Fiji National University
College of Engineering, Science and Technology
School of Mathematics and Computer Science
Department of Computer Science and Information systems
CIN711: Social and Professional Issues in Computing
Tutorial 2
Questions
1. What are the key characteristics of a professional employee?
2. What is the legal perspective of IT workers, are they professionals? Provide reasons.
3. Which parties should the IT workers maintain good relationships?
- Employers
- Clients
-Suppliers
- Society at large
-Other professionals.
4. Describe the relationship between IT workers and employers.
5. What is BSA and what is their role in IT industry?
6. Describe 2 challenges for IT workers.
7. Describe the relationship between IT workers and clients.
8. Differentiate the following either as “bribery” or “gift” or “kind gesture”.
a. Student gives teacher Diwali sweets
b. Student gives $20 to teacher for car fuel
c. IT worker gives gift pack to one of its suppliers through a friend
d. IT worker receives personal gadgets from supplier for a favor
9. What is a professional code of ethics?
10. List down the four most prominent IT-related professional organizations.
11. Which certifications are high in demand?
12. What are some of the common ethical issues in IT users?
Case Study 1
Whistle-Blower Claims Accounting Shenanigans at SuccessFactors
SuccessFactors is a U.S. multinational company that provides cloud-based human resources related
software applications. Under its “software-as-a-service” business model, the company
provides software resources to subscribers who access them via the Internet for a fee. Annual
revenue for the firm was $206 million in 2010.
SuccessFactors spreads its costs over a large number of subscribers to keep its subscription
rates low and generate income. Subscribers, in turn, rely on SuccessFactors to manage
their data and software in a secure and reliable manner. Subscribers avoid large capital outlays
for computing equipment and eliminate the costs associated with the purchase of hardware and
software and the hiring of numerous computer operations and support people.
SuccessFactors has not been profitable—incurring losses in each fiscal period since its
inception in 2001, with a loss of $12.5 million for 2010 and an accumulated deficit of $231.3
million.44 Nevertheless, SAP paid $3.4 billion (over 10 times its 2011 revenue of $327 million)
to acquire SuccessFactors in early 2012. (This number compares very unfavorably with the
median price—three times revenue—paid in the 32 software mergers that occurred in North
America in the five years prior to SAP’s purchase of SuccessFactors.)45 SAP was willing to pay
such a premium to gain significant market share and expertise in the rapidly growing human
resources software-as-a-service arena. At the time, SuccessFactors had a customer base of
some 15 million subscription seat licenses spread across 3,500 customers.
As with many companies, SuccessFactors supplemented the financial results that it
reported in accordance with GAAP (generally accepted accounting principles that form the basis
for financial reporting), with non-GAAP financial measures. The manner in which such non-
GAAP measures are defined and calculated differ from company to company. One of these
non-GAAP financial measures was a measure called “backlog.” SuccessFactors, and many
other cloud computing service firms, invoice subscribers on an annual basis even if the term of
the subscription agreement is longer than one year. Amounts that have been invoiced, but that
have not yet been recognized as revenue, are recorded as deferred revenue. SuccessFactors
reported the portion of the total contract value not yet invoiced as backlog.48 SuccessFactors
had a backlog of about $90 million at the end of 2007 compared with a backlog of $43 million at
the end of 2006—an increase the company attributed to an upsurge in new contracts and customers.
49 In 2009, SuccessFactors stopped reporting this backlog figure, and the omission caught the eye of the
SEC. When the agency inquired about why the company was no longer reporting
this figure, SuccessFactors responded that it felt investors did not consider this
figure useful.
In the third quarter of 2010, Success Factors stated that it had adopted a 2009 SEC rule
that limited the manner in which revenue could be reported on multiyear contracts.51 However,
in its 2011 annual report, filed just after SAP announced its intent to acquire the firm, but before
the deal was finalized, SuccessFactors admitted that its accounting controls suffered from “a
material weakness” and that its “internal control over financial reporting was not effective as of
December 31, 2011.” Indeed, a SuccessFactors salesperson turned whistle-blower claimed
that from 2009 to 2011, accounting controls at SuccessFactors were so weak that salespeople
were able to improperly rewrite existing multiyear contracts as new contracts to earn additional
commissions. If true, this would also accelerate revenue, making the company look more
financially sound, while also reducing the backlog number. SAP investigated these claims with
an examination conducted by an outside law firm and found no merit to the claims.
Discussion Questions
1. In the end, SuccessFactors investors were not hurt by this alleged improper accounting
because SAP paid such a high premium to acquire the firm, which helped SAP jump-start
its cloud computing business. Was anyone hurt by this alleged improper accounting and,
if so, who and how?
2. Should management encourage the reporting of non-GAAP financial measures that may be
useful to investors? Why or why not?
3. What sort of measures should the management teams of service companies put in place to
ensure that there is no improper accounting of multiyear contracts?
