Electronic computing systems provided support for high volume transaction processing of situations with relatively static classification requirements

 

 

The invention of the electronic computer was in large measure the high water mark of the Industrial Revolution's twin concepts of mass production and mass marketing. Of course, the market for electromechanical computers had been well established by the time of World War II--which event helped to jump start development of electronic computers. Based on the concepts of Babbage and the initiative of Hollerith, the office machine industry had grown to approximately $150 million by 1928.

 

When computers were introduced into the mainstream of business and government in the mid-twentieth century, they were not expected to revolutionize the way institutions were managed and government's affairs were conducted. They were designed and built as calculators based on Babbage's work a century earlier on calculation machines. Stimulated by the war effort at mid-century, the first complete electromechanical computer--Harvard University's Mark I--was built by IBM to support high-volume calculations. Even with those limitations, this first computer did attract the attention of the general public.

 

The dedication of the Harvard Mark I captured the imagination of the public to an extraordinary extent and gave headline writers a field day. American Weekly called it "Harvard's Robot Super Brain," while Popular Science Monthly declared "Robot Mathematician Knows All the Answers." After the dedication and the press coverage, there was intense interest in the Harvard Mark I from scientific workers and engineers wanting to use it.  

 

At the time, most calculations were directed to the war effort--calculating trajectory tables, gun sights, etc. There was no effective model for the use of electronic computers in business such that Thomas J. Watson, Sr., was said to have claimed in 1949 that "there was a market for no more than about a dozen computers [and, hence] IBM had no place in that business." In fact, such computers did make an enormous impact on business beginning in the 1950s.

 

. . . the computer was reconstructed--mainly by computer manufacturers and business users--to be an electronic data-processing machine rather than a mathematical instrument.  

 

There was a veritable gold rush in the early 1950s to enter the computer business--including IBM, which quickly recanted from the elder Mr. Watson's statement and took steps to dominate the industry. UNIVAC--an effort to commercialize computers by the developers of the first fully electronic computer--struggled to survive based on sales to the Census Bureau, Northrop, AC Nielson, and Prudential Insurance.

 

IBM entered the market for electronic computers with the idea of expanding on the installed base of business machines--typewriters, adding machines, cash registers, punched card machines--simply by making them faster, not by increasing their functionality in any way. Thus, their first efforts were directed toward embedding electronic functionality into special-purpose equipment--which they accomplished with some success.

 

Computers came into the general consciousness in the U.S. when a UNIVAC machine was used on national television to correctly--and very accurately--to predict Eisenhower's 1952 presidential victory over Stevenson. From that point on, computers developed an aura of precision and accuracy that continues to this day. In spite of this, computers were not generally available to businesses until the 1960s, the first five years of which proved to be a heyday for IBM.

 

The technocrats at IBM . . . were overridden by the marketing managers, who recognized that customers were more interested in the solution to business problems than in the technical merits of competing computer designs. As a result, IBM engineers were forced into taking a total-system view of computers--that is, a holistic approach that required them to "take into account programming, customer transition, field service, training, spare parts, logistics, etc."

 

 

IBM owned 70% of the business computer market in 1960--and was actually able to expand on that by the end of the decade. What was most significant within IBM's own product mix was a shift from punched card accounting machines in the late 1950s to the company's own computers capable of supporting the accounting model. In fact, IBM was in a dominant position in carrying customers from the old to the new by developing computerized applications supporting activities such as "payroll, invoicing, stock control, production planning, and other common business functions." Such application required little if any modification by end users. With time, IBM developed "entire program suites for the industries that it served most extensively, such as insurance, banking, retailing, and manufacturing." This made it very difficult for other companies to compete--particularly since IBM essentially gave the software away to users of its hardware and peripherals.

 

Report Program Generator (RPG), an initiative to provide IBM end users with a language for programming computers based on the company's electromechanical accounting machines, was highly successful--to the point that RPG is in common use today.

 

But the major issue in the IBM-led computing industry of the 60s was not flexibility, but power. With the announcement of the System 360 in April of 1963, IBM set the stage for the next thirty years of computing with an entire range of software-compatible computers. In fact, the new product was comprised of less-than-advanced components and the $100 million software development project that accompanied the project "was little short of a fiasco." IBM's victory was a marketing coup--a fact was not lost on subsequent generations of computer makers and sellers.

 

IBM's success from the mid 50s to the mid 70s--when it virtually dictated to the market for mainframe computers--was a natural outgrowth of that company's orientation towards selling integrated systems. In short, IBM supplied 'canned solutions', but it backed up its rigid offerings with aggressive marketing and superb support.

 

. . . when IBM sold a punched-card machine system, the business's entire information system had to be reconfigured around the machinery. This key difference between IBM and its competitors persisted right into the computer age. Thus, when a company used equipment from one of IBM's office machine competitors, it was all too likely to acquire a problem rather than a solution. Often the computer and its software were no more than a set of tools with which to fashion a solution, instead of the solution itself.  

   

When mainframe computers reached the commodity stage in the 1970s, IBM lost its essential competitive edge in the market for institutional computers. Mainframe systems--rigid though they were (and are)--did provide companies an element of top-down control that was helpful in supporting institutional policies and controlling resources--particularly money. They did precious little to support the control of variation in processes--as proven in concept and functionality by Shewhart and taught by Deming. In many cases, however, mainframe software applications written in the 1950s and 1960s are still in use.

 

Accounting in the computer age

 

 

Another effect of the growth of institutional computing was further encouragement of specialization within the firm. This resulted from a variety of factors. Accounting applications and quantitative programs related to accounting received precedence over other types of programs that would support sales, customer service, and other more people-intensive tasks.

 

In the early 1960s, organizations began to implement IT by automating primarily clerical aspects of accounting (e.g., payroll, accounts receivable, and accounts payable). What had once taken several hundred people countless hours, truckloads of aspirin, and reams of paper was suddenly performed by a computer using far less time and with greater reliability. In a matter of a decade, nearly every large organization (both public and private) had taken advantage of IT capabilities.  

     

The increased efficiency and accuracy of IT were welcomed enthusiastically by management. With IT it seemed like accounting systems had finally reached their maturity. During this time accounting maintained control over the IT investments of most organizations since the vast majority of applications supported accounting functions.  

   

The accounting model formed the initial conceptual underpinning for the computerized business model. Computer-based control became analogous to accounting control. This condition in the process toward computer-based systems to support institutional mission brought with it advantaged and disadvantages. For one thing, accountants achieved a position of particular preeminence in their respective organizations due to their ability to express their model of the world by means of such a powerful tool. This development--coupled with the increasing need for accountants to track complex processes and regulations for fast-growing institutions--gave the accountants a sense of mission that was not fulfilled with the growth of computing.

 

As non-accounting uses for computers naturally came under consideration, rather than respond to them, they ignored them--going their own way.

     

Trouble loomed over the relationship between accounting and IT [in that earlier period]. Management began to use IT to experiment with providing other useful information outside the traditional scope of accounting. For example, why couldn't IT be used to provide customer profiles, defect rates in production, more detailed cost reports, or productivity measurements of key production personnel? Each of these requests by management had significant implications on the architecture of the financial accounting system. Rather than rethink the architecture, accounting professionals distanced themselves from the new demands. The result of this decision was the creation of a new discipline that focused on applying information technology throughout the organization. Interestingly, from the very outset IT people had a mission to provide information customers with any information requested. These requests included accounting information. From the information systems perspective, accounting spun off a discipline with a mission that subsumed accounting.  

 

The position of accountants in organizations in that period could be compared with that of the violinists and string players in the turn of the century following the eighteenth century. They 'ruled the roost.' Of course, there is an implication in the above quote that "the new demands" could have been subsumed within the accounting world. This is unlikely--even with architecture changes. By being more involved in the integration process, however, they could have helped greatly.

 

Intense conflict among function specialists brought on by computers

 

Regardless of the merits of that argument that by not actively participating in the process of introducing non-accounting processes into usage by computers, the advent of the computer did create a war between specialists in economic entities that used computers. Animosities and natural divisions between functional specialists deepened--with decidedly negative results.

 

During the 1970s the rift between IT and accounting deepened both professionally and academically. Both IT and accounting were leery of each other which resulted in poorly coordinated and segmented use of IT application architecture that provided less than ideal support for information customers [a curious concept introduced by the reengineering movement that flies in the face of integration and collaboration within an organization]. In some organizations, IT became a battleground between various functional areas such as finance, production, and marketing. During the 1970s and 1980s organizations invested enormous sums of money to install and maintain new information systems. The problem with these investments was that each functional area of the business began promoting it own IT applications and technical architectures, which resulted in tremendous waste and duplication of effort.  

   

It is possible that in the history of the symphony a noisy era existed that resembled the last few decades of functional infighting over computerized resources in the world of business, government, and education. If so, for the sakes of the listeners, it was hopefully mercifully short. With due respect to the accounting historians, they are probably being too hard on themselves. The answer to expanded computerization was probably not to be found in an expansion of the accounting model or any other specific classification structure--but in the nature of the tools themselves. Surely control of process is only possible by controlling the tools used to define and manage them.

 

General management in the computer age

 

 

The task of general management has not shown to have been directly affected by computers in the fifty years since such devises were introduced into business and government institutions. This is shown by the inability of decision support or executive information systems to gain widespread usage. One reason for this failure is that "managers expressed the need for such diverse types of information from such different sources that effective systems would almost have to be designed individually." Here, the lack of an easily learned common language has taken its toll.

 

Interpersonal communications have been the norm for managers in general--partly due to the sheer complexity of underlying issues that must be sorted out by a competent, responsible human.

     

Many of the myriad items of data floating around any business have one or more of the following characteristics: the item may be minor in importance until considered in light of other data; it may be an isolated fragment that does not fit into a standardized reporting format; its value may be determined by time and may change in the time required to put it into a formal system. (For example, it may be the answer to a specific question that has an immediacy dimension, or a simple statement that a task has been accomplished or not.) It may be an opinion that needs verification before it is used. These are just a few of the characteristics of the data that bounce back and forth through informal conversations between managers and their subordinates each day. In fact, much of the detail that is necessary to run an organization has characteristics that make informal oral transmission more efficient than entering it into a formal system.  

   

This will not change. The problem, however, with such conversations and exchanges as exclusive means of obtaining information and maintaining organizational control is twofold: Such communications may not be based on valid underlying analysis and assumptions; and conversations are poor mechanisms for communicating complexity. Complex processes involve a steady stream of 'ifs' and 'thens' and 'elses' that can have a mind-numbing effect when passed from mouth to ear. An organization that is managed largely on 'snippets' of information without definition and control of its underlying processes is surely to be subject to severe problems.

 

Of course, many managers get information from regular reports and online queries that were set up by others--though managerial use of such report generating tools is increasing. In a recent study, all manager groups listed by age made significant use of computers. Sixty-five percent of managers over fifty registered significant use of computers--a statistic that was much higher for younger groups. All managers in the study made use of electronic mail, operating data, and spreadsheets. Heavier users made use of 'other modeling' programs, indicating some interest in process-related issues. Interestingly, word processing use by managers was very low in the management group in question.

 

Finally, general managers and their staffs are charged with administering the overall policies of the institution in question. This task itself is a complex set of limitations and classifications based on the preferences and mandates of the board of directors and a step-by-step process of delegating powers and responsibilities throughout the organization. Without a means of organizing this process of defining and delegating throughout the organization, this critical element in establishing top-down control over the institution in question takes place 'off system' with a loose link between the delegation process and system features. Technical administrators are given 'root' password access to systems--granting them full powers to assign and remove rights to users.

 

Surely such individuals are trusted employees--as are facilities managers who are given keys and authority to pass them to others or to otherwise control access to the institution's physical plant.

 

Until a means can be created by which management can grant rights to organizational resources, processes, and process features based on the business model--rather than based on access to hardware or software environments--the Dual Control model cannot be fully implemented. The process manager model has promise to provide such functionality--giving management direct control over organization structure in an easily administered, secure environment.

 

It may seem unusual to consider such a tool at the command of management--but it is just as valid as the conductor's baton or the pilot's console. In a global networked business environment, process integration on the system is a critical factor for success.

 

Marketing and sales in the computer age

 

 

Marketing and sales has typically operated 'off system.' This is largely because--with the notable exception of technical market analysts--marketing and sales people tend to be less technical than other company agents. Apart from some system capabilities to enter order headers and line items (really an extension of accounting systems), there has been little system support for the sales and marketing process. This is in part due to the dynamic nature of these functions and to the complex logic that goes into the sales process.

 

Manufacturing and production in the computer age

 

 

These individuals typically have technical backgrounds, but do not benefit from straightforward applications as are enjoyed by accounting departments. Their systems are often highly unique--not only incompatible with the accounting and other systems but designed to operating in entirely different hardware and software environments. Where an accounting application would tend to be written in COBOL, an engineering application could just as easily be coded in Fortran.

 

Information technologists in the computer age

 

 

The complexities and challenges of computers have encouraged a growth of information technology workers (an outgrowth of the 'systematizers' of the nineteenth century) within organizations--individuals whose sole role is in the management of the information infrastructure. They have historically been responsible for hardware and software--including detailed descriptions of how the institution in question does business.

 

This modern phenomenon produced a different turn on the concept of specialization--particularly in larger institutions. In Adam Smith's example of the benefits of specialization in a pin factory there was an understanding by all employees of the overall purpose of the business by and some form of integrated planning and management of underlying processes which must be brought together to deliver the end product. This condition cannot be relied upon in the modern firm--in which specialization has often resulted in an insulated work force that is only vaguely aware of the organization's product or service.