1. Copyright 2004 John Wiley & Sons, Inc.14 - 1 Information Technology: Strategic Decision Making For Managers Henry C. Lucas Jr. John Wiley & Sons, Inc Dinesh Mirchandani University of Missouri – St. Louis

2. Copyright 2004 John Wiley & Sons, Inc.14 - 2 Copyright 2004 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.

3. Copyright 2004 John Wiley & Sons, Inc.14 - 3 Chapter 14 The Second Component: The Database

4. Copyright 2004 John Wiley & Sons, Inc.14 - 4 The Importance of the Database The database is where an organization stores content for instantaneous retrieval when needed –Data, documents, pictures, or anything that can be represented in a computer is stored in the database A business depends on information to operate and the database is one of its most valuable resources

5. Copyright 2004 John Wiley & Sons, Inc.14 - 5 Storage of Data The first computers stored information on paper tape, punched cards, and magnetic tape The development of the magnetic disk changed processing dramatically Programs bring data from the disk (or secondary memory) into primary memory for processing –Disk access however is up to a million times slower than primary memory access

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7. Copyright 2004 John Wiley & Sons, Inc.14 - 7 Database Management Software (DBMS) DBMSs automate tasks associate with using direct access files DBMS administrators –describe the database and its required indexes –define records Individual programs ask for specific pieces of data –only programs that access a piece of data need to be changed when that data changes

8. Copyright 2004 John Wiley & Sons, Inc.14 - 8 DBMS Requirements A DBMS must provide the following –A method for defining the contents of the database –A way to describe relationships among data elements and records –A mechanism to set up the database in the first place –Ways to manipulate the data including Updating (adding, modifying, and/or deleting information) Retrieval

9. Copyright 2004 John Wiley & Sons, Inc.14 - 9 Benefits of the Relational Database Model Data are organized in two dimensional tables which are easy to develop and understand The structure can be described mathematically –each table represents a relation Columns from tables can be extracted and even joined Relational databases are easy to use

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11. Copyright 2004 John Wiley & Sons, Inc.14 - 11 An Example Records consist of related data fields –Student number, student last name, student first name, address line 1, address line 2, city, state, zip code, phone number Each field consists of one data element and the size of the field is the same for each record Index or key fields make it easier to search records –Student ID number

12. Copyright 2004 John Wiley & Sons, Inc.14 - 12 Microsoft Access RDBMS Can create relations and add data to them –E.g., Student and Class Inquire for information based on criteria Join relations on some key

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19. Copyright 2004 John Wiley & Sons, Inc.14 - 19 Object-Oriented Databases Traditionally relational databases supported a limited number of data types –Alphabet, numeric, dates, and time Modern organizations use a variety of data –Graphics objects, audio clips, videos, subscripted arrays, and complex data for data mining RDBMS vendors have extended their packages to handle such data objects

20. Copyright 2004 John Wiley & Sons, Inc.14 - 20 Structured Query Language (SQL) A retrieval language for users Basic structure of a SQL expression –The select clause lists the attributes desired in answer to a query –The from clause is a list of relations or tables that the query language processor should consult in filling the request –The where clause describes the attributes desired in the answer SQL is used as an intermediary and a standard in accessing several different database systems

21. Copyright 2004 John Wiley & Sons, Inc.14 - 21 Oracle: An Enterprise DBMS Oracle DBMS architectures are server- centric Extended relational data model that supports many different data types and uses SQL for queries Typically supports thousands of users, processes terabytes of data, and integrates with Oracle application packages in financial management, supply chain management, manufacturing, etc.

22. Copyright 2004 John Wiley & Sons, Inc.14 - 22 Distributed Databases Different parts of the database are located on different computers in a network Issues distributed databases raise are –Will data be replicated across computers or will their be only one copy –If data are replicated, how frequently must different versions be updated to reflect changes –How will updates to the database be coordinated so that integrity is maintained –Who “owns” distributed data and who has access to it –distributed databases offer users easier access to data at the cost of higher overall complexity of the system

23. Copyright 2004 John Wiley & Sons, Inc.14 - 23 The Data Warehouse Businesses collect a tremendous amount of transactions data from routine operations These data can be analyzed to understand the business better –Requires multidimensional analysis called Online Analytical Processing (OLAP) –Helps create a learning organization that is better able to understand its markets, customers and itself

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27. Copyright 2004 John Wiley & Sons, Inc.14 - 27 Data Mining Discovers interesting structure in large amounts of data This structure consists of –Patterns –Statistical or predictive models of the data –Relationships between the data Applied extensively to customer data –Allows firms to determine for instance which products sell together

28. Copyright 2004 John Wiley & Sons, Inc.14 - 28 Reasons for Data Mining Increasing business unit and overall profitability Understanding customer desire and needs Identifying profitable customers and acquiring new ones Retaining customers and increasing loyalty Increasing ROI and reducing costs on promotions Cross-selling and up-selling Detecting fraud, waste, and abuse Determining credit risks Increasing web site profitability Increasing store traffic and optimizing store layouts Monitoring business performance

29. Copyright 2004 John Wiley & Sons, Inc.14 - 29 Approaches to Data Mining Visualization Statistical techniques Search and optimization Artificial intelligence (e.g., neural networks)

30. Copyright 2004 John Wiley & Sons, Inc.14 - 30 Databases and the Organization The typical organization has many databases –Some are organized while others are loose collections of information A manager is responsible for the creation, maintenance, and protection of data Databases are the firm’s memory and allow it to remain in business

31. Copyright 2004 John Wiley & Sons, Inc.14 - 31 Summary Organizations keep tremendous amounts of machine readable data Data in files are stored in records which consist of fields which contain groups of characters The DBMS automates the task of setting up a database The relational model is the most dominant DBMS model today Data warehouses and data mining can contribute significantly to firm success