The application selection and development is a key step in the IT supply chain. Because IT applications can be integrated, layered, distributed, modularized, and customized in many ways, it is appropriate to first look at the basic building blocks of an application. From the perspective of a value capture in the business use and operations stages these blocks are master data, transactions, procedures or methods, messages, and processes:

– A transaction is an action that produces a result. For example, order entry is the transaction that produces an order, and a query is a transaction to produce a report.

– Master data in IT applications defines the different entities involved in the business. Customers, products, suppliers, employees, warehouses, order types and terms of payment are all described using master data. The purpose of master data is to effectively organize information that is needed often (e.g., the delivery addresses of customers, and occasional changes to those addresses).

– Messages are a practical way to link transactions. For example, an order message can be used to link the purchase transaction of your customer with your order entry transaction.

– Procedures or methods are used in transactions to get the desired result. For example, pricing is the method used to make sure that the customer order has the right price.

– Processes, or work flows, in IT applications link all the transactions needed to produce a business result.

To get the right product to the right customer, an application may have an order-to-delivery process linking order entry, shipping, and invoicing. Technology providers often talk in terms of modules and functionality, but it is more practical to think of a module as an application that performs a set of processes and transactions. Because the trend is toward more open solutions, it is important to avoid confusing individual IT applications with the business solution.

— William J. Hoover, Jr.

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