Finance + tech: exponential capabilities enabled by technology: from abacus to analytics, scribe to strategic partner, the bond between finance and technology has evolved--particularly over the past 80 years--to create an inextricable link that has enabled vast improvements and raised the game to a whole new level.

• Author: Nordman, Carl
• Position: Cover story - Company overview

Technology innovation over the years has contributed to elevating the speed, complexity and volatility of commerce globally. Technology has enabled process and productivity improvements in business, but more importantly has contributed to generating enormous amounts of data on every aspect of business performance.

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To keep pace, today's financial executives have access to vastly improved tools and practices available for performance management and analytics. This in turn has increased the efficacy of finance and elevated the role of the financial executive to one of strategic partner to the enterprise.

Finance practices throughout history have evolved in significant ways that have had a profound influence on commerce and culture across the world, arguably contributing to the emergence of global commerce and enabling the rise of modern capitalism (see sidebar on page 42).

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As we reflect on FEI's 80th anniversary and IBM Corp.'s centennial, it has indeed been a period of incredible and impressive technology innovation. During this time business and financial executives have been front and center in this evolution, benefitting from technology innovation and using it to improve business performance and outcomes, continuing a rich history of influencing the direction and growth of global commerce and, arguably, broader society.

The strategic role of today's financial executives is more commonly being defined and enabled by the quality and speed of information--the result of 80 years of technology innovation--and its use to drive business performance insights. Finance's increasing role and prominence in the enterprise is largely dependent upon the access to and quality of integrated performance information and value driven by the incisiveness of resulting business insights. A key future challenge will be how to further leverage this role with the emergence of the "Age of Big Data."

Big Data refers to the increasing growth and complexity of data and information in terms of volume, speed and variety. Finance is uniquely positioned at the hub of enterprise financial, operational and risk data to best take advantage of emerging trends in Big Data.

Origins of Modern Accounting and Finance Tools

In the early 1900s, population growth, speed of commerce and economic complexity were increasing rapidly in the United States. As a consequence, new means to perform accounting efficiently and accurately were imperative.

The punched card tabulator was the pivotal innovation in the Machine Age that led to vast improvements in how accounting was performed. Its development can be traced back to the 1880s, when Herman Hollerith, who worked at the U.S. Census Bureau, had an idea for a machine using punch cards that could count and sort census results far faster than human clerks.

The bureau's challenge then was that counting the census by hand could no longer be completed in time to be useful, and, consequently, the first tabulating machines were developed and used to count the 1890 census.

In 1896 came the introduction of the integrating tabulator, which could add numbers and was a clear advance over just counting the holes. Though the advantages were immediately apparent for accounting and tracking inventory, it would be quite some time before it would become mainstream and large scale.

In the 1930s, formation of the Social Security Administration (SSA) was the catalyst for mechanical accounting devices to really take off. The SSA's impact on American business created the largest accounting initiative in history as 3.5 million businesses would need to establish payroll withholding systems for 27 million employees to comply with the rules; the largest companies would need high-speed accounting machines to do it.

During the 1930s and '40s, increasingly sophisticated electric accounting machines were marketed by International Business Machine Corp.'s Electric Accounting Machine division, which operated in 79 countries throughout the world and maintained some 80 sales offices throughout the U.S.

There was widespread adoption of punch card and tabulating machine technology for accounting-related processing, a trend that continued into the 1960s and '70s, when punch cards were the backbone of computing--until the introduction of more reliable and cost-effective technologies.

Punch Cards

The longevity of punch cards--for more than 50 years--for input, processing and output across the history of mechanical tabulators, then electronic calculators and computers, is impressive. By the 1970s, punch cards provided the backbone for these basic business functions. Their longevity is truly a testament to their general reliability and cost-effectiveness compared to other options available at that time.

Among machines designed to work with punch cards were keypunches (to encode the cards), sorters (to put them in proper order for processing) and readers (like tabulators and calculators, to aggregate and output information). Though at the time an extremely reliable medium, decades later the increased use of punch cards began to create issues, as computer innovation began to push the limits of the technology's ability to keep up.

Innovation in computer processing technology, including vacuum tubes and transistor technology, dramatically increased processing speed, taxing the practicality of punch cards as an input, storage and output device. Punch cards essentially became too slow to keep up with new processing power available in later generations of computers.

First-Generation Computers--Vacuum-tube Based

The period of first-generation computers based on vacuum tube technology lasted from approximately 1937 to 1955. Vacuum tube technology would have limited commercial uses due to cost and reliability issues, but set the stage for future generations of computers to go mainstream.

This new technology marked a transition from mechanical to electronic computing that brought greater processing power and capacity. Further, the integration of peripheral components into this new generation of computer foreshadowed future computer "systems" that married keyboards, printers, magnetic storage and punch card devices with powerful central processing units.

In 1951, UNIVAC 1 (Universal Automatic Computer) was developed, perhaps one of the best-known first-generation...