Business Intelligence and Tools Unit 1

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Unit 1 Introduction to Business
Intelligence (BI) Systems
Structure
1.1 Introduction
Objectives
1.2 A Business Intelligence (BI) System
Self Assessment Question(s) (SAQs)
1.3 Delivering the Business Value through a BI System
Self Assessment Question(s) (SAQs)
1.4 The Business Dimensional Lifecycle
1.4.1 Project Planning
1.4.2 Project Management
1.4.3 Revising the Project Planning
Self Assessment Question(s) (SAQs)
1.5 Roles in a BI Project
1.5.1 Future of BI Systems
Self Assessment Question(s) (SAQs)
1.6 Summary
1.7 Terminal Questions (TQs)
1.8 Multiple Choice Questions (MCQs)
1.9 Answers to SAQs, TQs, and MCQs
1.9.1 Answers to Self Assessment Questions (SAQs)
1.9.2 Answers to Terminal Questions (TQs)
1.9.3 Answers to Multiple Choice Questions (MCQs)
1.1 Introduction
Discovering the patterns and trends in massive data available within the
organization is one of the grand challenges of the organizations in the
current information age. In the book, Business @ the Speed of Thought:
Using a Digital Nervous System, Bill Gates states that the most meaningful
way to differentiate ones organization from its competitors is to do an
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outstanding job with information. In the 1990s, organizations around the
globe made huge investments in legacy systems that resulted in the
accumulation of large amounts of data with the organizations. But these
systems were mainly concentrated on producing the traditional type row-
column reports'. These are the track and trace type reports and so
organizations find it difficult to generate reports across different functional
areas. Managers lack of multidimensional perspective and the difficulty to
gain access to the organizational information paved the way for the
development of Business Intelligence tools.
In this scenario, organizations are now focusing on designing and building
the Business Intelligence systems with an objective to effectively manage
the organizations data, information and enable the organization to gain
competitive advantage over its competitors.
Objectives
The objectives of the Unit are:
The purpose of a Business Intelligence system in an Organization
The process to deliver the business value through the BI System
The Business Dimensional Lifecycle approach to study a BI System
Roles involved in implanting a BI project
The future scenario of BI systems
1.2 A Business Intel ligence (BI) System
Business Intelligence (BI) is a generic term used to describe leveraging the
organizational internal and external data, information for making the best
possible business decisions. The field of Business intelligence is very
diverse and comprises the tools and technologies used to access and
analyze various types of business information. These tools gather and store
the data and allow the user to view and analyze the information from a wide
variety of dimensions and thereby assist the decision-makers make better
business decisions. Thus the Business Intelligence (BI) systems and tools
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play a vital role as far as organizations are concerned in making improved
decisions in the current cut throat competitive scenario.
In simple terms, Business Intelligence is an environment in which business
users receive reliable, consistent, meaningful and timely information. This
data enables the business users conduct analyses that yield overall
understanding of how the business has been, how it is now and how it will
be in the near future. Also, the BI tools monitor the financial and operational
health of the organization through generation of various types of reports,
alerts, alarms, key performance indicators and dashboards. Business
intelligence tools are a type of application software designed to help in
making better business decisions. These tools aid in the analysis and
presentation of data in a more meaningful way and so play a key role in the
strategic planning process of an organization. They illustrate business
intelligence in the areas of market research and segmentation, customer
profiling, customer support, profitability, and inventory and distribution
analysis to name a few.
Various types of BI systems viz. Decision Support Systems, Executive
Information Systems (EIS), Multidimensional Analysis software or OLAP
(On-Line Analytical Processing) tools, data mining tools are discussed
further. Whatever is the type, the Business Intelligence capabilities of the
system is to let its users slice and dice the information from their
organization's numerous databases without having to wait for their IT
departments to develop complex queries and elicit answers.
Although it is possible to build BI systems without the benefit of a data
warehouse, most of the systems are an integral part of the user-facing end
of the data warehouse in practice. In fact, we can never think of building a
data warehouse without BI Systems. That is the reason; sometimes, the
words data warehousing and business intelligence are being used
interchangeably.
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Figure 1.1 depicts how the data from one end gets transformed to
information at the other end for business information.
Self Assessment Question(s) (SAQs)
(For Section 1.2)
1. What is a Business Intelligence System? Give the example of BI
systems.
1.3 Delivering the Business Value through a BI System
A business intelligence project can be successful only when the BI system is
able to deliver the business value. Thus, the most important determinant of
long-term success of a BI system is the Business Value delivered by such
a system.
The business value that organizations derive through the use of BI Systems
is as follows:
The BI applications provide data access for broad, important user
community. This enables the managers to build their own reports at their
convenience.
The BI applications assist in data validation. For example, a report that
compares the sales by product type, gender and store would pull the
data from three different dimensions; product, customer and store.
Data from
Operational
Systems
Data
Analysis
Information,
Reports for
business decisions
Cleanse
Transform
Summarize
Historical data
Consistent
Optimized for querying,
analysis, and reporting
Fig 1.1: A Business Intelli gence (BI) System
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The BI applications can generate more complex queries and they can be
effectively used to get the ongoing performance metrics.
Fig 1.2 details how a BI system delivers business value from the data
available within an organization for a given set of business drivers of an
organization. However, delivery of the business value is not that easy in
practice. The manager of a BI system has to take care of the following
steps in order to deliver the intended business value:
Step 1: Ensuing strong business partnership
Developing a solid business sponsorship is the first step to start a BI project.
Your business sponsors (it is generally good to have more than one) will
take a lead role in determining the purpose, content, and priorities of the
system and so the business sponsors are expected to have the following
skills;
Visionary - a sense for the value and potential of information with clear,
specific ideas as to how to apply it.
Resourceful - able to obtain necessary resources and facilitate the
organizational change that the BI system will bring about.
Reasonable - can temper the enthusiasm with the understanding that
the BI system takes time and resources to come out as a major
information system.
Step 2: Defining organizational-level business requirements
The long-term goal of a BI system is to build an organizational-wide
information infrastructure.
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Fig. 1.2: Delivery of Business Value through a BI System
This cannot be done unless the BI system developing team understands
business requirements at an organizational level. Thus the process of
understanding the organizational-level business requirements includes the
following steps:
Establishing the initial Project Scope
Interviewing the BI System stakeholders
Gathering the organizational level business requirements
Preparation of an overall Requirements document
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Step 3: Prioritizing the business requirements
The prioritization process is a planning meeting that involves the BI system
developing team, the business sponsors, and other key senior managers
across the organization. A Prioritization Grid can be developed for the set of
business processes identified in the previous step against the feasibility of a
business process and the business value that the processes likely generate.
Thus the output of a prioritization process is a list of business processes in
the priority order.
Step 4: Planning the Business Intelligence project
After getting the complete understanding about the business priorities, the
BI System developing team revisits the Project plan. Now the plan is made
based on the priority of the business processes detailed in the previous
step.
Step 5: Defining the Project-level business requirements
Based on the previous steps, now the BI System developing team defines
and documents the project-level business requirements. These
requirements act as guidelines while developing the BI system.
Self Assessment Question(s) (SAQs)
(For Section 1.3)
1. Explain how BI applications enable the organizations in delivering the
business value.
1.4 The Business Dimensional Lifecycle
The Business Dimensional Lifecycle is a methodology adopted for planning,
designing, implementing and maintaining the BI system. Various steps
involved in this approach are depicted below.
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Each of the phases in the above life cycle is described below.
1.4.1 Project Planning
Developing a project plan involves identification of all the tasks necessary to
implement the BI project. The Project Manager identifies the key team
members, assigns the tasks, and develops the effort estimates for their
tasks. There is much interplay between this activity and the activity of
defining the Business Requirements and aligning the BI system/data
warehouse system with the business requirements is very crucial. Therefore
you need to understand the business requirements properly before
proceeding further.
1.4.2 Project Management
This is the phase wherein the actual implementation of the project takes
place. The first step here is to define the business requirements and the
Project Planning
Defining the Business Requirements
Technical
Architecture
Design
Dimensional
Modeling
Selection and
Installation of
a Product
Physical
Design
ETL Design &
Development
Deployment
BI Application
Specification
BI Application
Development
Project
Manage-
ment
Maintenance Growth
Fig. 1.3: Phases in Business Dimensional Lifecycle
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implementation is carried out in three phases on the basis of the
requirements. The first phase (includes technical architecture design,
selection and installation of a product) deals with technology, the second
phase (includes Dimensional Modeling, Physical Design, ETL Design &
Development) focuses on data and the last phase (includes BI Application
Specification, BI Application Development) deals with design and
development of analytical applications. The steps in these phases are
discussed below.
1.4.2.1 Defining the Business Requirements
Business requirements are the bedrock of the BI system and so the
Business Requirements Definition acts as the foundation of the Lifecycle
methodology. The business requirements defined at this stage provide the
necessary guidance to make the decisions. This process mainly includes
the following activities:
Requirements planning
Collecting the business requirements
Post-collection documentation and follow-up
1.4.2.2 Technical Architecture Design
Creation of the Technical Architecture includes the following steps:
1. Establishing an Architecture task-force
2. Collecting Architecture-related requirements
3. Documenting the Architecture requirements
4. Developing a high-level Architectural model
5. Designing and specifying the subsystems
6. Determining Architecture implementation phases
7. Documenting the technical Architecture
8. Reviewing and finalizing the Architecture
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1.4.2.3 Selection and Installation of a Product
The selection and the installation of a business intelligence product is
carried out in the following steps:
1. Understanding the corporate purchasing process
2. Developing a product evaluation matrix
3. Conducting market research
4. Shortlisting the options and performing detailed evaluations
5. Conducting a prototype (if necessary)
6. Selecting a product, installing on trial, and negotiating the value/price.
1.4.2.4 Dimensional Modeling
A dimensional model packages the data in a symmetric format whose
design goals are obtaining the user know-how, query performance, and
resilience to change. In this step, a data-modeling team is formed and
design workshops are conducted to create the dimensional model. Once the
modeling team is confident of the model prepared, the model is
demonstrated and validated with a broader audience and then documented.
1.4.2.5 Physical Design
In this step, the dimensional model created in the previous step is translated
into a physical design. The physical model includes the details viz., physical
database, data types, key declarations, permissibility of nulls.
1.4.2.6 ETL Design & Development
ETL stands for Extraction, Transformation, and Loading. ETL tools are used
to extract the data from the operational data sources and to load the same
into a data warehouse.
1.4.2.7 BI Application Specification
In this step, a set of analytical applications are identified for building a BI
system based on the business requirements definition, type of data being
used, and the architecture of the warehouse proposed.
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1.4.2.8 BI Application Development
This is step wherein a specific application (tool) is selected from the
identified applications for actual implementation of the BI system.
1.4.2.9 Deployment
This is the step wherein the technology, data and analytical application
tracks are converged. The completion of this step can be assumed as the
completion of actual building of the BI system.
1.4.2.10 Maintenance & Growth
During this step, the project team provides the user-support to the end-users
of the system. Also, the team involves in providing the technical support
required for the system so as ensure the continuous utilization of the
system. This step may also include making some minor enhancements to
the BI system.
1.4.3 Revising the Project Planning
As the project makes progress, the project manager of the project has to
revise the project plan to accommodate the new business interests,
concerns raised by the end-users.
Self Assessment Question(s) (SAQs)
(For Section 1.4)
1. What is the purpose of a Business Dimensional Lifecycle and enumerate
the steps involved in implementing this methodology?
1.5 Roles in a BI Project
A typical BI Project consists of the following roles and the responsibilities of
each of these roles are detailed below:
Project Manager:
Monitors the progress on continuum basis and is responsible for the
success of the project.
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Technical Architect:
Develops and implements the overall technical architecture of the BI
system, from the backend hardware/software to the client desktop
configurations.
Database Administrator (DBA):
Keeps the database available for the applications to run smoothly
and also involves in planning and executing a backup/recovery plan,
as well as performance tuning.
ETL Developer:
Involves himself in planning, developing, and deploying the
extraction, transformation, and loading routine for the data
warehouse from the legacy systems.
Front End Developer:
Develops the front-end, whether it be client-server or over the web.
OLAP Developer:
Dexlops the OLAP cubes.
Data Modeler:
Is responsible for taking the data structure that exists in the
enterprise and model it into a scheme that is suitable for OLAP
analysis.
QA Group:
Ensures the correctness of the data in the data warehouse.
Trainer:
Works with the end users to make them familiar with how the front
end is set up so that the end users can get the most benefit out of
the system.
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1.5.1 Future of BI Systems
The current BI systems are focused on providing information within an
organization to end-users and are evolved to solve the problem of poor
knowledge sharing. Thus these BI applications include the activities of query
and reporting, decision support, online analytical processing (OLAP),
forecasting, statistical analysis, and data mining. But the business today has
become more complex with new regulations and an increased focus on
compliances making the organizations to be more careful in the decision-
making process.
As the traditional BI systems focus on latency ridden extract, load, and
query data warehousing cycles, the managers had to rely on out-of-date
information. Thus the goal of future BI systems is to reduce data access,
analysis and decision making latencies and maximize the data value. The
data latency can be reduced dramatically by using in-memory processing in
place of storing data on a disk. Similarly, the analysis latency can be
reduced by automating the interpretation of the data and thus decision
latency can be eliminated in most of the operational decisions by automating
the processes.
The architecture of future BI systems would be event based and so they get
data directly from middleware, the natural place to turn for real-time data.
Using modern 'Event Stream Processing' technology, the future BI systems
can be easily integrated with Enterprise Application Integration (EAI) and
with Service Oriented Architecture (SOA) infrastructure. Therefore the future
BI systems work with well-defined processes and less-defined areas and
organizations get the advantage of real time alerts and actions, and
automated analysis.
Self Assessment Question(s) (SAQs)
(For Section 1.5)
1. Discuss the various roles involved in the execution of a BI project?
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1.6 Summary
Gathering and analyzing the data from various internal and external sources
of an organization is a key process in making business decisions. To
improve this decision making process, the organizations are now focusing
on building the Business Intelligence systems that can effectively manage
the organizations data and information. Thus the BI systems enable the
organization gain competitive advantage over its competitors in the current
cut throat competitive scenario. Decision Support Systems, Executive
Information Systems, online analytical processing tools, and data mining
tools are the important BI systems being used widely.
To deliver the intended business value, the BI system development team
has to undergo the following processes; ensuing strong business
partnership, defining organizational-level business requirements, prioritizing
the business requirements, planning the business intelligence project, and
defining the project-level business requirements. The Business Dimensional
Lifecycle is a methodology adopted for planning, designing, implementing
and maintaining the BI system. This process includes the following steps;
Defining the Business Requirements, Technical Architecture Design,
Selection and Installation of a Product, Dimensional Modeling, Physical
Design, ETL Design & Development, BI Application Specification, BI
Application Development, Deployment, Maintenance & Growth, and
Revising the Project Planning.
In spite of their attractive bells and whistles, the BI tools alone cannot
provide the business solutions. It is the practitioner who has to make
important decisions like how and what techniques need to be employed. At
the same time, the kind of assistance provided by the tools in making the
business decisions cannot be undermined.
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1.7 Terminal Questions (TQs)
1. Discuss the role of a data warehouse in a Business Intelligence system?
2. Differentiate the following terms; Data, Information, Knowledge, and
Intelligence in your own words.
3. Analyze the application of BI systems specific to the following industries:
A. Financial industry
B. Manufacturing industry
C. Telecommunications industry
D. Retail industry
E. Insurance industry
1.8 Multiple Choice Questions (MCQs)
1. Which of the following defines a broad category of applications and
technologies for gathering, storing, analyzing, and providing access to
data to help organizations make better business decisions?
a. Information
b. Decision Making System
c. Business Intelligence System
d. Data Managing System
2. Which of the following terms is being used as a substitute for business
intelligence (in general)?
a. Data warehousing
b. Executive Information System
c. Decision Support System
d. On-Line Analytical Processing
3. Which of the following statements is wrong with regard to a Business
Intelligence (BI) system?
a. The BI systems gather and analyze the data collected from various
data sources.
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b. The BI Systems provides the detailed reports to improve the
decision-making ability of an executive.
c. The BI Systems automate the business decision-making
processes and the managers do not require any role to play.
d. The BI Systems can be effectively used to track the key
performance indicators.
4. Which of the following describes the role played by the Business
Sponsors while developing a BI System?
a. The business sponsors will provide the list of technologies and
tools to be used for developing the BI system.
b. The business sponsors gather and analyze the data collected from
various data sources to identify an appropriate model of a BI
system.
c. The business sponsors track the progress of the BI system
development and report the same to the senor management at
regular intervals of time.
d. The business sponsors assist the BI developing team in
determining the purpose and priorities of the BI system
5. Which of the aspects of the BI system is taken care by the steps
dimensional modeling and physical design?
a. Technology
b. Design of an application
c. Maintenance of a BI system
d. Data
6. Which of the statement(s) describe(s) the reason for defining the
Business Requirements in developing a BI system?
a. Business requirements provide the inputs required for designing a
BI System
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b. The essence of developing a BI system is to create business value
and it is possible only if the business requirements are understood
properly
c. Both (A) and (B)
d. None of the above
7. Which of the following is a Business Intelligence system(s)?
a. Executive Information Systems (EIS)
b. Decision Support Systems (DSS)
c. On-Line Analytical Processing (OLAP)
d. All the above
8. ETL stands for
a. Enter, Transfer, Lengthen
b. Extract, Transform, Load
c. Extract, Transfer, Lengthen
d. Enter, Transform, Load
9. Which of the following acts as a base for designing and developing a
BI system?
a. Understanding the business requirements
b. Use of latest technology
c. The ability of the project manager
d. The financial resources assigned for the project
10. Which of the following steps in the Business Dimensional Life Cycle
deals with technology track?
1. Technical Architecture Design
2. Selection and installation of the product
3. Dimensional modeling
4. ETL Design
a. 1 & 2
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b. Only 1
c. 1,2 and 4
d. 1,2 and 3
1.9 Answers to SAQs, TQs, and MCQs:
1.9.1 Answers to Self Assessment Questions (SAQs):
Section 1.2
1. Business Intelligence System is a broad category of applications and
technologies for gathering, storing, analyzing, and providing access to
data to help organizations make better business decisions. The
Business Intelligence is an environment in which business users receive
the reliable, consistent, and understandable information timely and this
data enable the business users to improve their decision making
abilities. Various types of BI systems include Decision Support Systems,
Executive Information Systems (EIS), Multidimensional Analysis
software or OLAP (On-Line Analytical Processing) tools, data mining
tools.
Section 1.3
1. BI Systems enable the organization increase the business value. They
provide data access for broad, important user community of the
organization so that the managers can prepare their own reports at their
convenience through use of the entire historical data and the current
data. Also, the BI systems can generate more complex queries and so
they can be effectively used to get the ongoing performance metrics.
Activities like data validation can also be done through use of BI
systems.
Section 1.4
1. The Business Dimensional Lifecycle is a methodology adopted for
planning, designing, implementing and maintaining the BI system.
Various steps involved in this approach include defining the business
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requirements, technical architecture design, selection and installation of
a product, dimensional modeling, physical design, ETL design &
development, BI application specification, BI application development,
deployment, maintenance & growth, and revising the project planning.
Section 1.5
1. The important roles in the execution of a BI project include Project
Manager, Technical Architect, DBA, ETL Developer, OLAP Developer,
Data Modeler, QA Group, and Trainer. You may elaborate these roles
as discussed in the Section 1.5.
1.9.2 Answers to Terminal Questions (TQs):
1. Gathering and analyzing the data from various internal and external
sources of an organization is a key process in making business
decisions. Therefore organizations today are focusing on building the
Business Intelligence systems to manage the organizations data and
information effectively and also to improve the decision making
processes. Here, data warehouse comes in to the picture as it is
designed in order to store a large amount of data (both historical data
and the current data from the OLTP systems). The BI systems designed
in the originations in turn obtain the data from the data warehouse and
process it to aid the decision making processes. Although it is possible
to build BI systems without a data warehouse, most of the systems are
being built as an integral part of the user-facing end of the data
warehouse in practice.
2. Data is defined as a numerical or any other fact(s) represented or
recorded. It is represented or recorded in a form that is suitable for
processing by a computer. In terms of business intelligence system, the
data refers to a record or result of a transaction or an operation that
involves addition, deletion, and/or modification of the content of a
database.
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Information is the processed data in a meaningful way and so becomes
useful and provides answers to questions such as "who", "what",
"where", and "when". Organizations create information by summarizing
or analyzing the data. This information is designed to increase the
knowledge of an individual and is tailored to the needs of the recipient.
Use of the information will lead to creation of the knowledge. Knowledge
provides an insight by answering the "how" questions. Also, Knowledge
is the understanding gained through experience or study.
Intelligence is appreciation of "why" and is the application of knowledge
toward the attainment of common goals.
3. The application of the BI systems in various industries is as provided
below.
A. Financial Industry:
Customer profitability analysis:
Enables to understand the overall profitability accurately.
Consolidates activity based costing and sales data for a defined time
period
Credit management:
Establishes the patterns of credit issues by customer class and type.
Provides the means to manage credit limits, early warnings to help
customers avoid credit related problems
Provides accurate valuation of an institutions credit portfolio.
Forecasts the impact of change in credit policy.
Branch sales:
Provides customer information to improve customer service and
account selling
Improves customer support, sales and strengthens customer loyalty.
Reduces the paper work
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B. Manufacturing industry:
Sales/Marketing:
Provides analyses of customer-specific transaction data.
Enables to understand the consumer behavior and its changing
trends
Forecasting:
Forecasts the demand for a specific product
Determines the accurate inventory requirements
Distribution and logistics:
Helps the distribution centers manage increased quantities.
Uses advance shipment information to schedule and consolidate
inbound and outbound freight.
Transportation management:
Develops optimal load consolidation plans and routing schedules
C. Telecommunications industry:
Customer profiling and segmentation:
Determines the high-profit generating product profiles and customer
segments
Provides detailed reports on competition, and channel patterns.
Allows the development of individualized frequent-caller programs
Customer demand forecasting:
Analyzes customers' historical product usage to forecast future
product needs
Provides basis for churn analysis and control for improving customer
retention.
Links to network investment, price modeling, and competitive
analysis
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D. Retail industry:
Forecasting:
Defines accurate inventory requirements
Provides informed decisions about which items to order and to
determine their optimum quantity
Marketing:
Provides analyses of customer-specific transaction data.
Understands the changing patterns of the customer choices and
strengthens the consumer 'pull'.
Merchandising:
Provides quick, detailed access to sales and inventory data
Focuses more on store-ad-item level performance.
Can buy more strategically, defining the right merchandise for the
market at any point in time.
Can refine inventory, do continuous merchandise planning and flow
management.
Distribution and logistics:
Helps the distribution centers manage increased volumes.
Uses advance shipment information to schedule and consolidate
inbound and outbound freight.
Transportation management:
Develops the optimal load consolidation plans and routing schedules
Inventory planning:
Helps in identifying the inventory level needed, item by item, to
ensure a given grade of service.
Helps warehouse planners assign products to locations so as to
minimize distances, improve efficiency
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Balances the supply, demand, and capacity to determine how to
allocate limited quantities of finished goods
Space management:
Provides the store-specific sales patterns and category space
through use of Planograms
E. Insurance:
Claims and premium analysis:
Analyzes detailed claims and premium history by product, policy
holder, claim type, and other specifics
Enables the insurer to set reserves based on detailed, timely data
Analyzes severity trends based on experience and reduce severity
using a methodology that crosses line-of-business characteristics
and integrates outside data sources accessed on-line. Pricing is then
based on appropriate performance factors.
Customer analysis:
Analyzes the client needs and product usage patterns
Develops the marketing programs based on client characteristics
Conducts risk analysis and cause-of-loss determination across
products.
Produces profitability reports by client and identify opportunities.
Provides customer-support personnel with detail information about
each client, improving client service
Risk analysis:
Details the risk of introducing a new product or insuring a new
customer
Identifies the high-risk market segments and opportunities in specific
segments.
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Relates market segments to each other and qualifies their combined
risk
1.9.3 Answers to Multiple Choice Questions (MCQs):
1. Ans. c
2. Ans. a
3. Ans. c
4. Ans. d
5. Ans. d
6. Ans. c
7. Ans. d
8. Ans. b
9. Ans. a
10. Ans. a