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Management Information Systems, 12E

Laudon & Laudon

Lecture Files by Barbara J. Ellestad

Chapter 6 Foundations of Business Intelligence: Databases and InformationManagement

Information is becoming as important a business resource as money, material, and people. Even though a

company compiles millions of pieces of data doesn’t mean it can produce information that its employees,

suppliers, and customers can use. Businesses are realizing the competitive advantage they can gain by

compiling useful information, not just data.

6.1 Organizing Data in a raditional File !n"ironment

Why should you learn about organizing data? Because its almost inevitable that someday youll be establishing

or at least !or"ing !ith a database of some "ind. #s !ith anything else, understanding the lingo is the first stepto understanding the !hole concept of managing and maintaining information. It all comes do!n to turningdata into useful information, not just a bunch of bits and bytes.

File rgani!ation "erms and #once$ts

Figure 6-1: The data hierarchy

$he first fe! terms, field, record, file, and database, are depicted in %igure &.', !hich sho!s the relationship bet!een them.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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#n entity is basically the person, place, thing, or event on !hich you maintain information. Each characteristicor )uality describing an entity is called an attribute. In the table belo!, each column describes a characteristic

*attribute+ of ohn ones’ *!ho is the entity+ address.

First Name Last Name Street City State Zip Telephone

ohn ones ''' -ain t /enter /ity 0hio 11223 444('12(&&&&

uppose you decide to create a database for your ne!spaper delivery business. In order to succeed, you need to"eep accurate, useful information for each of your customers. 5ou set up a database to maintain the

information. %or each customer, you create a record. Within each record you have the follo!ing fields6

/ustomer first name, customer last name, street address, city, state, zip, I7, and date last paid. mith, ones, andBroo"s are the records !ithin a file you decide to call 8aper 7elivery. $he entities then are mith, ones, and

Broo"s, the people about !hom you are maintaining information. $he attributes are customer’s name *first and

last+, address *street, city, state, zip code+, I7, and date last paid. $his is a very simplistic e9ample of adatabase, but it should help you understand the terminology.

%roblems it' t'e "raditional File En(ironment

Building and maintaining separate databases !ithin an organization is usually the main cause of :islands ofinformation.: It may begin in all innocence, but it can )uic"ly gro! to monstrous proportions. ;et’s loo" at

some of the problems traditional file environments have caused.

Data Redundancy and Inconsistency:

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sales department. $his problem happens far more fre)uently in older traditional file environments that lac" theability to share data and ma"e it available across the organization.

Bottom Line: any problems such as data redundancy! program-data dependence! infle"ibility! poor

data security! and inability to share data among applications ha#e occurred $ith traditional file

en#ironments. anagers and $or%ers must %no$ and understand ho$ databases are constructed so they

%no$ ho$ to use the information resource to their ad#antage.

6.# he Database $pproach to Data Management

$he "ey to establishing an effective, efficient database is to involve the entire organization as much as possible,

even if everyone !ill not immediately be connected to it or use it. 8erhaps they !ont be a part of it in the beginning, but they very !ell could be later on. 7atabase management systems ma"e it easy, fast, and efficient

to relate pieces of data together to compile useful information.

)atabase Management Systems

5ouve heard the old saying, :7ont put all your eggs in one bas"et.: When it comes to data, just the opposite istrue. 5ou !ant to put all your corporate data in one system that !ill serve the organization as a !hole. 7oing

so ma"es it easier, cheaper and more efficient to use the data across the entire organization. It ma"es it easier to

use in applications and ma"es it available through many different delivery methods.

# &atabase anagement System *7B-+ is basically another soft!are program li"e Word or E9cel or e(mail

$his type of soft!are is more complicated> it permits an organization to centralize data, manage themefficiently, and provide access to the stored data by application programs.

Physical views of data are often different from the logical views of the same data !hen they are actually being

used.

%or instance, assume you store tablets of paper in your lo!er(right des" dra!er. 5ou store your pencils in the

upper(left dra!er. When it comes time to !rite your re)uest for a pay raise, you pull out the paper and penciland put them together on your des"top. It isnt important to the tas" at hand !here the items !ere stored

physically> you are concerned !ith the logical idea of the t!o items coming together to help you accomplish the

tas".

$he physical vie! of data focuses on !here the data are actually stored in the record or in a file. $he physical

vie! is important to programmers !ho must manipulate the data as they are physically stored in the database.

7oes it really matter to the user that the customer address is physically stored on the dis" before the customer

name? 8robably not.

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redundant and inconsistent data because each entity has only one record. 5ou construct the data separate fromthe programs that !ill use them. $he data are available to !hoever needs them, in the form that !or"s best for

the tas" at hand. ecuring just one database is much easier than controlling access to multiple databases.

Relational DBMS

# relational database stores data in tables. $he data are then e9tracted and combined into !hatever form or

format the user needs. $he tables are sometimes called files, although that is actually a misnomer, since you canhave multiple tables in one file.

7ata in each table are bro"en do!n into fields. # field, or column, contains a single attribute for an entity. #

group of fields is stored in a record or tuple *the technical term for record+. %igure &(3 in the te9t sho!s the

composition of relational database tables.

Each record re)uires a %ey field, or uni)ue identifier. $he best e9ample of this is your social security number6

there is only one per person. $hat e9plains in part !hy so many companies and organizations as" for your

social security number !hen you do business !ith them.

In a relational database, each table contains a primary %ey, a uni)ue identifier for each record. $o ma"e surethe tables relate to each other, the primary "ey from one table is stored in a related table as a foreign %ey. %orinstance, in the customer table belo! the primary "ey is the uni)ue customer I7. $hat primary "ey is then

stored in the order table as the foreign "ey so that the t!o tables have a direct relationship.

/ustomer $able 0rder $able

ield !a"e #escription ield !a"e #escription

/ustomer =ame elf(E9planatory 0rder =umber 'rimary (ey

/ustomer #ddress elf(E9planatory 0rder Item elf(E9planatory

Customer )& 'rimary (ey =umber of Items 0rdered elf(E9planatory

*rder Number Foreign (ey Customer )& Foreign (ey

$here are t!o important points you should remember about creating and maintaining relational database tables.

irst , you should ensure that attributes for a particular entity apply only to that entity. $hat is, you !ould not

include fields in the customer record that apply to products the customer orders. %ields relating to products!ould be in a separate table. $econd , you !ant to create the smallest possible fields for each record. %or

instance, you !ould create separate fields for a customer’s first name and last name rather than a single field for

the entire name. It ma"es it easier to sort and manipulate the records later !hen you are creating reports.

+rong $ay:

Name ,ddress Telephone number

ohn ;. ones ''' -ain t /enter /ity 0hio 11223 444('12(&&&&

ight $ay:

First Name iddle )nitial Last Name Street City State Zip Telephone

ohn ;. ones ''' -ain t /enter /ity 0hio 11223 444('12(&&&&

Operations of a Relational DBMS


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se these three basic operations to develop relational databases6

• Select: /reate a subset of records meeting the stated criteria.

• oin: /ombine related tables to provide more information than individual tables.

• 'ro/ect: /reate a ne! table from subsets of previous tables.

$he biggest problem !ith these databases is the misconception that every data element should be stored in the

same table. In fact, each data element should be analyzed in relation to other data elements, !ith the goal of

ma"ing the tables as small in size as possible. $he ideal relational database !ill have many small tables, notone big one. 0n the surface that may seem li"e e9tra !or" and effort, but by "eeping the tables small, they can

serve a !ider audience because they are more fle9ible. $his setup is especially helpful in reducing redundancy

and increasing the usefulness of data.

ObjectOriented DBMS

-any companies are moving a!ay from strictly te9t(based database systems. 7ata as objects can be pictures,

groups of te9t, voice, and audio. *b/ect-oriented databases bring the various objects from many different

sources and get them !or"ing together. If you combine the capabilities of a relational 7B- and an object(

oriented database, you create an ob/ect-relational &BS.

$he ne9t time you go to your dentist’s office, you might see a good e9ample of an object(oriented database

management system. -any sophisticated dental database programs include a traditional te9t(based record ofyour treatment history, and !ill also include objects such as computer(stored @(ray films, and maybe a digital

photograph of the inside of your mouth. #ll these objects are maintained as a database record. When you visit

your dentist, she can retrieve your record on the computer terminal, update your treatment history, and ta"e ne!@(rays and a ne! digital photo, all on the computer. 0n the screen, she can compare last year’s @(rays !ith this

year’s. he may even use a graphic tooth chart to mar" !hich teeth need attention.

Databases in the !lo"d

/loud computing service companies provide a !ay for you to manage your company’s data through Internetaccess using a Web bro!ser. #t the present time you may not be able to create a sophisticated relational

database management system but it !on’t be long before it’s a standard service for organizations of all sizes.

8ricing for cloud(based database services are predicated upon6

• sage A small databases cost less than larger ones

• olume of data stored

• =umber of input(output re)uests

• #mount of data !ritten to the database

• #mount of data read from the database

mall( and medium(sized businesses can benefit from using cloud(based databases by not having to maintain

the information technology infrastructure needed to establish a local database. ;arge businesses can benefit

from the services by using it as an adjunct to their onsite database and moving pea" usage to the cloud.

#a$abilities of )atabase Management Systems

$here are three important capabilities of 7B- that traditional file environments lac" A data definition, data

dictionary, and a data manipulation language.


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&ata definition: -ar"eting loo"s at customer addresses differently from hipping, so you must ma"e sure that

all database users are spea"ing the same language. $hin" of it this !ay6 -ar"eting is spea"ing %rench,

production is spea"ing Cerman, and human resources is spea"ing apanese. $hey are all saying the same thing, but its very difficult for them to understand each other. /reating the data definitions sometimes gets

shortchanged. 8rogrammers !ho build the definitions sometimes say, :

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second table? -inimizing redundancy and increasing the stability and fle9ibility of databases is called

normali3ation.

5our goals for creating a good data model are6

• Including all entities and the relationships among them

• 0rganizing data to minimize redundancy

• -a9imizing data accuracy

• -a"ing data easily accessible

Whichever relationship type you use, you need to ma"e sure the relationship remains consistent by enforcing

referential integrity. $hat is, if you create a table that points to another table, you must add correspondingrecords to both tables.

7etermine the relationships bet!een each data entity by using an entity-relationship diagram li"e the one

belo!.

Figure 6-11 #n %ntity-Relationship Diagram

7etermine !hich data elements !or" best together and ho! you !ill organize them in tables. Brea" your

groups of data into as small a unit as possible 1normali3ation2. Even !hen you say its as small as it can get, go

bac" through again. 7ecide !hat the "ey identifier !ill be for each record. ee, youve done all this and youhavent even touched the computer yetD

Cive it your best shot in the beginning6 It costs a lot of time, money, and frustration to go bac" and ma"e

changes or corrections or to live !ith a poorly(designed database.

Bottom Line: elational databases sol#e many of the problems inherent $ith traditional file

en#ironments. &atabase anagement Systems ha#e three critical components: The data definition! the

data dictionary! and the data manipulation language. anagers should ma%e sure that end users are fully

in#ol#ed in properly designing organi3ational databases using normali3ation and entity-relationship

diagrams.

6.% &sing Databases to Impro"e Business 'erformance and Decision Ma(ing

/orporations and businesses go to great lengths to collect and store information about their suppliers andcustomers. What they haven’t done a good job of in the past is fully using the data to ta"e advantage of ne!

products or mar"ets. $hey’re trying, though, as !e see in this section.

)ata *are'ouses


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#s organizations !ant and need more information about their company, their products, and their customers, theconcept of data $arehousing has become very popular. Femember those islands of information !e "eep

tal"ing about? nfortunately, too many of them have proliferated over the years and no! companies are trying

to rein them in by using data !arehousing.

(hat is a Data (areho"se)

=o, data !arehouses are not great big buildings !ith shelves and shelves of bits and bytes stored on them. $heyare huge computer files that store old and ne! data about anything and everything that a company !ants to

maintain information on.

Figure 6-1&: 'omponents of a Data (arehouse)

#s %igure &('1 sho!s, the data come from a variety of sources, both internal and e9ternal to the organization.$hey are then stored together in a data !arehouse from !hich they can be accessed and analyzed to fit the

user’s needs.

Data Marts

ince a data !arehouse can be cumbersome because of its size and sheer volume of data, a company can brea"the information into smaller groups called data marts. It’s easier and cheaper to sort through data marts that

tend to be more focused on a particular subject. It’s still useful to have a huge data !arehouse, though, so that

information is available to everyone !ho !ants or needs it. 5ou can let the user determine ho! the data !ill bemanipulated and used.

sing data !arehouses and data marts correctly can give management a tremendous amount of information thatcan be used to trim costs, reduce inventory, put products in the right stores at the right time, attract ne!

customers, or "eep old customers happy.

"ools for Business Intelligence+ Multidimensional )ata nalysis and )ata Mining

Businesses collect millions of pieces of data. sing the right tools, a business can use its data to developeffective competitive strategies that !e discussed in previous chapters. Father than guessing about !hich

products or services are your best sellers, business intelligence provides concrete methods of analyzing e9actly

!hat customers !ant and ho! best to supply them.

$hree benefits of using business intelligence include6


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• /apability to amass information

• 7evelop "no!ledge about customers, competitors, and internal operations

• /hange decision(ma"ing behavior to achieve higher profitability

Online *nal$tical Processin% +O,*P-

#s technology improves, so does our ability to manipulate information maintained in databases.

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for connecting !ith their customers by e9tracting information more easily and more precisely from their data!arehouses. %irms are using better data mining techni)ues to target customers and suppliers !ith just the right

information at the right time.

%or instance, based on past purchases, /had!ic"’s clothing retailer determines that a customer is more li"ely to

purchase casual clothing than formal !ear at certain times of the year. Based on its predictive analysis, the

retailer then tailors its sales offers to meet that e9pected behavior.

Te.t Minin% and (eb Minin%

-uch of the data created that might be useful to businesses is stored not in databases but in te9t(based

documents. Word files, emails, call center transcripts and services reports contain valuable data that managers

can use to assess operations and help ma"e better decisions about the organization. nfortunately, there has not been an easy !ay to mine those documents until recently. Te"t mining tools help scrub te9t files to find data or

to discern patterns and relationships.

Because so much business is ta"ing place over the Web, businesses are trying to mine data from it also. $hereare three categories of +eb mining processes6

• Web content mining6 E9tract "no!ledge from the content of Web pages A te9t, images, audio, and video

• Web structure mining6 7ata related to the structure of a Web site A lin"s bet!een documents

• Web usage mining6 ser interaction data recorded by Web servers A user behavior on a Web site

)nteracti#e Session: Technology: +hat can Businesses Learn from Te"t ining4 1see p. 556 of the te"t2

describes ho$ businesses are disco#ering customer sentiments! preferences! and re7uests in unstructured

data and addressing negati#e and positi#e trends and patterns using te"t mining soft$are.

)atabases and t'e *eb

Web bro!sers are far easier to use than most of the )uery languages associated !ith the other programs onmainframe computer systems. /ompanies realize ho! easy it is to provide employees, customers, and suppliers

!ith Web(based access to databases rather than creating proprietary systems. It’s also proving cheaper !ays to

create front(endJ bro!ser applications that can more easily lin" information from disparate systems than tryingto combine all the systems on the bac"(endJ. $hat is, you lin" internal databases to the Web through soft!are

programs that provide a connection to the database !ithout major reconfigurations. # database ser#er! !hich

is a special dedicated computer, maintains the 7B-. # soft!are program, called an application ser#er!

processes the transactions and offers data access. # user ma"ing an in)uiry through the Web server can connectto the organization’s database and receive information in the form of a Web page.

%igure &('3 sho!s ho! servers provide the interface bet!een the database and the Web.


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Figure 6-1, Linking Internal Data!ases to the (e!)

$he benefits of using a Web bro!ser to access a database include6

• Ease(of(use

• ;ess training for users

• =o changes to the internal database

• #llo!s a business to "eep its old legacy system instead of replacing it

• /heaper than building a ne! system from scratch

• /reating ne! efficiencies and opportunities

• 8rovide employees !ith integrated firm!ide vie!s of information

Bottom Line: There are many $ays to manipulate databases so that an organi3ation can sa#e money and

still ha#e useful information. +ith technological impro#ements companies don8t ha#e to continually start

from scratch but can blend the old $ith the ne$ $hen they $ant to update their systems. The +eb is the

perfect deli#ery #ehicle for databases and is cheaper than building proprietary systems.

6.) Managing Data *esources

#t the beginning !e said that as many users as possible should be brought together to plan the database. We believed it so much then that !e’ll say it again here. By e9cluding groups of users in the planning stages, no

matter ho! insignificant that group may seem, a company courts trouble.

Establis'ing an Information %olicy

=o one part of the organization should feel that it o!ns information to the e9clusivity of other departments or

people in the organization. # certain department may have the primary responsibility for updating and

maintaining the data, but that department still has to share the information across the !hole company ifnecessary. Well(!ritten information policies outline the rules for using this important resource, including ho!

it !ill be shared, maintained, distributed, and updated.

#s" any manager !hat her resources are and she’s li"ely to list people, e)uipment, buildings, and money. ery

fe! managers !ill include information on the list, yet it can be more valuable than some of the others. # dataadministration function, reporting to senior management, emphasizes the importance of this resource. $hisfunction helps define and structure the information re)uirements for the entire organization to ensure it receives

the attention it deserves.

7ata administration is responsible for6

• 7eveloping information policies


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• 8lanning for data

• 0verseeing logical database design

• 7eveloping data dictionaries

• -onitoring the usage of data by techies and non(techies

&ata go#ernance describes the importance of creating policies and processes for employing data in

organizations. -a"ing sure data are available and usable, have integrity, and are secure is one part. 8romotingdata privacy, security, )uality, and complying !ith government regulations li"e the arbanes(09ley #ct is the

second part.

5ou need to get the non(techies tal"ing and !or"ing !ith the techies, preferably together in a group that is

responsible for database administration. sers !ill ta"e on more responsibility for accessing data on theiro!n through )uery languages if they understand the structure of the database. sers need to understand the role

they play in treating information as an important corporate resource. =ot only !ill they re)uire a user(friendly

structure for the database, but they !ill also need lots of training and hand(holding up front. It !ill pay off in

the long run.

Ensuring )ata -uality

;et’s bring the problem of poor data )uality close to home. What if the person updating your college records

fails to record your grade correctly for this course and gives you a 7 instead of a B or an #? What if your

completion of this course isn’t even recorded? Because of the bad data, you could lose your financial aid or perhaps get a rather nasty e(mail from -om and 7ad. $hin" of the time and difficulty getting the data corrected

&ata 7uality audits verify data accuracy in one of three !ays6

• urvey entire data files

• urvey samples from data files

• urvey end users about their perceptions of data )uality

It’s better for the company or organization to uncover poor )uality data than to have customers, suppliers, or

governmental agencies uncover the problems.

Whether a company creates a single data !arehouse from scratch or puts a Web(front on old, disparate,

disjointed databases, it still needs to ensure data cleansing receives the attention it should. It’s too e9pensive,

both monetarily and customer oriented, to leave bad data hanging around. # special type of soft!are helps ma"ethis job easier by surveying data files, correcting errors in the data, and consistently integrating data throughout

the organization.

)nteracti#e Session: *rgani3ations: Credit Bureau 9rrorsBig 'eople 'roblems 1see p. 5;5 of the te"t2discusses ho$ much damage data 7uality errors can cause consumers $hen they apply for loans! /obs! or

e#en pri#ate insurance.

Bottom Line: ,s $ith any other resource! managers must administer their data! plan their uses! and

disco#er ne$ opportunities for the data to ser#e the organi3ation through changing technologies. )f data

7uality suffers! it

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Discussion +uestions:

'. 7escribe the three capabilities of database management systems6 data definition, data dictionary, and data

manipulation language. 7iscuss the importance of creating and using a data dictionary !ith a largecorporate database.

1. 7iscuss the importance of business intelligence as it relates to databases.

2. What do you see as the benefits of using a Web(li"e bro!ser to access information from a data !arehouse?

3. What is a data mart? What are the advantages of having one?

4. 7iscuss management issues associated !ith databases li"e information policies, data administration, data

governance, and data )uality?

$ns,ers to Discussion +uestions:

'. # 7B- has three capabilities6 '+ 7ata definition is the capability to specify the structure of the content of

the data. It’s used to create database tables and define the characteristics of the fields in each table> 1+ thedata dictionary stores definitions of data elements and their characteristics> 2+ the data manipulation

language is used to add, change, delete, and retrieve data in the database. 7ata dictionaries are important

because they are a lasting source of information about each data element that helps ensure the credibilityand )uality of data. 7ictionaries for large corporate databases should include information about usage,

o!nership, authorization, security, business functions, programs, and reports that use each data element.

1. $he tools available for business intelligence include database )uery soft!are, multidimensional dataanalysis, and data mining. Business intelligence provides firms !ith the capability to amass information

*data !arehouses+, develop "no!ledge about customers, competitors, and internal operations *0;#8, datamining+, and change decision(ma"ing behavior to achieve higher profitability and other business goals. $hefirm’s operational databases "eep trac" of the transactions generated by running the business. $hese

databases feed data to the data !arehouse. -anagers use business intelligence tools to find patterns and

meanings in the data. -anagers then act on !hat they have learned from analyzing the data by ma"ing moreinformed and intelligent business decisions.

2. Web bro!sers are easier to use than most database )uery languages for accessing and compilinginformation. #n organization can build a Web(based front(endJ to the database !ithout having to re!or"

the database structure itself. =o special soft!are for users, other than a bro!ser program, is necessary for

accessing databases attached to a Web site.

3. 7ata !arehouses and data marts store vast amounts of data available for analysis of customers, suppliers,

business partners, and employees. If users analyze these data to see ne! patterns, relationships, and insights

they can ma"e better business decisions and improve a business’s competitive strategies. # data mart is asmall group of data, or subset, e9tracted from a larger data !arehouse. It’s easier and cheaper to sort

through a small data mart than to sort through the entire database of a !arehouse. #n organization can

create a data mart focused on a portion of its data for specific purposes, instead of the entire database.


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4. -anagers should focus on four issues regarding data resources6 Information policies, data administration,data governance, and data )uality. Information policies are important management tools because they

specify rules for sharing, disseminating, ac)uiring, standardizing, classifying, and inventorying information.

7ata administration is responsible for specific policies and procedures through !hich data can be managedas an organizational resource. 7ata governance describes the importance of creating policies and processes

for employing data in organizations> ma"ing sure data are available and usable, have integrity, and are

secure> and, promoting data privacy, security, )uality, and complying !ith government regulations. 7ata

)uality audits can identify problems !ith faulty data and help rectify errors in the database before theycreate even more management problems.


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