Tuesday, March 15, 2005
Posted by Rafay Bin Ali at 6:17 AM
Tuesday, March 08, 2005
Blogs are proving to be an excellent communications tool. By forging one-to-one relationships with customers, organizations have discovered a new medium to retain the customers. Organizational theories have confirmed that retention is more financially feasible than exploring newer ones. This is claim is backed by research and known to all executives.
Uusing a blog often signifies the redefinition of corporate strategies that are targeted at the customers. As such, some changes in financial statements are quite obvious. If a corporation does decide to use a blog to further its goals, should such proceedings be recorded as an expense (recorded in an income statement, or an asset (recorded in the balance sheet)?
Clearly, blogs provide some tangible as well as intangible benefits. Most tangible benefits (such as profit) are long term, while intangible benefits (goodwill, customer satisfaction, retention, valuable feedback for pennies) could usually be seen in shorter-terms. Note that the defintion of long and short term varies. For this post, readers could consider a period longer than a year as long term, and anything less as a short term. If these benefits could be realized, recording blogs as an investment in an asset seems obvious.
On the other hand, blogs incur expense. These expenses are usually rather insignificant - even less than the petty cash expenses in some cases.
To have a better idea of what I mean, please examine the following treatments. The first image is where the blog is recorded as an expense. The second image shows treatment as an asset.
It is clear that blogging should be treated, if at all, as an investment in an asset. It is an investment that paysoff in the long run. Whether it should be classified under current or fixed assets depends on how quick the blogging mechanism is at generating cash for the organization. Managers can still use conventional risk evaluation and feasibility techniques such as NPV, IRR or Payback Period to determine the relationship between the cost and the eventual ROI. In the case of blogs, the initial outlay is quite insignificant, unless equipment such as server machines and a custom-built blog software are purchased.
Note: If a business blog is setup by a sole propreitor (or a small partnership), it could also be recorded on the Statement of Owner's Equity - rather than an income statement or a balancesheet. This does not seem to be practical, however, in the case of corporations.
Whether blogging should be recorded as an expense or as an investment is largely a matter of choice for organizations. There is no fixed rule. Factors such as the organizational committment to technology, financial executives' knowledge of IT, IT department's willingness to convey the potential blogging benefits are just some of the many that may lead to the adoption of one method over the other. However, a blog is surely an investment. As such, the responsibility lies with the CIO and the IT department to proof this. Proving this would also lead to the justification for the IT department's existence and encourage more resource allocations to the department.
I would appreciate comments from all the readers about this post. Please do forward your suggestions, criticism (negative criticism is more than welcome), and any errors in the templates of the financial statements shown. Thank you.
Posted by Rafay Bin Ali at 4:05 PM
Sunday, March 06, 2005
Virtual World requires a whole new branch in psychology that deals with issues of
- Internet addiction
- Personality changes in chat rooms
- Virtual needs of today's net users
- Human emotional needs and desires and how these are fulfilled virtually (love, sex, belongingness, friends, recognition)
- Net related stress, hypertension, fear, anxiety
My goal in this and many of the later posts would be to explore the existing human development and behavioral theories and modifying them to fit the virtual user.
Internet addictionA lot has been said about addiction to the Net. However, most studies have failed to accurately determine its causes. I think Internet addiction is a rather inappropriate term to describe a phenomenon that is quickly penetrating our real lives. Why is the 24/7 use of Internet considered an addiction, when the same does not hold true in the real world? If someone is heavily social, has a lot of friends, goes out a long, hangs out often, why is this 24/7 indulgence in the real world considered appropriate?
The way I see it, there is no such thing as Internet addiction because sooner than later, the Internet would be all over our lives. It would dominate each and every activity that we do, and change the modus operandi of carrying out chores. In the past, the distinction between the real and the virtual was far too great and Internet addiction might have been a problem. Today, it is just the reverse. If you are not wired, that is a bigger problem.
Most of the problems that stem out of Internet addiction are only because of the Net's misuse. Employees spending too much time in chat rooms and children neglecting homework to get on the Net. Come to think of it, if we fail to act appropriately in the real world don't we find ourselves landing into trouble? For example, suppose a person steals - does he/she not get into trouble with the law? The same is the case with the Internet.
The future would further blur the distinction between the virtual and the real. The debate should not be about Internet addiction. Rather, we need to discuss how to make the transition from the real into the virtual as painless as possible. This transition is bound to happen - may be not in our life times, but it is a given. Might as well work to make it as transparent and convenient as humanly possible.
Another problem is the terminology used. The word addiction, itself, has a negative connotation. Such words should be ejected from the people's vocabulary.
Posted by Rafay Bin Ali at 10:45 PM