ARCHITECTURE

Organizational Architecture related to Managerial Accounting



Organizational Architecture related to Managerial Accounting

Introduction

A professional service firm (PSF) applies specialist technical knowledge to the creation of customized solutions to clients' problems. The period has conventionally been utilised to recount firms working inside the formally regulated professions, such as law, accountancy, and architecture, but is often utilised more amply to encompass firms such as administration consultancies, advertising bureaus, and buying into banks.

Discussion

The system architecture, determined in the upstream phase of development, identifies the major subsystems and the technological interdependencies between them. Subsequent detailed development of each subsystem occurs within this framework. With a modular architecture, detailed development of the subsystems can proceed more or less independently because there are limited interdependencies between them. In an integral architecture, however, there are extensive interdependencies that lead to considerable information sharing among subsystem developers, often involving tacit knowledge.

Trade-offs frequently exist when choosing between a modular and an integral architecture, so that developers usually fix a system's architecture somewhere between these two extremes (Ulrich & Eppinger, 2003). A more modular approach facilitates high subsystem performance, improvement of a subsystem without affecting the rest of the system, and use of the same subsystem in different systems, while a less modular approach offers high overall system performance. A Formula One race car has less modularity than a subcompact passenger car does.

Multilateral alliances often compete against each other or against individual firms on the basis of different architectures for the same system. The introduction of reduced instruction-set computing (RISC) workstations pitted multilateral alliances led by Sun, Mips, IBM, and other firms against each other (Gomes-Casseres, 1996). A particular architecture becomes the industry standard when most or all of the companies agree to follow it. Thus, another reason for a multilateral alliance is to include firms having enough customers and complementary offerings for the rest of the industry to accept its architecture.

The professional services sector has grown by more than 10% per annum over the past 25 years and currently generates more than US$1,000 billion in revenues globally. There has been a corresponding growth in the dimensions of the companies inside this part, as numerous PSFs have followed their purchasers overseas and sought to become global. In the legal sector, U.K. firms have taken the lead in expanding internationally and now have extensive global networks, but they are dwarfed in scale by the accounting and consulting firms. The largest accounting firm, ...