196 Part II • Applying Information Technology
retail customers or for an independent broadband provider
using BT’s network. BT identified 160 core business
processes that the company provided and then figured out
the IT services used to perform these processes. The SOA
services built to carry out one process can frequently be
reused in another process. The result is that both BT and its
business partners can leverage the SOA infrastructure as
they develop new applications. George Glass, Chief
Architect at BT, indicates that the SOA approach has
helped the company cut time to market for a new customer
service from 270 days to 90 days (Babcock, 2007).
Transaction Processing Systems
Let us begin our survey of applications with the “grand-
daddy” applications, the ones that started it all—
transaction processing systems. These systems process
the thousands of transactions that occur every day in most
organizations, including sales; payments made and
received; inventory shipped and received; hiring, firing,
and paying employees; and paying dividends. In addition
to producing the documents and updated records that result
from the transaction processing (such as invoices, checks,
and orders), these systems produce a variety of summa-
rized reports that are useful to upper-level management.
Transaction processing systems are life-or-death
systems for “paperwork” organizations, such as banks
and insurance companies, and critical systems for the
overwhelming majority of medium and large organiza-
tions. These systems were the first computerized
systems, and they still use the majority of large-machine
computing time in most organizations. For the most part,
these transaction processing systems can be justified by
traditional cost-benefit analysis. These systems are able
to process transactions more rapidly and economically
(and certainly more accurately) than a manual (human)
system. Transaction processing systems might be
mainframe-based or midrange-based, or they might be
two-tier or three-tier client/server systems, or they might
involve the use of service-oriented architectures (SOAs).
Most of the latest systems being implemented are
client/server systems or employ SOAs, but there are
many mainframe- or midrange-based transaction
processing systems still in use.
As a manager, you do not need to know the details of
these systems. You only need to have an understanding of
a transaction processing system’s general nature,
importance, and complexity. Therefore, we will limit our
discussion to two representative transaction processing
systems for single business functions—payroll and a sales
Order Entry System
Payroll System
At first glance, a payroll system seems fairly simple.
Operators input the number of hours worked for each
employee (usually employing online data entry), and the
system batch processes these transactions to produce
payroll checks. While this one-sentence description is
correct, it represents only the tip of the iceberg, because it
involves only about 10 percent of the system. The payroll
processing subsystem also must keep year-to-date totals
of gross income, social security income, individual
deductions, various categories of taxes, and net income.
It also must incorporate the ability to compute federal,
state, and local taxes, as well as social security contribu-
tions, and it must handle both mandatory and voluntary
deductions.
What other subsystems are necessary? Figure 5.4 lists
the primary subsystems in most payroll systems and the tasks
the subsystems must accomplish. Thus, the payroll system is
both commonplace and complex. The payroll system is usu-
ally easy to justify on a cost-benefit basis because it would
take an incredible number of payroll clerks to complete a
modern payroll and maintain all the associated records.Order Entry System
We will illustrate a mainframe- or midrange-based order
entry system, but an order entry system could certainly
employ client/server technology. The basic idea behind an
online order entry system is simple. As orders are received
(whether in person, by mail, or by telephone), the sales
representative enters the information into the system. TheSubsystems to accomplish:
Payroll processing, including updating year-
to-date master file
Capture hours-worked data
Add/delete employees
Change deduction information for employees
Change wage rates and salaries
Creation of initial year-to-date master file
Calculate and print payroll totals for pay period,
quarter, and year
Calculate and print tax reports for pay period,
quarter, and year
Calculate and print deduction reports for pay
period, quarter, and year
Calculate and print W-2 forms at end of year
Interface with human resources information
system
Interface with budget information systemFIGURE 5.4 Components of a Payroll System