage and transmission of data. For instance, before the use of the online
public access catalog, school libraries use physical card catalogs as a registry of
all books and files stored in their archives. But with the internet, the previously
physical information was digitized, allowing for wireless data transmission.
This begs the question: what is the use of Information Technology in business?
For one, it allows businesses to break the boundaries of location and language.
Take, for example, a retail store. If the store sticks to merely doing physical
transactions from its brick and mortar store, it limits the possible clientele to the
people within its location. But by using the internet, the store can be part of a
nationaland even globalmarketplace. This is the basic concept that makes
websites such as eBay and Amazon a success.

Information Technology in business can also open up opportunities for low cost
business operations. Many companies and entrepreneurs, for instance, go into
telecommuting when looking for workers and employees. Not only does
43 | P a g e

telecommuting (obviously possible with the use of Information Technology)

allow institutions to outsource work, it also widens the talent pool search, giving
entrepreneurs to more choices when it comes to workers and employees.
Of course, Information Technology also works in the physical business set-up.
Information Technology in business allow companies to store product
information on virtual databases (rather than physical ones), allowing for easier
retrieval of data when needed. It makes internal communication easier, thanks to
email, telephone linking, and other similar methods of communication.

44 | P a g e

THE ROLE OF INFORMATION

TECHNOLOGY IN BUSINESS
PROCESS REENGINEERING
Information technology (IT) has historically played an important role in the
reengineering concept.It is considered by some as a major enabler for new
forms of working and collaborating within an organization and across
organizational borders.
45 | P a g e

BPR literature identified several so called disruptive technologies that were

supposed to challenge traditional wisdom about how work should be performed.

Shared databases, making information available at many places

Expert systems, allowing generalists to perform specialist tasks

Telecommunication networks, allowing organizations to be centralized

and decentralized at the same time

Decision-support tools, allowing decision-making to be a part of

everybody's job

Wireless data communication and portable computers, allowing field

personnel to work office independent

Interactive videodisk, to get in immediate contact with potential buyers

Automatic identification and tracking, allowing things to tell where they

are, instead of requiring to be found

High performance computing,and school, allowing on-the-fly planning

and revisioning

In the mid-1990s, especially workflow management systems were considered as

a significant contributor to improved process efficiency. Also ERP (Enterprise
Resource Planning) vendors, such as SAP, JD Edwards, Oracle, PeopleSoft,
positioned their solutions as vehicles for business process redesign and
improvement.
46 | P a g e

Information Technology: the great equalizer in the business of going global

Today, technology makes it possible for small companies to penetrate global
markets very quickly and at very low cost. A recent study found that at least
one-third of small- to medium-sized companies make extensive use of Web
technologies, and those that do have benefitted significantly, using new Internetbased services to perform the functions that entire departments once performed
for large corporations.

CLOUD COMPUTING
Indeed, these so-called micro-multinationals have the same capabilities at their
fingertips as their larger counterparts because they can purchase most
communications and computer infrastructure necessities online at minimal cost.
For instance, for as little as 10 cents an hour, companies can purchase cloud
computing services which offer nearly unlimited computing capacity
from notable providers such as Amazon, Google, and Microsoft.

OTHER IT RESOURCES
In addition, email and social networks, "wikis" (shared Web pages on which
people can post and edit messages), voice-over Internet services, video
teleconferencing, and online sales and advertising platforms all provide nearly
limitless possibilities to connect, outsource, and streamline business operations.
Aside from improving company performance, these platforms are increasingly
important in finding new clients and matching talent pools with job
opportunities.

47 | P a g e

A "SUPER EFFICIENT" BUSINESS MODEL

The great leap forward in technology offers small global businesses other key
competitive benefits, such as the ability to:

Work "24/7" across time zones, countries, and continents.

Compete effectively for venture capital funding.

Pursue customers worldwide and "localize" product offerings and

communications to better serve them.

Your Funding Needs

TECHNOLOGY STRATEGY
Technology strategy (Information Technology strategy or IT strategy) is the
overall plan which consist of objective(s), principles and tactics relating to use
of the technologies within a particular organization. Such strategies primarily
48 | P a g e

focus on the technologies themselves and in some cases the people who directly
manage those technologies. The strategy can be implied from the organization's
behaviors towards technology decisions, and may be written down in a
document.
Other generations of technology-related strategies primarily focus on: the
efficiency of the company's spending on technology; how people, for example
the organization's customers and employees, exploit technologies in ways that
create value for the organization; on the full integration of technology-related
decisions with the company's strategies and operating plans, such that no
separate technology strategy exists other than the de facto strategic principle
that the organization does not need or have a discreet 'technology strategy'.
A technology strategy has traditionally been expressed in a document that
explains how technology should be utilized as part of an organization's
overall corporate strategy and each business strategy. In the case of IT, the
strategy is usually formulated by a group of representatives from both the
business and from IT.[1] Often the Information Technology Strategy is led by an
organization's Chief Technology Officer (CTO) or equivalent. Accountability
varies for an organization's strategies for other classes of technology. Although
many companies write an overall business plan each year, a technology strategy
may cover developments somewhere between three and 5 years into the future.

INFORMATION TECHNOLOGY IN
BANKS AS A BUSINESS
The term Information Technology is often used in a broader sense to include
Information systems as well as Information Technology. However Information
49 | P a g e

Technology is mainly a synthesis of developments in the field of computer

science and the developments in telecommunication technology.
The developments in the telecommunication technology in the first half of
twentieth century led to installation of worldwide telephone systems, radio and
television networks and later development of satellite-based telecommunication.
The continuous research and development efforts in telecommunication made
communication more efficient, reliable, cost effective and also increased the
coverage as the technology matured.
The developments in computer technology started in second half of the
twentieth century with limited use of computer for data processing. The rapid
developments in all technologies making up different components of the
computers led to unprecedented growth in computer industry. This development
led to mass scale spread of powerful computing resources at a very affordable
price to the users and trend in use of computers shifted from users approaching
central computers for data processing to computers moving to the users desk for
all activities like word processing and note preparing, data processing, data
analysis, trend and pattern analysis as well as scenario building.
The Information technology is a logical development arising out of confluence
of these two technologies which has narrowed down the differences between
collecting, storing and processing information and transporting the information
elsewhere thereby driving the geographical distances to irrelevance. The key
components of IT include:
1. Computer hardware including CPU, memory chips, storage disks, device
drivers and peripheral devices such as Scanners, Printers, etc.

50 | P a g e

2. Operating Systems such as DOS & WINDOWS, UNIX & LINUX which
act as an interface between the application programmes and computer
hardware.
3. Software Packages and Development tools which are used for developing
applications to store and process data. Various database systems,
relational databases, front end tools, programming languages are some of
the examples of this type.
4. Networking systems, which enable computers at different locations to
communicate with each other for file transfers, job processing and
resource sharing. These include networks operating within a limited area
to networks, which spread across the world.
5. Telecommunication systems such as analogue and digital networks,
satellite networks which provide media for data transmission and
networking for co-operative processing of data and resource sharing.

RECENT RBI INITIATIVES FOR IT

IN BANKING
RBI as a central bank takes various decisions and implement policies for the
smooth running of banking industry. As today, is the world of IT, which has
51 | P a g e

impact on every field , banking industry cant be kept isolated. To encourage

more use of Information Technology in banking RBI takes initiative from time
to time . Some recent initiatives taken by RBI are as follows :-

IMPLEMENTATION OF CENTRALISED FUNDS

MANAGEMENT SYSTEM
The centralised funds management system (CFMS) provides for a centralised
viewing of balance positions of the account holders across different accounts
maintained at various locations of RBI. While the first phase of the system
covering the centralised funds enquiry system (CFES) has been made available
to the users, the second phase comprising the centralised funds transfer system
(CFTS) was made available by the middle of 2003. So far, 54 banks have
implemented the system at their treasuries/funds management branches.

COMMITTEE ON PAYMENT SYSTEMS

In order to examine the entire gamut of the process of reforms in payment and
settlement systems which would be culminating with the real time gross
settlement (RTGS) system, a Committee on Payment Systems (Chairman: Dr.
R.H. Patil) was set up in 2002. The Committee, after examining the various
aspects relating to payment and settlement systems, submitted its report in
September 2002 along with a draft Payment Systems Bill. The draft Bill
provides, inter alia, a legal basis for netting, apart from empowering RBI to
have regulatory and oversight powers over payment and settlement systems of
the country. The report of the Committee was put on the RBI website for wider
dissemination. The draft Bill has been forwarded to the Government.

52 | P a g e

MULTI-APPLICATION SMART CARDS

Recognising the need for technology based payment products and the growing
importance of smart card based payment flows, a pilot project for multiapplication smart cards in conjunction with a few banks and vendors, under the
aegis of the Ministry of Communications and Information Technology,
Government of India, has been initiated. The project is aimed at the formulation
of standards for multi-application smart cards on the basis of inter-operable
systems and technological components of the entire system.

SPECIAL ELECTRONIC FUNDS TRANSFER

It was indicated in the mid-term Review of October 2002, national EFT (NEFT)
has being introduced using the backbone of the structured financial messaging
system (SFMS) of the IDRBT. NEFT would provide for movement of electronic
transfer of funds in a safe, secure and quick manner across branches of any bank
to any other bank through a central gateway of each bank, with the inter-bank
settlement being effected in the books of account of banks maintained at RBI.
Since this scheme requires connectivity across a large number of branches at
many cities, a special EFT (SEFT) was introduced in April 2003 covering about
3000 branches in 500 cities. This has facilitated same day transfer of funds
across accounts of constituents at all these branches.

NATIONAL SETTLEMENT SYSTEM (NSS)

The clearing and settlement activities are dispersed through 1,047 clearing
houses managed by RBI, the State Bank of India and its associates, public
53 | P a g e

sector banks and other institutions. In order to facilitate banks to have better
control over their funds, it was proposed to introduce national settlement system
(NSS) in a phased manner.

REAL TIME GROSS SETTLEMENT SYSTEM (RTGS)

It was also indicated in the mid-term Review of October 2002, to have RTGS
system for the easy clearing between banks.

REPORTING OF CALL/NOTICE MONEY MARKET

TRANSACTIONS ON NDS PLATFORM
Negotiated dealing system (NDS), which has become operational since
February 2002, enables on-line dealing and dissemination of trade information
relating to instruments in money, government securities and foreign exchange
markets. Membership in NDS is open to all institutions which are members of
INFINET and are maintaining subsidiary general ledger (SGL) Account with
RBI. These include banks, financial institutions (FIs), primary dealers (PDs),
insurance companies, mutual funds and any other institution as admitted by
RBI. At present, all deals in government securities, call/notice/term money, CDs
and CP executed among NDS members have to be reported automatically
through NDS, if the deal is done on NDS and within 15 minutes of concluding
the deal, if done outside NDS. However, it has been observed that a very
sizeable proportion of daily call/notice money market deals is not reported by
members on NDS as stipulated. With a view to improving transparency and
strengthening efficiency in the market, it is proposed that:
1. From the fortnight beginning May 3, 2003, it was mandatory for all NDS
54 | P a g e

members to report all their call/notice money market deals on NDS. Deals done
outside NDS should be reported within 15 minutes on NDS, irrespective of the
size of the deal or whether the counterparty is a member of the NDS or not.
2. Full compliance with the reporting requirement to NDS was reviewed in
September 2003. In some cases where there was repeated non-reporting of
deals by an NDS member, it was considered that non-reported deals by that
member are treated as invalid with effect from a future date.

55 | P a g e

NETWORKING &
COMMUNICATION SYSTEMS
INTERNET
Internet is the global connection of computers. The computers are connected
through a huge networks of telecommunication links. This connection
mechanism is dynamic, that is, it keeps on changing constantly and is spread all
over the world. Using Internet you can communicate or find out about
happenings in any part of the world. Internet is also called as network of
networks. This global network links thousands of computers at universities,
research institutions, government agencies and business houses throughout the
world. Some common definitions given in the past include:
A network of networks based on the TCP/IP protocols,
A community of people who use and develop those networks,
A collection of resources that can be reached from those networks.

The networks that make up the Internet are based on standard set of protocols (a
mutually agreed upon method of communication between parties), the Internet
also has gateways to networks and services that are based on other protocols.
The Internet had its origin in the cold war between Russia and America during
the second half of the decade from 1960 to 1970. When U.S. Air Force needed
to ensure that it could still communicate with its forces in the event of a Nuclear
Strike. The Internet was originated on 2nd January 1969 when U.S. department

56 | P a g e

of defence funded a project that developed a national computer network called

Advanced Research Project Agency Network (ARPANET).
The U.S. department of defence immediately saw this network as an ideal
communication weapon. Despite its military background, the ARPANET
eventually became primarily a means of instant communication between
computer researches across the nation. In 1983 the ARPANET was reserved for
civilian use, while a new network called Military Network (MILNET) created
for military use.
The internet consist of numbers of computers called hosts and interconnecting
equipment such as routers and telecommunications links that interconnect
routers and hosts to the together.
A host is a computer on the internet. Each host is capable of acting as provider
of information, such as files documents or images. A host can also access
information on another host if it has the required permission to do so.
A router is a device that joins telecommunications links and groups of
computers together. It provides a mechanism for determining a route (or path)
between the two computers that want to exchange information.
Each host computer is identified into two ways. Firstly, each computer on the
Internet has a unique assigned name, such as host1.cit.ac.nz, which is referred to
as its domain name. Secondly, each computer on the Internet also has a unique
numerical address, called a TCP\IP address. This is a group of four numbers
joined by dots. For example, the computer known as host1.cit.ac.nz could have
a TCP\IP address of 156.59.20.49.
The allocation of unique domain names and TCP\IP addresses are controlled by
governing bodies in each country. In New Zealand, the organization responsible
for this is http://www.domainz.net.nz/
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A host computer that provides information for others to use is normally called a
server. Examples of servers are web servers, file servers, mail servers and news
servers.

LOCAL AREA NETWORK (LAN)

A set of computers and peripherals that are in close proximity and are
interconnected is called a local area network. A LAN transports information
whether it is text, data image, graphics or voice. In other words, a LAN can be
described as a network of computers confined to a limited geographical area say
within a single office building or a building complex or a factory or an
educational campus.
LAN differs from mainframe and mini computer systems in that whereas the
terminals on a LAN are intelligent workstations, the terminals attached to the
latter are dumb and therefore completely depend on the central processor for
their processing operations. This means that the workstations under the LAN
have their own processing capacity and depend on the central system only for
the supply of the file requested. The entire processing on the file is carried out
locally at the workstation and only the processed file would be sent back to the
central system if required. This will considerably reduce the burden on the
central processor on a LAN.

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METROPOLITAN AREA NETWORK (MAN)

A network that is spread over a big city and adheres to a prescribed standard
(e.g. the IEEE 802.6 standard in the USA) is called the metropolitan area
network (MAN). MANs normally use fiber optic technology to achieve the
high data-communication rate. The protocol used in a MAN, called Dual Queue
Dual Bus (DQDB) consists of two loops of fibre optic cables to which the
network nodes connect. A DQDB-based network forms a ring so that a central
node or station can provide clocking and synchronisation information to control
and manage the proper transmission of frames.
By using WAN and MAN an organisation can derive all the advantages of a
LAN over a wide area getting at the same time the benefit of speed and
economy.

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WIDE AREA NETWORKS (WAN)

LAN enables connecting computers located in one office. Suppose an
organisation has offices in two different geographical locations or if it has a
branch network, the LANs at these different locations also can be connected
which is called a wide area network (WAN). The nationwide or the worldwide
telephone network system is the best example of WAN whieh connects
ihousands of telephone exchanges spread over hundreds of thousands of
kilometres.
In order to connect the two LANs located at different locations, a special kind of
phone Sine is required lo be leased from the telephone company. Further,
special WAN hardware consisting of routers, bridges and gateways are also
required to establish a single heterogeneous WAN system.
The bridges connect LANs enabling communication between them. Bridges
connect LANs that may have different hardware components and different
protocols. A router on the other hand is like a bridge but more protocoldependent in that they need to have the same high-level protocol in all the
network segments they connect. A router usually can link only LANs with
identical protocols.
Brouters, also known as multiprotocol routers, are a kind of hybrid of bridges
and routers. They act as bridges for some packets and as routers for others thus
providing the advantages of both bridges and routers. They are however very
complex and expensive but if successfully installed they provide the best
internet-working solution.

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Two systems built on totally different communications architectures can be

connected by using gateway which is a computer system and software that
translate the data passing between the two systems.

CLIENT-SERVER COMPUTING
The term client/server was known to be used first in the 1970s at the Xerox Palo
Alto Research Centre (PARC). While trying to run software on computers tied
together in networks, the researchers in PARC found that the software
organization seemed to work more efficiently when portions of computer
applications spread out among co-operating machines. Each cooperation, which
could be more than one per application, was driven by software acting as the
client, making requests and getting service from the other. The server side of
such co-operations remain passive, serving only to the needs of the clients. The
researchers started calling this style of software co-operation as client/server
computing.
The PC revolution has also ushered in the era of down-sizing because due to the
emerging computing technology the power of mainframes can be delivered on
desktops. In mainframes, applications were stored and maintained centrally and
dumb terminals were directly connected to the system to access the data.
Whenever an update is made to a system, it is applied on the mainframe for use
by everyone. This model is called host-based computing. Centralized host-based
computing models allow many users to share a single computer's applications,
have a single centralized and integrated database and DBMS software for
different applications. Network technology provided users the access to central
data on the main computer, the file server, from remote locations. In
network/file server computing architecture, many users can share data and

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resources one at a time. When user A is using File X, user B and user C have to
wait as the application software is bound to the server over the network.

Client Server System

In the client/server model, the application software is divided in to two
components, one running on the server side and the other on the user/client side.
The clients send requests to the server over the network. These requests queue
up in the server and get processed with the server process acting as a software
engine that manages shared resources such as databases and communication
links.

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ASYNCHRONOUS TRANSFER MODE OR ATM NETWORKS

This network uses data transmission which can be considered as a special type
of packet switching technology in this type of transmission, the data is broken
into cells of fixed size having 53 bytes each. These 53 bytes contain 48 bytes of
data and 5 bytes of header information. The ATM uses hardware level packet
switching at the data link layer which is second layer in the OSI model after the
physical layer (containing only bits). In traditional packet switching, the error
checking is done after the data is received at the destination and passed on upto
the software. ATM switches set up a virtual circuit between source and
destination computer and at each switching node, ATM header identifies a
virtual circuit that can route cell's message to destination computer. This
hardware level switching being faster than conventional packet switching, ATM
network can transmit the data upto 1.2 Gigabits and in normal set up it can
transmit data upto 155 mbps. Although ATM is compatible with transmission
media twisted pairs or coaxial cables, these media do not support high
bandwidth which ATM is capable of providing and this restricts the
performance of ATM.

FIBRE OPTICS NETWORK

The fibre optics as a media for Local Area Network and wide area Network is
getting increasingly popular due to its high bandwidth, high immunity to
disturbance, excellent security and also due to its thinness and light weight. The
fibre optics networks can use optic fibre exclusively or use combination of fibre
and copper media using linear bus, token bus or token ring. Although there are
different types of fibre optics network, the Fibre Distributed Data Interface
(FDDI) is most popular type of Fibre network.
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The FDDI is a star token ring network which can transmit data at 10Ombps upto
200 kilometers to which around as many as thousand terminals can be
connected. The FDDI can also support ISDN connection over its ring. It uses
Light Emitting Diodes (LEDs) as its light source as it is less expensive as well
as more safe for the user than the laser beam.
The FDDI cabling consists of two fiber rings one transmitting clockwise and
other transmitting counter clockwise which act as back up lines for each other. It
also possible to join the two fibres and form one single ring with twice the
original length. The FDDI ring has two classes of stations as class A and Class
B stations. Class A stations are connected to both the rings and class B to any
one of the ring. This is done to provide fault tolerance to important stations. The
FDDI uses Token Ring' type transmission in which a terminal has to capture the
token and transmit the message. After the message is transmitted the station
generates new token.
The FDDI network provides high bandwidth upto 100mbps, high level of
security from tapping and eavesdropping, reliability and sturdiness, immunity
from electromagnetic interference and ease of handling due to its light weight.
The FDDI is a complex topology requiring high skills to set up and maintain the
network. The equipments such as adapters and concentrators are expensive and
optic fiber itself is expensive. The cost elements make FDDI networks less
common.

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BRANCH NETWORK
The branches of banks have different services to provide to their customers like
maintaining savings and loan accounts, document collection which require
maintaining a database of their customers and the transactions. The branches
also have other functions like clearing, funds transfer, interbranch transactions,
foreign exchange transactions, etc. Accounts of all these services are required to
be centralised and merged with the main accounts of the bank. The branches
also have to send a lot of reports and information like cash transactions, forex
transactions to their head offices. The working of different desk therefore
require a centralised database and centralised accounting. This requires
establishing a LAN within a branch with terminals for each user to perform his
task and a central server to consolidate all the transactions. As the transactions
of the branches are reported to controlling offices the branch level network also
needs to have connectivity to the central computers of the bank. Many banks
have their transactions replicated to the 'Data Centres' where transactions from
all the branches are stored.

BANK NETWORK

The banks are increasingly providing 'Anytime Any where'service to their

customers. For example using the Automated Teller Machines (ATMs).
Providing ATM service needs real time updating of the balances since the ATMs
verify the balances in customers account and dispense cash on the spot. The
credit card and debit card transactions are increasingly popular. The acceptance
of credit card requires authorisation from the bank's central computers regarding
validity of card or in case of debit cards, the customer account is directly
debited. The EFT at Point of sale requires on line computer support. All this
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requires a very strong network across the entire bank so that the customer can
avail bank's services as per his convenience. Similarly, large corporate offices
have bank terminals at their offices through which they can operate their
accounts. The bank wide network connects different networks , ATMs and
customers of the bank to the central computer or data centres and branches of
the bank. The bank wide network therefore is essentially a WAN with need to
have lot of security features built in and yet easy to use by the customers.
The recent trend, the large banks have their own networks connecting their
overseas branches too. The hubs are located in different countries and data is
stored at a place to the bank. It is also possible that the bank may centraise some
of their operations in any particular office located in a country which is different
than that where the transactions take place.

BANKNET & RBINet

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The development of the infrastructure in the country would require huge

investment on part of the banking system. The Reserve Bank of India (RBI) has
embarked upon a programme to create an infrastructure, as well as a scheme
Reserve Bank of India Electronic Fund Transfer System (RBIEFT) which would
be available to all the banks for transfer of funds. The carrier will be known as
the BANKNET. BANKNET comprises of X-25 network using inter-city trunk
voice grade data circuits. It presently connected Mumbai. Delhi, Calcutta,
Chennai, Nagpur, Bangalore and Hyderabad. The software used for the RBIBET
will be RBINet.
The EFT was started on 18.04.1996 between Mumbai and Chennai covering
1900 branches of the 27 public sector banks. The scheme is being extended to
all the four metropolitan cities covering 4587 branches of the 27 public sector
banks. The system will basically provide inter-bank intercity fund transfer but
can also be used for intra-bank as well as the inter-city fund transfers. The
scheme aims providing credit to beneficiary's account within 24 hours.
The communication between the office of the RBI will be on BANKNET and
the details of the credit will be passed on to the services branch along with the
MICR clearing. The communication between the services branch to other
branches will be by courier or telephone lines depending upon the infrastructure
available with the individual banks. The RBI proposes the use the MICR
clearing for settlement of funds on Inter-bank fund transfers.

INFINET
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INFINET is a Closed User group (CUG) VSAT technology based network that
has 675 VSATs supporting around 200 locations across India.
IDRBT (Institute for Development and Research in Banking Technology)
inaugurated INFINET (INdian FINancial NETwork) in June 1999 to provide a
reliable communication backbone for the banking and financial sector.
INFINET is a CUG (Closed User Group) VSAT-based network that has 675
VSAT's supporting around 200 locations across India. It's for the exclusive use
of member banks and financial institutions nationwide.

INFINET being the backbone for the national payment systems soon garnered
membership from many banks and financial institutions. This created a need for
higher bandwidth speed to support newer users. A new terrestrial network that
provides bandwidth up to 34 Mbps was setup by Cisco Systems and CMC
Limited. The aim was to enable all inter- and intra-bank transactions at highspeed and in a reliable manner.

FEATURES OF INFINET
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HI SPEED CONNECTIVITY
Since inauguration IDRBT uses VSAT on the backbone and Ethernet on the
LAN. .The primary objective of IDRBT was to help its members carry out interand intra-bank transactions seamlessly through the electronic medium.
INFINET has proved to be very fruitful. Various inter-bank and intra-bank
applications like simple messaging, MIS (Management Information Systems),
ECS (Electronic Clearing Service), electronic debit, online processing, trade in
government securities, centralized funds, anywhere/anytime banking, and interbranch reconciliation are now carried out using INFINET.

VSAT GEAR
The INFINET is primarily a TCP/IP based network. A detailed IP-addressing
scheme has been devised by IDRBT for all the CUG members. The scheme has
to be followed strictly by members when they interact through the
communication backbone. The network consists of a central earth station (Hub),
which is located at Hyderabad. The Hub consists of an 11 meter antenna and
other communications equipment. The network started with one eighth of
transponder number 13 on INSAT 2B in June 1999. Later, in July 2000, a full
transponder, number 8 was allotted on INSAT 3B.
The network works on TDM/TDMA (Time Division Multiplexing/Time
Division Multiple Access) technology. The central earth station is housed in a
VSAT control center located in the ground floor of the executive facilities center
of the Institute. A DAMA (Demand Assigned Multiple Access) overlay will be
soon provided to facilitate high-speed data communications, voice, and video.

MORE BANDWIDTH

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A leased line backbone with multiple 2 Mbps lines and Gigabit Ethernet as a
LAN backbone was implemented to meet greater bandwidth needs. The new
terrestrial network links will integrate with the existing VSAT network to
complement the total bandwidth. INFINET will now become a blend of both
leased line and VSAT network technologies. An important factor is that the
terrestrial WAN network will allow easy migration to Ethernet speeds in future.
The NMS (Network Management System) of the leased line network is located
at the INFINET hub at Hyderabad. The backup NMS is located at the RBI
(Reserve Bank of India) office in Mumbai.
The institute has tied up with Cisco Systems to set up the terrestrial network
with the help of 45 Cisco routers. This includes 25 high-end routers, security
systems, NMS software, and switches. Cisco's 7500 series routers would form
the core of the network, located in important cities, and will interconnect
various cities. Cisco's 3600 routers will be deployed at the distribution level to
enable bank branches to ride on the core network.

SAFEGUARDING
The network design has taken into consideration multiple paths for any location.
This ensures that data can traverse the network and reach the destination even if
the primary connectivity is down. All the locations have been configured along
with the ISDN ports in their respective routers as backup. In an extreme case of
all the land-based lines going down, the VSAT links can be used to send data
from one location to another.
To defend INFINET from hacking or intrusion, PIX firewalls from Cisco have
been deployed in all key locations within the network. And to address the vital
issue of security of financial transactions in the electronic environment, the
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Institute has set up a Center for Security Technology. This center will play a key
role to help evolve security standards, protocols, certification procedures, and
solutions to suit Indian financial conditions

SWIFT

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The SWIFT acronym stands for Society for Worldwide Inter-bank Financial
Telecommunications. It is basically a communication channel to exchange
information among banks and financial institutions.
Prior to the introduction of SWIFT system the communication between various
bank in different countries were using mediums like telephone, telegram, telex,
mail, courier, etc. Such a system resulted in lot of delay and was proving costly.
Say for example a letter from India to UK could take anything from 5 to 10
days. Similarly a telegram could lake a minimum of 3 days. Further each bank
could use their own mode of cornmunicalion depending upon the development
of communication system in that country. Added to this was the usage of
language. The communication would take place in a common language know to
the two parties to the transaction, say in English Then each of the bank had its
own standards for putting through the transactions. Interpretation of the
message was another area which caused lot of misunderstandings. There was an
urgent need to formalise and standardise the mode of communication as well as
the terms generally used in all such communication.
In May 1973. 239 major banks from 15 countries formed the organisation called
SWIFT as a co-operative body with its headquarters at Brussels, Belgium. The
live operations commenced on May 9th, 1977. SWIFT allows the financial
institutions world-wide to exchange standardised messages relating to
international financial transactions. The user of system include Banks, nonbanking financial institutions like dealers in securities, brokers, clearing and
depository institutions, trust or fiduciary services companies, stock exchanges,
etc.
SWIFT network consists of Regional Processors (RP) and SWIFT Access
Processors(SAP). One RP is installed for a region. One such regional processor
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is located at Singapore. The SAP is one or more for each country depending
upon the commercial importance of the centre. The SAP is the gateway to
SWIFT network for that country. All the SAPs and RPs arc networked through
high speed global telecommunication network to two main frame computer one
in USA and another at Netherlands. All computers in the network have atleast
one standby processor which provide extensive hardware backup. Likewise, all
the data communication paths within the network are duplicated to ensure
continued service in the event of any failure of one path.
Each of the user is given a uniquely identifier code by a 11 digit code called
Bank Identifier Code commonly known as BIC. SWIFT periodically publishes
the address of all its members in BIC directory. Soft copies of the updates are
supplied to its members once every quarter. The structure of the BIC address is
as follows

The first four digit code represents hanks name it is unique to each bank and

irrespective of the location the code is uniform e.g.

CNRB

Canara Bank

BKDN

Dena Bank
BKID

Bank of India

SYNB

Syndicate

State Bank of India

STIN

State Bank of

Chase Manhattan CITI

CitiBank NA

Bank
SBIN
Indore
CHAS

Bank

COBA

Commerzebank AG

DEUT

Deutsche Bank AG

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The next two digit code represents the country where the bank is located

e.g.
CN

China

DE

Germany

GB

United Kingdom IN

India

IT

Italy

MY

Malaysia

MX

Mexico

US

United States

JP

Japan

LU

Luxemburg

The next two digit code represents (he regional processor to which the bank

is linked to
BB

Mumbai

BJ

Beijing

FF

Frankfurt

JT

Tokyo

2L

London

33

New York

KK

Copenhagen

66

Los Angeles

PP

Paris

SG

Singapore

The last three digit code represents the branch/office of the bank

The full address of a Bank/Branch having SWIFT connection will be :

SBININBB 110

Stale Bank of India, Mumbai Main branch

SBINUS33DTS

State Bank of India. DTS Branch, New York

SBIBDEFF

State Bank of India, Frankfurt, Germany

UBININBBNPT -

Union Bank of India, Mumbai Main office

ABNAINBBDEL -

ABN Amro Bank. New Delhi

CNRBINBBWXM-

Canara Bank. Mysore foreign exchange cell

CNRBGB2L

Canara Bank, London

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SWIFT establishes one of its SAP in each country depending upon the
commercial importance of the city. Banks in India were hooked to SWIFT
network on 02.12.1991. The SAP is located al World Trade Centre, Cuffe
Parade, Mumbai. The system is maintained by M/s. CMC Ltd. All the members
are given one access to the SAP. Each of the member banks has to designate one
of its office through which the connectivity will be obtained. The designated
office is known as Computer Based Terminal (CBT) of the bank. The CBT will
be located in the premises of the member banks. The CBT is connected to the
SAP either through a dial-up line or leased line. All the equipments installed in
the CBT should conform to SWIFT specifications. It is the responsibility of the
member banks to maintain the system in their CBT. The CBT acts as the
gateway to SWIFT for its branches. All the other branches of the banks are in
turn connected to the CBT and this is again through leased lines or dial-up lines.
The Indian set-up is explained in figure below :-

SWIFT Set-Up in India

NICNET INDIAS INFORMATION SUPER HIGHWAY

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The progress and evolution of civilizations can be marked by the ages through
which the world has successively passed. The Stone Age, the Iron Age, the
Bronze Age and so on. This Age can be called the Information Era. In the earlier
ages, there were tangible, ascertainable materials to mark the progress of that
era. The present Era, however, is represented by Information, which is not
tangible. Despite that the business of trading in this intangible commodity,
(Information) i.e., buying and selling of information, is a very profitable
business. The dealers in information literally pluck information "out of the air"
and trade in it. This is a direct result of the low cost of communication, i.e.
computers, electronics and communications. The low cost of communication
tools is in turn the result of advances of technology. These advances have made
technology tools available at reasonable prices to the common man, and have
led to the intensive and intelligent use of Information. Information Technology,
the synthesis of computers and communications, has paved the way for the
Information Super Highway. The Information Super Highway is nothing but the
networking of networks of computers to share information. Therefore the
Internet, which is a network of networks, can be called the trailblazer of the
Information Super Highway.
The Information Super Highway connects small home users to big corporate
giants. A PC can be hooked onto the world to access any required information.
This vision is called "Information at your fingertips".
The term Information Super Highway should be interpreted not so much as a
"Highway", where information travels, but more as a Stock Exchange, or
market, where the commodities traded are not stocks and shares, but bits of
Information. If a person is told a fact already known to him, it is not
information. Information has been defined as the reduction of uncertainty.
Sharing information by connecting computers from research laboratories,
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offices, and homes, through a high-speed network is the basic concept of the
Information Super Highway.
India is poised to make a major breakthrough in the area of Information
Technology, through a nationwide "National Information Highway". The
Government of India has already initiated a series of policies to create an
environment for the National Information Highway.

The Department of Electronics (DOE) and the Infrastructure Leasing and

Financial Services (ILFS) have brought together various Government

organizations, the Departments of Telecommunications, Electronics, Science
and Technology and the National Informatics Centre (NIC). Together, they have
published the "Multimedia Information Highway -A Conceptual Framework", a
document which lists the various action points for the National Information
Highway.

DOE has envisaged a National Information Highway, at a project cost of Rs.

100 crores.

NIC has established a nation-wide network. It interacts directly with Intelsat.

DOE has established ERNET catering to the educational and research

organizations. These organizations can access over 15,000 international journals

and magazines.

The DOE also has six earth stations linked to Intelsat. Maximum data

transmission speed is 2.2 million bits per second.

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The National Information Highway will initially cover cities with high

export potential. It will be connected to more than 160 different international

data networks.

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INTEGRATED SERVICES DIGITAL NETWORK (ISDN)

The traditional telephone networks were designed for transmission of analogue
voice data in which the voltage levels continuously changed in a sinusoidal
form. However with advent of computer networks, the need for transmission of
digital form of data was felt in which the voltage changes abruptly as one (high
voltage) and zero (low voltage). At the same time it was also considered
necessary to transmit audio, video and data signals using one network which has
necessary broad bandwidth. The telephone network therefore should be capable
of handling a digital transmission.
The analogue signals suffer attenuation during the transmission and the
attenuation of the signal is different for different frequencies. The process
amplification of these signals used to restore these signals is also dependent on
the frequency of the signal and adds some degree of distortion at each stage.
The transmitted signal is, therefore, different than original signal. On the other
hand, in a digital transmission, the amplifiers restore the incoming signal levels
to zero or one level exactly as per original value and, therefore, the original
signal can be reproduced identically.
In a digital transmission, audio data like voice or music, video data like pictures
and images or computer data can be multiplexed and sent over same lines
thereby making more efficient use of transmission media. Further as digital
transmission can speed up the transmission of data using packet switching it
increases the through put.
Thus, digital network carrying digital signal can provide an integrated service to
transmit data, video and audio signals in a better manner than analogue network.

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The ISDN network which is being installed at different places in world aims at
replacing existing analogue telephone network with digital network which can
provide all these services. The efforts to install this network is being coordinated by CCITT which is a global body for telephone, telegrams and data
communication. The ISDN network would allow connection of different types
of terminals like telephone, computers, fascimile machines, Alarm services like
wake up calls, medical alarms, fire alarm, telemetery services like electricity
meters to be connected to the ISDN network directly. The ISDN service also
aims at providing 'teletext or e-mail' facility which would provide instant mail
facility using text only. The Non ISDN terminals can be connected through an
interface. Further, ISDN service is aimed at to allow simultaneous connection to
different services like telephone, fax, computer connection at the same time
without disturbing other connection. It is expected that over a period of time,
ISDN would replace existing analogue telephone system.

ISDN Services

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VSAT
VSAT stands for Very Small Aperture Terminal and refers to receive/transmit
terminals installed at dispersed sites connecting to a central hub via satellite
using small diameter antenna dishes (0.6 to 3.8 meter).

VSAT technology represents a cost effective solution for users seeking an

independent communications network connecting a large number of
geographically dispersed sites. VSAT networks offer value-added satellitebased services capable of supporting the Internet, Data, LAN, voice/fax
communications, and can provide powerful, dependable private and public
network communications solutions.
Generally, these systems operate in the Ku-band and C-band frequencies.

Ku-band based networks, are used primarily in Europe and North

America and utilize the smaller sizes of VSAT antennas.

C-band, used extensively in Asia, Africa and Latin America, require

larger antenna.

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RECENT DEVELOPMENTS
RTGS
The Real Time Gross Settlement (RTGS) System was implemented by the
Reserve Bank on March 26, 2004, after a comprehensive audit and review of
the software, also by conducting extensive training of users at commercial
banks. The RTGS provides for an electronic based settlement of inter-bank and
customer based transactions, with intra-day collateralised liquidity support from
the Reserve Bank to the participants of the system. The RTGS system has also
been enabled for straight through processing (STP) of customer transactions
without manual intervention.
The RTGS System will be fully integrated with the Accounting System of the
Reserve Bank and other settlement services such as Deferred Net Settlement
(DNS) Systems, the settlement of which would be performed as RTGS
transactions through a facility for Multi Lateral Net Settlement batch
processing.
The RTGS System has several unique features. It is a single, all-India system,
with the settlement being effected in Mumbai. The payments are settled
transaction by transaction. The settlement of funds is final and irrevocable. The
settlement is done in real time; the funds settled can be further used
immediately. It is a fully secure system, which uses digital signatures and PKI
based encryption, for safe and secure message transmission. It provides for
intra-day collateralised liquidity support for the member-banks to smoothen the
temporary mismatches of fund flows and thereby ensuring smooth settlements.
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Under the RTGS System, inter-bank transactions; customer based inter-bank

transactions and net clearing transactions can be settled. Both high value and
retail payments can be effected through the RTGS system. Thus it provides less
risk-based funds transfers for both banks and for their customers, apart from
providing for more efficient funds management at the treasuries of banks.

CORE BANKING
Core Banking is the network of all branches of the bank with its core (Central)
office \ Headquarters. The concept behind the core banking is to make the
branch customer as bank customer and to provide a platform to the branches of
bank for their various settlements.
Many a times customer has to fulfill various formalities or have to lot of paper
work for just transferring the money from one branch to other branch. Core
banking seems to be very useful in this regard because the customer can now
treat the whole bank as one branch and can do the transfer of funds easily. The
branches of the bank will settle the transactions among itself via the central
office. This concept provides an easy and quick settlement of cheques drawn on
one branch to another branch of the same bank.

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SECURITY & CONTROL SYSTEMS

In many ways, the security of a banking system is no different to the security of
a system which belongs to any other commercial organisation. However, the
public awareness of the need for good computer security for banking systems is
very high. Many security practices are very similar to those of any other
business organisation. The security of banking systems is also very visible to a
bank customer i.e. magnetic stripe cards, physical security of bank premises
etc., and computer security in banking systems is therefore open to much debate
and discussion within the public eye. It can be very difficult for a layman to
gain an insight into the vast scale of electronic financial activities. Much of the
'baseline' good security practices in terms of backup, contingency, physical
security, accounting and system controls, which help to mitigate the likely risks,
are now accepted practice within banking.
There are many aspects of central security which are similar to those of any
commercial organisation. Security of central/host systems, which also form a
key component of a bank's security control approach, will obviously vary
between institutions. However, some of the system security aspects will be
common to many of the banks.
A general systems direction has been to translate accepted and proven manual
banking security practices into an automated electronic environment. Typically,
data input will be subject to strong dual control procedures, which will demand
separation of input, independent check, and release authorisation for value
transactions. Business system controls will require that unauthorised, or
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potentially suspect, account activity is controlled by a system of credit limit

controls. This can even be seen in the use of on-line systems which are directly
used by the public where card limits, account limits, or company account limit
checks, are usually automatically confirmed during the transaction acceptance
processes. Even where offline banking systems are used then telephone referral
is used as a substitute means of limit checking.
A more recent trend has been to introduce more 'expert' monitoring systems
which can identify suspect trends across a range of end devices (e.g. ATMs) and
provide central on-line alarm reporting. These methods arose to combat the
'white plastic' type of fraud, and to meet the need to monitor, and centrally stop
any attempts to exploit fraudulently manufactured plastic cards to attack
multiple cash dispensers. However, with more recent on-line authorisations the
threat is effectively prevented.
Features such as limit checking help to restrict the customer and bank exposure
to an individual account. This is a very important element in the drive to deliver
banking services, to remote (and potentially) unknown users, at the end of a
telecommunications link. The level of risk being accepted, by both parties, is
therefore restricted to a known amount of funds. A multiple account type of
attack however has to be managed by strong central protection features. These
features require that the central exposure risks across multiple accounts are well
protected from attack by the central programs, and access controls have to limit
the possibility to a very sophisticated type of attack. Consequently, further dual
control procedures and authorisation processes are frequently used to separate
production and development systems, and to control any unauthorised actions
by internal staff.

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In foreign countries, most banks employ dedicated security staff and internal
audit staff, to design, implement or review computer security. More recently,
risk analysis methods or systems have been introduced to assist in such review
programmes. Indian banks should also invest in security awareness or education
for their IT staff, and either employ outside consultant or use their own internal
specialists. A strong change control methodology should also be used for both
cetral and distributed software in order to limit software-based attacks, and to
reduce the risk of virus infection. This has become a general area of concern as
a result of the widespread use of PC technology within banking systems.
The networking of physical security alarm systems can offer a degree of
security only previously available at expensively manned checkpoints.
However, networking is sometimes impractical or not economic and manned
checkpoints will remain for these occasions, especially when the resource risk
(e.g. data centre) justifies this resource expenditure. Closed Circuit Television
(CCTV) offers some advantages to reduce the level of manning or human
patrols required, and many installations have justified such approaches not only
for key unmanned centres or rooms, but also for perimeter protection.
The linking of alarm systems to local police stations, specialists security
monitoring service organisations, or centrally manned bank installations
remains a matter for individual economic-choice.
The security and performance benefits of using hardware in addition to security
software solutions are essential requirements for many existing bank systems.
The volume of transactions demands very efficient methods for central message
switching or transaction processing systems. Most of the better banking security
designs are therefore built into the application layer and call host security
modules for fast, efficient and secure cryptographic support.

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Typically, link encryption devices have been used for confidentiality of traffic.
However, until recently the necessary management systems which are required
to diagnose equipment fault conditions from a central location have not been
widely used. These types of network management and key distribution services
have grown in importance. Some banks have started operating private networks.
Network management systems are an important feature which support the
investment in private networks and help to control and maintain network
services available.

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IMPACT OF IT
Banking industry provides financial services to the customers such as
acceptance of deposits, giving loans, providing facilities for transfer of funds,
giving financial guarantees, providing foreign exchange facilities, etc. All these
services are basically information processing services with cash operations
forming the only physical process again based on information processing. The
currency notes or cash itself is a banking service in the form of promissory
notes issued by the central banking authorities. The advent of Information
technology has changed the way in which the data is processed. Therefore,
almost all services provided by banks including the concept of money or credit
are influenced by the information technology thereby opening new
opportunities as well as posing new threats before the banking industry. We
shall attempt understanding this impact from basic functions of banking to the
concept of money and monetary policies of central bank.
The elimination of manual records, the introduction of electronic fund transfer,
ATMs etc. raise the important issue of security and integrity of data. This
includes issues relating to confidentiality of information, preventing data
corruption and prevention of fraud. Appropriate technologies for encryption of
data for secured transaction, regular & multiple backups, extensive use of
passwords and other forms of authorization would need to be adopted.
For paperless and electronic financial transactions in India, a host of legal
aspects need to be looked into. As in case of EFT, a cheque is not required to be
presented physically for making payment as per the current practice. Also the
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legal liabilities of banks and customers in case of loss of ATM cards, ATM
frauds etc. are not quite understood in the present system. The adoption of new
technologies would warrant a thorough review of the system towards changed
legal stipulations.
Finally, the most important aspect of costs involved and benefits expected need
a closer scrutiny. Expenditure on IT has always not been in tune with the returns
envisaged.

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CONCLUSION
IT continues to develop rapidly as the key underlying technologies of
semiconductors, disk drives, and network communications improve at
exponential rates. Constant improvements in the underlying technologies make
possible new IT applications that affect all areas of society, including the
economy, households, government, and the R&D enterprise.
Throughout society, the utility of IT applications tends to advance much more
slowly than the underlying technologies. A doubling of processing speeds, for
example, does not bring a doubling of utility. The effective implementation and
use of IT are the result of a complex process that requires not only adoption of a
technology but also changes in organizations and institutions. As part of this
process, individuals and organizations actively adapt (and sometimes resist) the
technologies. As a result, the effects of IT on society often take place more
slowly than visionaries predict. Nevertheless, the effectsdriven by the
continual change in underlying technologiesare substantial over time.

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BIBLIOGRAPHY
BOOKS:
1. Information Technology & Electronic Banking - Iib
2. Banking Technology Part 1 & 2 - Iib
3. Alavudeen, A.; Venkateshwaran, N. (2010), Computer Integrated
Manufacturing, Phi Learning

MAGAZINES:

1. Information Week
2. ICFAI Reader (Various Issues)
3. IT NEXT

SITES:
1. http://en.wikipedia.org
2. www.smallbusiness.chron.com
3. www.computerworld.in
4. www.bankingtech.com
4. www.rbi.org.in
5. www.google.co.in

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