Chapter 6

Foundations of
Business Intelligence:
Databases and
Information
Management
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
LEARNING OBJECTIVES

• Describe how the problems of managing data resources in

a traditional file environment are solved by a database
management system
• Describe the capabilities and value of a database
management system
• Apply important database design principles
• Evaluate tools and technologies for accessing information
from databases to improve business performance and
decision making
• Assess the role of information policy, data administration,
and data quality assurance in the management of firm’s
data resources
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Can HP Mine Success from an Enterprise Data Warehouse?

• Problem: HP’s numerous systems unable to deliver the

information needed for a complete picture of business
operations, lack of data consistency
• Solutions: Build a data warehouse with a single global
enterprise-wide database; replacing 17 database
technologies and 14,000 databases in use
• Created consistent data models for all enterprise data and
proprietary platform
• Demonstrates importance of database management in
creating timely, accurate data and reports
• Illustrates need to standardize how data from disparate
sources are stored, organized, and managed

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Organizing Data in a Traditional File Environment

• File organization concepts

• Computer system organizes data in a hierarchy
• Field: Group of characters as word(s) or number
• Record: Group of related fields
• File: Group of records of same type
• Database: Group of related files
• Record: Describes an entity
• Entity: Person, place, thing on which we store
information
• Attribute: Each characteristic, or quality, describing entity
• E.g., Attributes Date or Grade belong to entity COURSE

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Organizing Data in a Traditional File Environment

The Data Hierarchy

A computer system
organizes data in a
hierarchy that starts with the
bit, which represents either
a 0 or a 1. Bits can be
grouped to form a byte to
represent one character,
number, or symbol. Bytes
can be grouped to form a
field, and related fields can
be grouped to form a record.
Related records can be
collected to form a file, and
related files can be
organized into a database.

Figure 6-1
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Organizing Data in a Traditional File Environment

• Problems with the traditional file environment (files

maintained separately by different departments)
• Data redundancy and inconsistency
• Data redundancy: Presence of duplicate data in multiple files
• Data inconsistency: Same attribute has different values
• Program-data dependence:
• When changes in program requires changes to data accessed by
program
• Lack of flexibility
• Poor security
• Lack of data sharing and availability

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Organizing Data in a Traditional File Environment

Traditional File Processing

The use of a traditional approach to file processing encourages each functional area in a corporation to
develop specialized applications and files. Each application requires a unique data file that is likely to be a
subset of the master file. These subsets of the master file lead to data redundancy and inconsistency,
processing inflexibility, and wasted storage resources.

Figure 6-2
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Database
• Collection of data organized to serve many applications by
centralizing data and controlling redundant data
• Database management system
• Interfaces between application programs and physical data files
• Separates logical and physical views of data
• Solves problems of traditional file environment
• Controls redundancy
• Eliminates inconsistency
• Uncouples programs and data
• Enables organization to central manage data and data security

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Human Resources Database with Multiple Views

A single human resources database provides many different views of data, depending on the information
requirements of the user. Illustrated here are two possible views, one of interest to a benefits specialist
and one of interest to a member of the company’s payroll department.

Figure 6-3
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Relational DBMS
• Represent data as two-dimensional tables called relations or files
• Each table contains data on entity and attributes
• Table: grid of columns and rows
• Rows (tuples): Records for different entities
• Fields (columns): Represents attribute for entity
• Key field: Field used to uniquely identify each record
• Primary key: Field in table used for key fields
• Foreign key: Primary key used in second table as look-up field to
identify records from original table

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Relational Database Tables

A relational database organizes data in the form of two-dimensional tables. Illustrated here are tables for
the entities SUPPLIER and PART showing how they represent each entity and its attributes.
Supplier_Number is a primary key for the SUPPLIER table and a foreign key for the PART table.

Figure 6-4A
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Relational Database Tables (cont.)

Figure 6-4B
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Operations of a Relational DBMS

• Three basic operations used to develop useful sets of data
• SELECT: Creates subset of data of all records that
meet stated criteria
• JOIN: Combines relational tables to provide user with
more information than available in individual tables
• PROJECT: Creates subset of columns in table,
creating tables with only the information specified

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

The Three Basic Operations of a Relational DBMS

The select, project, and join operations enable data from two different tables to be combined and only
selected attributes to be displayed.

Figure 6-5
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Object-Oriented DBMS (OODBMS)

• Stores data and procedures as objects
• Capable of managing graphics, multimedia, Java
applets
• Relatively slow compared with relational DBMS for
processing large numbers of transactions
• Hybrid object-relational DBMS: Provide capabilities
of both OODBMS and relational DBMS

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Capabilities of Database Management Systems

• Data definition capability: Specifies structure of database
content, used to create tables and define characteristics of fields
• Data dictionary: Automated or manual file storing definitions of
data elements and their characteristics
• Data manipulation language: Used to add, change, delete,
retrieve data from database
• Structured Query Language (SQL)
• Microsoft Access user tools for generation SQL
• Many DBMS have report generation capabilities for creating
polished reports (Crystal Reports)

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Microsoft Access Data Dictionary Features

Figure 6-6
Microsoft Access has a
rudimentary data dictionary
capability that displays
information about the size,
format, and other
characteristics of each field
in a database. Displayed
here is the information
maintained in the SUPPLIER
table. The small key icon to
the left of Supplier_Number
indicates that it is a key field.

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Example of an SQL Query

Illustrated here are the SQL statements for a query to select suppliers for parts 137 or 150. They produce a
list with the same results as Figure 6-5.

Figure 6-7
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

An Access Query

Illustrated here is how the query in Figure 6-7 would be constructed using query-building tools in the
Access Query Design View. It shows the tables, fields, and selection criteria used for the query.

Figure 6-8
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Designing Databases
• Conceptual (logical) design: abstract model from business
perspective
• Physical design: How database is arranged on direct-access
storage devices
• Design process identifies
• Relationships among data elements, redundant database
elements
• Most efficient way to group data elements to meet business
requirements, needs of application programs
• Normalization
• Streamlining complex groupings of data to minimize redundant
data elements and awkward many-to-many relationships

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

An Unnormalized Relation for Order

An unnormalized relation contains repeating groups. For example, there can be many parts and suppliers
for each order. There is only a one-to-one correspondence between Order_Number and Order_Date.

Figure 6-9
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Normalized Tables Created from Order

After normalization, the original relation ORDER has been broken down into four smaller relations. The
relation ORDER is left with only two attributes and the relation LINE_ITEM has a combined, or
concatenated, key consisting of Order_Number and Part_Number.

Figure 6-10
6.22 © 2010 by Prentice Hall
 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Entity-relationship diagram
• Used by database designers to document the data model
• Illustrates relationships between entities
• Distributing databases: Storing database in more than
one place
• Partitioned: Separate locations store different parts of database
• Replicated: Central database duplicated in entirety at different
locations

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

An Entity-Relationship Diagram

This diagram shows the relationships between the entities ORDER, LINE_ITEM, PART, and SUPPLIER that
might be used to model the database in Figure 6-10.

Figure 6-11
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

• Distributing databases
• Two main methods of distributing a database
• Partitioned: Separate locations store different parts of
database
• Replicated: Central database duplicated in entirety at
different locations
• Advantages
• Reduced vulnerability
• Increased responsiveness
• Drawbacks
• Departures from using standard definitions
• Security problems
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
The Database Approach to Data Management

Distributed Databases

There are alternative ways of distributing a database. The central database can be partitioned (a) so that each remote
processor has the necessary data to serve its own local needs. The central database also can be replicated (b) at all remote
locations.

Figure 6-12
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

• Very large databases and systems require special

capabilities, tools
• To analyze large quantities of data
• To access data from multiple systems
• Three key techniques
• Data warehousing
• Data mining
• Tools for accessing internal databases through the
Web

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

• Data warehouse:
• Stores current and historical data from many core operational
transaction systems
• Consolidates and standardizes information for use across
enterprise, but data cannot be altered
• Data warehouse system will provide query, analysis, and reporting
tools
• Data marts:
• Subset of data warehouse
• Summarized or highly focused portion of firm’s data for use by
specific population of users
• Typically focuses on single subject or line of business

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

Components of a Data Warehouse

The data warehouse extracts current and historical data from multiple operational systems inside the
organization. These data are combined with data from external sources and reorganized into a central
database designed for management reporting and analysis. The information directory provides users
with information about the data available in the warehouse.

Figure 6-13
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

The IRS Uncovers Tax Fraud with a Data Warehouse

• Read the Interactive Session: Organizations, and then

discuss the following questions:
• Why was it so difficult for the IRS to analyze the taxpayer data
it had collected?
• What kind of challenges did the IRS encounter when
implementing its CDW? What management, organization, and
technology issues had to be addressed?
• How did the CDW improve decision making and operations at
the IRS? Are there benefits to taxpayers?
• Do you think data warehouses could be useful in other areas
of the federal sector? Which ones? Why or why not?

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

• Business Intelligence:
• Tools for consolidating, analyzing, and providing access
to vast amounts of data to help users make better
business decisions
• E.g., Harrah’s Entertainment analyzes customers to
develop gambling profiles and identify most profitable
customers
• Principle tools include:
• Software for database query and reporting
• Online analytical processing (OLAP)
• Data mining

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

Business Intelligence

Figure 6-14
A series of analytical tools
works with data stored in
databases to find patterns
and insights for helping
managers and employees
make better decisions to
improve organizational
performance.

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

• Online analytical processing (OLAP)

• Supports multidimensional data analysis
• Viewing data using multiple dimensions
• Each aspect of information (product, pricing, cost,
region, time period) is different dimension
• E.g., how many washers sold in East in June
compared with other regions?
• OLAP enables rapid, online answers to ad hoc queries

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

Multidimensional Data Model

Figure 6-15
The view that is showing is
product versus region. If
you rotate the cube 90
degrees, the face that will
show is product versus
actual and projected sales. If
you rotate the cube 90
degrees again, you will see
region versus actual and
projected sales. Other views
are possible.

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

• Data mining:
• More discovery driven than OLAP
• Finds hidden patterns, relationships in large databases and
infers rules to predict future behavior
• E.g., Finding patterns in customer data for one-to-one
marketing campaigns or to identify profitable customers.
• Types of information obtainable from data mining
• Associations
• Sequences
• Classification
• Clustering
• Forecasting

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
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Using Databases to Improve Business Performance and Decision Making

• Predictive analysis
• Uses data mining techniques, historical data, and
assumptions about future conditions to predict
outcomes of events
• E.g., Probability a customer will respond to an offer or
purchase a specific product
• Text mining
• Extracts key elements from large unstructured data sets
(e.g., stored e-mails)

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
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Using Databases to Improve Business Performance and Decision Making

• Web mining
• Discovery and analysis of useful patterns and information
from WWW
• E.g., to understand customer behavior, evaluate
effectiveness of Web site, etc.
• Techniques
• Web content mining
• Knowledge extracted from content of Web pages
• Web structure mining
• E.g., links to and from Web page
• Web usage mining
• User interaction data recorded by Web server

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

• Databases and the Web

• Many companies use Web to make some internal
databases available to customers or partners
• Typical configuration includes:
• Web server
• Application server/middleware/CGI scripts
• Database server (hosting DBM)
• Advantages of using Web for database access:
• Ease of use of browser software
• Web interface requires few or no changes to database
• Inexpensive to add Web interface to system

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Using Databases to Improve Business Performance and Decision Making

Linking Internal Databases to the Web

Users access an organization’s internal database through the

Web using their desktop PCs and Web browser software.

Figure 6-16
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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Managing Data Resources

The Databases Behind MySpace

• Read the Interactive Session: Technology, and then

discuss the following questions:
• What kind of databases and database servers does MySpace
use?
• Why is database technology so important for a business such
as MySpace?
• How effectively does MySpace organize and store the data on
its site?
• What data management problems have arisen? How has
MySpace solved or attempted to solve these problems?

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Managing Data Resources

• Establishing an information policy

• Firm’s rules, procedures, roles for sharing, managing, standardizing
data
• E.g., What employees are responsible for updating sensitive
employee information
• Data administration: Firm function responsible for specific policies
and procedures to manage data
• Data governance: Policies and processes for managing
availability, usability, integrity, and security of enterprise data,
especially as it relates to government regulations
• Database administration : Defining, organizing, implementing,
maintaining database; performed by database design and
management group

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Managing Data Resources

• Ensuring data quality

• More than 25% of critical data in Fortune 1000
company databases are inaccurate or incomplete
• Most data quality problems stem from faulty input
• Before new database in place, need to:
• Identify and correct faulty data
• Establish better routines for editing data once
database in operation

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 Management Information Systems
Chapter 6 Foundations of Business Intelligence: Databases
and Information Management
Managing Data Resources

• Data quality audit:

• Structured survey of the accuracy and level of
completeness of the data in an information system
• Survey samples from data files, or
• Survey end users for perceptions of quality
• Data cleansing
• Software to detect and correct data that are incorrect,
incomplete, improperly formatted, or redundant
• Enforces consistency among different sets of data from
separate information systems
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