Transaction Processing System

Instructor: Fahad Saleem

Class: MBIT Course:ERP
Transaction process system (TPS)
In this paper, we reviewed the past, present, A transaction process system (TPS) is an information
and future of transaction processing and processing system for business transactions involving the
transaction integrity. We described how we collection, modification and retrieval of all transaction data.
arrived at where we are and where the future Characteristics of a TPS include performance, reliability and
of transaction processing might lead us. Most consistency.
Abstract - of the challenges and requirements that led to
the development and evolution of transaction processing TPS is also known as transaction processing or real-time
systems are still applicable today, and recently, we have
seen some intriguing developments. Predictions for future processing.
business and technology trends point at the increased
importance of transaction processing systems.
Why transaction processing is important to the
business
INTRODUCTION What is clear is that the integrity of the business relies
heavily on the integrity of these transactions in the
The global economy is made up of an immense number
information system. If any one of these activities fails to do
of business transactions, usually involving the exchange of
its job correctly, the business will be out of balance. If the
goods or services for money. These business transactions
inventory database is not updated correctly, the store will
tend to be short and repetitive. Common characteristics
think it has more books on hand than it does. What
include concurrent access by many users, through multiple
happened to the book? Did it get misplaced? Did someone
interfaces, to shared information. In this chapter, we review
steal it? Was it mislabeled? Likewise, if the credit card is
more closely what we mean by a transaction, we look at the
not debited properly, the store could be out of money. If the
evolution of transaction processing, and we then consider
loyalty status is not updated correctly, the customer will
how it differs from other types of information processing.
miss out on the rewards they deserve. If the ledger is not
updated, the cash register will be out of balance at closing.
What is a transaction? Any one of these situations is not necessarily detrimental on
its own. Any of them can be reconciled later. A thorough
What is a transaction when using the term transaction, inventory of the store and scan of receipts can reveal the
clarifying whether you are talking about a business legitimate sale of the book.
transaction or an information technology (IT) transaction is
important? The difference is a matter of perspective. When Transaction processing middleware
you walk into your neighborhood store and buy a book that
It is possible to write stand-alone applications to perform
is a business transaction. Likewise, these transactions are transactions in shared, multiple-user environments;
all business transactions: when you submit an insurance however, doing so is complex. Application developers
claim, get your oil changed, see a doctor, pick up your would need to address issues, such as the communications
prescription from the pharmacy, pass through a tollbooth, with the user interface: ensuring that only authorized users
fly on an airplane, or even pay your electricity bill. access the system, preventing concurrent changes, handling
However, in today’s world, where almost everything we do failures and backing out partial updates, managing the
is backed up with computer automation, nearly all of these database connectivity, and numerous other complicated
business transactions drive one or more corresponding tasks—each of which would have to be rewritten for each
activities in the information system. When you buy a book, new application. This is why we have transaction processing
the cashier enters the amount in the register, rings up a (TP) middleware
total, and collects your money. Each of these activities can
be thought of as an IT transaction. Or, all of them together
can be thought of as a transaction. Or, some of these
activities might be divided into smaller transactions. It all
depends on how the application is written.

1
 Better Decisions

The improved communication MIS provides to all levels of

the business improves the decision-making skills of those in
charge. The old saying "knowledge is power" applies when
business owners use the data gathered in their MIS
applications to make smarter decisions. For example, a
business owner checks his MIS system and sees that his
supply of components is not sufficient to meet his
production goals. The owner can then decide either to order
more components or to lower his production targets.

Disadvantages

Data Quality Issues

One of the problems with an MIS framework is that the

Figure 1 Services provided by TP middleware quality of the system depends largely on the quality of its
data. If the data is insufficient, incorrect or misplaced, the
decisions that managers make based on that data can be
faulty. For example, a business owner finds a client order of
100,000 units in the MIS system. He orders additional
components from his suppliers to meet that order. However,
Batch vs. Real-Time Processing the actual order was only for 10,000 units. The owner
unwittingly over-orders the components, costing the
There are two ways to process transactions: using batches company thousands of dollars.
and in real time. In a batch processing system, transactions
are accumulated over a period of time and processed as a
Security Issues
single unit, or batch. For example, a store may update its
sales records every day after the store closes. Or a payroll
system may process all the time cards every two weeks to Another issue surrounding MIS processes involves data
determine employee earnings and produce paychecks. security. Hackers, identity thieves and corporate saboteurs
Whatever the time period in a batch system, there is some target sensitive company data. Such data can include vendor
time delay between the actual event and the processing of information, bank records, intellectual property and personal
the transaction to update the records of the organization. data on company management. The hackers distribute the
information over the Internet, sell it to rival companies or
In a real-time processing system, transactions are use it to damage the company's image. For example, several
processed immediately as they occur without any delay to retail chains were targeted recently by hackers who stole
accumulate transactions. Real-time processing is also customer information from their MIS systems and
referred to as online transaction processing, or OLTP. In
distributed Social Security numbers and credit card data
this case, the records in the system always reflect the [2]
current status. over the Internet

[3]
Case Study
Advantages
Introduction
Integrated System
IBM® has been investing in, leading, and inventing
A guiding principle of MIS is that all computer-related Transaction Processing technology for as long as there has
business processes work as a single integrated system. An been programmable computing. It is no coincidence that the
integrated system allows for improved communication world’s economic infrastructure largely rests on IBM
among executives, managers, department heads and technology, such as mainframes, and fundamental financial
employees. For example, a fully integrated MIS system activity occurs through CICS®, IMS™, and WebSphere®
gives the same data framework to the sales department as it transaction engines. IBM continues to evolve the entire
provides to the manufacturing plant. The shared data could compendium of intellectual property as it relates to
lead to adjustments in the manufacturing plant to align Transaction Processing so that companies like yours will
production with sales goals.

2
have the sophisticated technology required to not only to offer product bundles based on a customer’s specific
support but thrive in the new world of federated requirements and buying behavior.
environments
“We try to provide a friendly and pleasant online
Before TPS experience to our customers and that also rewards them for
their loyalty.” (Misha Kravchenko, Marriott International)
“
In 1992, IBM executed most of his transactions in person,
through the mail, or on the phone. ATMs were becoming
more popular and were starting to provide a wider range of Risk and compliance
services, and debit cards were just being introduced. The
introduction of Internet banking or online sales sites, such as Consistent risk information throughout business units
Amazon or eBay, would not be introduced until the middle prevents unexpected losses and civil or criminal penalties.
of the 1990s. A cellphone was the size of a “brick” and cost The aim is to eliminate redundancies and reduce risk by
thousands of dollars. Brick and mortar banks, retail stores, improving the timeliness and quality of information that is
travel agents, and car and insurance agencies were still available. Our interviewed clients stated that they have
heavily used for conducting day-to-day business implemented an audit trail of who does what, and they
transactions. A typical business transaction would involve stressed the need to externalize user privilege rights in a
IBM interacting directly with a teller, sales person, or rules engine that has similar service-level agreement (SLA)
business representative. That person would employ a user requirements as the TP systems. Any program to reduce risk
device (such as a cash register, teller machine, or terminal) by increased data collection invariably has an impact on
connected to a back-end system, where the transaction existing TP systems because much of the risk-related data is
would be processed. A single business transaction would processed by these systems. To remain compliant in the face
usually result in one or two back-end transactions. The of regularly changing rules that are imposed by
integrity of that transaction was controlled at the back end governments and other statutory bodies, financial
and the dedicated connection to the terminal where the institutions must enable their TP systems with the sensors
transaction was entered. These transactions were also necessary to detect and intercept certain events
limited to normal business hours.
Partner integration
After TPS
Most of our surveyed clients have commented on the trend
Business agility and optimization toward expanded partner integration to maximize the
distribution channels for their products, or to subcontract
Being competitive was always a business goal, however, parts of their supply chain. Companies that traditionally
with the liberalization of markets and the added competition managed their own distribution channels are changing their
from emerging markets, the challenge is greater than ever. business model and offering their services to external
To succeed in today’s competitive market, businesses need distribution channels. 1 FATCA (Foreign Account Tax
to simplify the architecture of their TP system to improve Compliance Act) requires Foreign Financial Institutions to
business agility, take out cost, and eliminate inefficiencies. identify their US accounts and report them to the US tax
The aim is to use real-time information to make better authority (the Internal Revenue Service, or IRS). 16
business decisions that optimize return on investment (ROI). Transaction Processing: Past, Present, and Future Straight
This ROI is witnessed in the travel industry, in particular through processing (STP) trading processes that remove the
where room occupancy is a clear measure of competitive need for manual intervention, or interruptible business
efficiency. In the case of Marriott International, business processes, today often span different companies. For
intelligence software looks at member status, inventory interoperability, these processes need to be based on
status, and dynamic pricing models. Factors considered standard protocols.
include whether the customer is staying over on a
Wednesday night or through a weekend, and whether the Reducing costs
customer is a Platinum member. On the room inventory
side, systems also consider whether rooms in the area for
which the customer is requesting lodging are in an The IT industry as a whole is challenged with improving
business flexibility and minimizing risk, but at the same
undersold or oversold status. All of this system intelligence
time, CIOs are expected to hold to constant or decreasing
comes together in a “best price, best yield” scenario for both
budgets. Across the industry, there is a deep desire to
the hotel chain and the customer in less than one second. A
eliminate expense where possible. Specialized systems, such
similar approach is witnessed in the banking and insurance
as optimizers and appliances, can play a role in reducing
industries. Financial institutions are trying to develop more
transaction costs in the following ways: Off-loading the
agile operating models and product engines that allow them

3
processor-intensive part of a workload, freeing up the
general processors for other work simplifying the
integration tasks that are required when building multi-
platform solutions, enabling new applications to be
implemented more quickly and with fewer IT staff

REFERENCES

[1] https://www.techopedia.com/definition/707/transaction-
process-system-tps

[2] http://www.ehow.com/about_5494879_advantages-
disadvantages information-management-systems.html

[3] http://www.redbooks.ibm.com/redpapers/pdfs/redp4854.pdf