Chapter 1

What is mean by Business Intelligence?

 BI(Business Intelligence) is a set of processes, architectures, and

technologies that convert raw data into meaningful information that drives
profitable business actions.It is a suite of software and services to transform
data into actionable intelligence and knowledge.

 BI has a direct impact on organization's strategic, tactical and operational

business decisions. BI supports fact-based decision making using historical
data rather than assumptions and gut feeling.

 BI tools perform data analysis and create reports, summaries, dashboards,

maps, graphs, and charts to provide users with detailed intelligence about the
nature of the business.

 Why is BI important?

 Measurement: creating KPI (Key Performance Indicators) based on historic

data
 Identify and set benchmarks for varied processes.
 With BI systems organizations can identify market trends and spot business
problems that need to be addressed.
 BI helps on data visualization that enhances the data quality and thereby the
quality of decision making.
 BI systems can be used not just by enterprises but SME (Small and Medium
Enterprises)

How Business Intelligence systems are implemented?

Here are the steps:

Step 1) Raw Data from corporate databases is extracted. The data could be spread
across multiple systems heterogeneous systems.

Step 2) The data is cleaned and transformed into the data warehouse. The table can
be linked, and data cubes are formed.
Step 3) Using BI system the user can ask quires, request ad-hoc reports or conduct
any other analysis.

Example:-

A bank gives branch managers access to BI applications. It helps branch manager

to determine who are the most profitable customers and which customers they
should work on.

The use of BI tools frees information technology staff from the task of generating
analytical reports for the departments. It also gives department personnel access to
a richer data source.

Advantages of Business Intelligence

Here are some of the advantages of using Business Intelligence System:

1. Boost productivity

With a BI program, It is possible for businesses to create reports with a single click
thus saves lots of time and resources. It also allows employees to be more
productive on their tasks.

2. To improve visibility

BI also helps to improve the visibility of these processes and make it possible to
identify any areas which need attention.

3. Fix Accountability

BI system assigns accountability in the organization as there must be someone who

should own accountability and ownership for the organization's performance
against its set goals.

4. It gives a bird's eye view:

BI system also helps organizations as decision makers get an overall bird's eye
view through typical BI features like dashboards and scorecards.

5. It streamlines business processes:

BI takes out all complexity associated with business processes. It also automates
analytics by offering predictive analysis, computer modeling, benchmarking and
other methodologies.

6. It allows for easy analytics.

BI software has democratized its usage, allowing even nontechnical or non-

analysts users to collect and process data quickly. This also allows putting the
power of analytics from the hand's many people.

BI System Disadvantages

1. Cost:

Business intelligence can prove costly for small as well as for medium-sized
enterprises. The use of such type of system may be expensive for routine business
transactions.

2. Complexity:

Another drawback of BI is its complexity in implementation of datawarehouse. It

can be so complex that it can make business techniques rigid to deal with.

3. Limited use

Like all improved technologies, BI was first established keeping in consideration

the buying competence of rich firms. Therefore, BI system is yet not affordable for
many small and medium size companies.

4. Time Consuming Implementation It takes almost one and half year for data
warehousing system to be completely implemented. Therefore, it is a time-
consuming process.

 The architecture and components of a BI system

After understanding what the BI system is, it's time to discover more about its
components and understand how these components work with each other. There
are also some BI tools that help to implement one or more components. The
following diagram shows an illustration of the architecture and main components
of the Business Intelligence system:
The BI architecture and components differ based on the tools, environment, and so
on. The architecture shown in the preceding diagram contains components that are
common in most of the BI systems. In the following sections, you will learn more
about each component.

The data warehouse :-The data warehouse is the core of the BI system. A

data warehouse is a database built for the purpose of data analysis and reporting.
This purpose changes the design of this database as well. As you know,
operational databases are built on normalization standards, which are efficient for
transactional systems, for example, to reduce redundancy. As you probably know,
a 3NF-designed database for a sales system contains many tables related to each
other. So, for example, a report on sales information may consume more than 10
joined conditions, which slows down the response time of the query and report. A
data warehouse comes with a new design that reduces the response time and
increases the performance of queries for reports and analytics. You will learn
more about the design of a data warehouse (which is called dimensional
modeling) later in this chapter.

Extract Transform Load

It is very likely that more than one system acts as the source of data required for
the BI system. So there is a requirement for data consolidation that extracts data
from different sources and transforms it into the shape that fits into the data
warehouse, and finally, loads it into the data warehouse; this process is
called Extract Transform Load (ETL). There are many challenges in the ETL
process, out of which some will be revealed (conceptually) later in this chapter.

According to the definition of states, ETL is not just a data integration phase. Let's
discover more about it with an example; in an operational sales database, you may
have dozen of tables that provide sale transactional data. When you design that
sales data into your data warehouse, you can denormalize it and build one or two
tables for it. So, the ETL process should extract data from the sales database and
transform it (combine, match, and so on) to fit it into the model of data warehouse
tables.

There are some ETL tools in the market that perform the extract, transform, and
load operations. The Microsoft solution for ETL is SQL Server Integration
Service (SSIS), which is one of the best ETL tools in the market. SSIS can
connect to multiple data sources such as Oracle, DB2, Text Files, XML, Web
services, SQL Server, and so on. SSIS also has many built-in transformations to
transform the data as required. , ETL with Integration Services, is about SSIS
and how to do data transformations with this tool.

Data model – BISM:-A data warehouse is designed to be the source of analysis

and reports, so it works much faster than operational systems for producing
reports. However, a DW is not that fast to cover all requirements because it is still
a relational database, and databases have many constraints that reduce the
response time of a query. The requirement for faster processing and a lower
response time on one hand, and aggregated information on another hand causes
the creation of another layer in BI systems. This layer, which we call the data
model, contains a file-based or memory-based model of the data for producing
very quick responses to reports.

Online Analytical Processing (OLAP)

OLAP or Online Analytical Processing is a concept in which data is analyzed
through multiple dimensions with help of structure called cube. OLAP helps in
converting data into information.
The main objective of OLAP is to summarize information for decision making
process from large data base. The report generated through OLAP can be presented
in a format as per the requirement of end user.
The advantages of OLAP are as follows:

 It ensures that response to query is quicker consistently.

 It provides facility to work with data which are difficult to query through
SQL.
 It lets user create view with the help of spreadsheet.

There are three types of OLAP multi-dimensional OLAP, relational OLAP and
Hybrid OLAP. In multi-dimensional OLAP data is usually stored in proprietary
structure suitable for multi-dimensional analysis. In relational OLAP data base is
structure through standard database in star or snowflake schema. A combination of
multi-dimensional OLAP and relational OLAP is the hybrid OLAP.

Online Transaction Processing(OLTP)

Online transaction processing shortly known as OLTP supports transaction-

oriented applications in a 3-tier architecture. OLTP administers day to day
transaction of an organization.

The primary objective is data processing and not data analysis

Example of OLTP system

An example of OLTP system is ATM center. Assume that a couple has a joint
account with a bank. One day both simultaneously reach different ATM centers at
precisely the same time and want to withdraw total amount present in their bank
account.

However, the person that completes authentication process first will be able to get
money. In this case, OLTP system makes sure that withdrawn amount will be
never more than the amount present in the bank. The key to note here is that OLTP
systems are optimized for transactional superiority instead data analysis.

Other examples of OLTP system are:

 Online banking
 Online airline ticket booking
 Sending a text message
 Order entry
 Add a book to shopping cart

Benefits of OLTP method

 It administers daily transactions of an organization.

 OLTP widens the customer base of an organization by simplifying
individual processes.

Drawbacks of OLTP method

 If OLTP system faces hardware failures, then online transactions get

severely affected.
 OLTP systems allow multiple users to access and change the same data at
the same time which many times created unprecedented situation.

Difference Between OLAP and OLTP

Following Table shows difference between OLAP and OLTP system:

OLAP OLTP
Data Storage:
It stores only historical data and Data Storage:
historical data processing is done. It involves daily processing of data
Users Of System: Users Of System:
OLAP System is used by higher OLTP system used by DBAs, Database
management like managers , analysts , Professionals ,Programmers for
executives,CEO,CFOs applying business logic.

Key use: Key use:

OLAP is used to analyse the business OLTP is used to run the business

Optimization Techniques: Optimization Techniques:

OLAP is very huge database so lot of OLTP uses less indexing as data is less
indexes are used for fast data processing here

Database Schema:
OLAP uses Star-Schema,Snowflakes Database Schema:
schema or Fact-Dimensions OLTP uses Entity Relations

Data Information: Data Information:

OLAP contains historical data OLTP contains Current data

Join Data: Join Data:

OLAP has less joins and in de- OLTP has large no of joins and in
normalized form database normalized form

Aggregated Data:
OLAP system has aggregated Aggregated Data:
multidimensional data OLTP has not aggregated data.

Summarized data: Detailed Data:

OLAP system OLTP system gives data in detailed
gives Summarized consolidated data format

Data Size: Data Size:

OLAP database size is 100 GB to 100 OLTP database size is 100 MB to 100
TB GB

 Business Intelligence Approaches:-

BI as a service based on internal data
Relying solely on the data retrieved from a company’s systems, this approach
provides insights into the company’s business processes, customers, performance,
and more. The main advantage of this approach is that a plethora of data is usually
available for the analysis. At the same time, the company is limited to their
‘internal wisdom’ – they lack external data to compare themselves against.
Here’s a project from our practice to illustrate the approach. One of our customers
requested us to help them prioritize their product categories as they wanted this
strategic decision to be data-driven. The project was based on their 2-year financial
and production history. During the project, we scrutinized the data to find
meaningful insights, and built reports and graphs so that the customer could glance
at the findings and answer the business question they had.
BI as a service based on external data
This approach is frequently used to run strategic market analysis or social media
analytics. The biggest challenge while working with external data is ensuring data
quality, as it usually comes from multiple disintegrated data sources and can
contain errors and discrepancies.
Here’s another project from our portfolio. A management consultancy outsourced
the obtained market data to us to get valuable insights into different industries in
various economic conditions. To solve this task, we deployed BI infrastructure
with a data warehouse and a 40+ dimensions OLAP cube on our server, while the
customer was provided with the access to the pre-built reports and dashboards,
with the possibility of running ad hoc analysis.
Hybrid approach
Using data from both inside and outside, a company can get the broadest picture
that encompasses both their internal operations and the market perspective. No
wonder that a hybrid approach is the most widespread.

Business Analytics:-

Business analytics (BA) refers to all the methods and techniques that are used by
an organization to measure performance. Business analytics are made up of
statistical methods that can be applied to a specific project, process or product.
Business analytics can also be used to evaluate an entire company. Business
analytics are performed in order to identify weaknesses in existing processes and
highlight meaningful data that will help an organization prepare for future growth
and challenges.
The need for good business analytics has spurred the creation of business analytics
software and enterprise platforms that mine an organization’s data in order to
automate some of these measures and pick out meaningful insights.

Specific types of business analytics include:

 Descriptive analytics, which tracks key performance indicators (KPIs) to

understand the present state of a business;
 Predictive analytics, which analyzes trend data to assess the likelihood of future
outcomes; and
 Prescriptive analytics, which uses past performance to generate
recommendations about how to handle similar situations in the future.
Importance of Business Analytics

 Business analytics is a methodology or tool to make a sound commercial

decision. Hence it impacts functioning of the whole organization. Therefore,
business analytics can help improve profitability of the business, increase
market share and revenue and provide better return to a shareholder.
 Facilitates better understanding of available primary and secondary data,
which again affect operational efficiency of several departments.
 Provides a competitive advantage to companies. In this digital age flow of
information is almost equal to all the players. It is how this information is
utilized makes the company competitive. Business analytics combines
available data with various well thought models to improve business
decisions.
 Converts available data into valuable information. This information can be
presented in any required format, comfortable to the decision maker.

Benefits of Business Analytics:-

Apart from having applications in various arenas, following are the benefits of
Business Analytics and its impact on business –
 Accurately transferring information
  Consequent improvement in efficiency
 Help portray Future Challenges
 Make Strategic decisions
 As a perfect blend of data science and analytics
 Reduction in Costs
 Improved Decisions
 Share information with a larger audience
 Ease in Sharing information with stakeholders
Moreover, any technology is subject to its own set of problems and
challenges. Following are the challenges in implementing business analytics in
an organization.
 Lack of technical skills in employees
 Fuss over acceptance of BA by staff
 Data Security and Maintenance
 Integrity of Data
 Delivering relevant information in the given time
 Inability to address complex issues
 Costs involved in implementing BA
 Investment of staff time in implementation of BA
 Lack of a proper strategy to implement BA

Types Of Business Analytics:-

There are four major types of business analytics to analyze data [9]. The four types
are:
1. Decision Analytics
2. Descriptive Analytics
3. Predictive Analytics
4. Prescriptive Analytics

459

1 Descriptive Analytics

2 Diagnostic Analytics

3 Predictive Analytics

4 Prescriptive Analytics
1. Descriptive Analytics
This can be termed as the simplest form of analytics. The mighty size of big data is
beyond human comprehension and the first stage hence involves crunching the
data into understandable chunks. The purpose of this analytics type is just to
summarise the findings and understand what is going on.
Among some frequently used terms, what people call as advanced analytics or
business intelligence is basically usage of descriptive statistics (arithmetic
operations, mean, median, max, percentage, etc.) on existing data.  It is said that
80% of business analytics mainly involves descriptions based on aggregations of
past performance. It is an important step to make raw data understandable to
investors, shareholders and managers. This way it gets easy to identify and address
the areas of strengths and weaknesses such that it can help in strategizing.
The two main techniques involved are data aggregation and data mining stating
that this method is purely used for understanding the underlying behavior and not
to make any estimations. By mining historical data, companies can analyze the
consumer behaviors and engagements with their businesses that could be helpful in
targeted marketing, service improvement, etc. The tools used in this phase are MS
Excel, MATLAB, SPSS, STATA, etc.

2. Diagnostic Analytics
Diagnostic analytics is used to determine why something happened in the past. It is
characterized by techniques such as drill-down, data discovery, data mining and
correlations. Diagnostic analytics takes a deeper look at data to understand the root
causes of the events. It is helpful in determining what factors and events
contributed to the outcome. It mostly uses probabilities, likelihoods, and the
distribution of outcomes for the analysis.
In a time series data of sales, diagnostic analytics would help you understand why
the sales have decrease or increase for a specific year or so. However, this type of
analytics has a limited ability to give actionable insights. It just provides an
understanding of causal relationships and sequences while looking backward.
A few techniques that uses diagnostic analytics include attribute importance,
principle components analysis, sensitivity analysis, and conjoint analysis. Training
algorithms for classification and regression also fall in this type of analytics
3. Predictive Analytics
As mentioned above, predictive analytics is used to predict future outcomes.
However, it is important to note that it cannot predict if an event will occur in the
future; it merely forecasts what are the probabilities of the occurrence of the event.
A predictive model builds on the preliminary descriptive analytics stage to derive
the possibility of the outcomes.
The essence of predictive analytics is to devise models such that the existing data
is understood to extrapolate the future occurrence or simply, predict the future
data. One of the common applications of predictive analytics is found in sentiment
analysis where all the opinions posted on social media are collected and analyzed
(existing text data) to predict the person’s sentiment on a particular subject as
being- positive, negative or neutral (future prediction).
Hence, predictive analytics includes building and validation of models that provide
accurate predictions. Predictive analytics relies on machine learning algorithms
like random forests, SVM, etc. and statistics for learning and testing the data.
Usually, companies need trained data scientists and machine learning experts for
building these models. The most popular tools for predictive analytics include
Python, R, RapidMiner, etc.
The prediction of future data relies on the existing data as it cannot be obtained
otherwise.  If the model is properly tuned, it can be used to support complex
forecasts in sales and marketing. It goes a step ahead of the standard BI in giving
accurate predictions.

4. Prescriptive Analytics
The basis of this analytics is predictive analytics but it goes beyond the three
mentioned above to suggest the future solutions. It can suggest all favorable
outcomes according to a specified course of action and also suggest various course
of actions to get to a particular outcome. Hence, it uses a strong feedback system
that constantly learns and updates the relationship between the action and the
outcome.
The computations include optimisation of some functions that are related to the
desired outcome. For example, while calling for a cab online, the application uses
GPS to connect you to the correct driver from among a number of drivers found
nearby. Hence, it optimises the distance for faster arrival time. Recommendation
engines also use prescriptive analytics.
The other approach includes simulation where all the key performance areas are
combined to design the correct solutions. It makes sure whether the key
performance metrics are included in the solution. The optimisation model will
further work on the impact of the previously made forecasts. Because of its power
to suggest favorable solutions, prescriptive analytics is the final frontier of
advanced analytics or data science, in today’s term.
 
Difference Between Business Intelligence and Business Analytics:-

Business Intelligence Business Analytics

Using data to help run the business – Using data to help drive business
making decisions. change – asking questions.  

Historical data analysis – tells you Statistical and trend analysis – tells
what happened.   you what is going to happen.

Learn what will happen to the

Learn about the state of the business business by forecasting from the data
from the data you collect. you collect.

Improves current strategy with Improves strategy for moving forward

knowledge of past results. with predictive analysis.

Identify current problems and Identify potential issues and determine

determine how to resolve them. how to avoid them.