BUSINESS INTELLIGENCE A MANAGERIAL APPROACH This page intentionally left blank SECOND EDITION BUSINESS INTELLIGENCE A MANAGERIAL APPROACH Efraim Turban University of Hawaii Ramesh Sharda Oklahoma State University Dursun Delen Oklahoma State University David King JDA Software Group, Inc. With contributions by Janine E. 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Library of Congress Cataloging-in-Publication Data Business intelligence: a managerial approach / Efraim Turban . [et al.].—2nd ed. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-13-610066-9 ISBN-10: 0-13-610066-X 1. Business intelligence. 2. Industrial management. I. Turban, Efraim. HD38.7.B8714 2011 658.4'72—dc22 2010018459 10987654321 ISBN 10: 0-13-610066-X ISBN 13: 978-0-13-610066-9 Dedicated to our spouses and children with love —The authors ABOUT THE AUTHORS Efraim Turban (M.B.A., Ph.D., University of California, Berkeley) is a visiting scholar at the Pacific Institute for Information System Management, University of Hawaii. Prior to this, he was on the staff of several universities, including City University of Hong Kong; Lehigh University; Florida International University; California State University, Long Beach; Eastern Illinois University; and the University of Southern California. Dr. Turban is the author of more than 100 refereed papers published in leading journals, such as Management Science, MIS Quarterly, and Decision Support Systems. He is also the author of 20 books, including Electronic Commerce: A Managerial Perspective and Information Technology for Management. He is also a consultant to major corporations worldwide. Dr. Turban’s current areas of interest are Web-based decision support systems, the use of intelligent agents in e-commerce systems, and collaboration issues in global e-commerce. Ramesh Sharda (M.B.A., Ph.D., University of Wisconsin–Madison) is director of the Institute for Research in Information Systems (IRIS), ConocoPhillips Chair of Management of Technology, and a Regents Professor of Management Science and Information Systems in the Spears School of Business Administration at Oklahoma State University (OSU). More than 100 papers describing his research have been published in major journals, including Management Science, Information Systems Research, Decision Support Systems, INFORMS Journal on Computing, Production Operations Management, Journal of Management Information Systems, Interfaces, and many others . He cofounded the AIS SIG on Decision Support Systems and Knowledge Management (SIGDSS). Dr. Sharda serves on several editorial boards, including those of INFORMS Journal on Computing, Decision Support Systems, and ACM Transactions on Management Information Systems. He also is coeditor of Annals of Operations Research and series editor of Integrated Information Systems Series and Operations Research Computer Science Interfaces book series with Springer. His current research interests are in decision support systems, collab- orative applications, and technologies for managing information overload. He has con- sulted with many organizations and has taught in international executive education programs. Dr. Sharda is also a cofounder of iTradeFair.com, a company that produces virtual trade fairs. Dursun Delen (Ph.D., Oklahoma State University) is an associate professor of manage- ment science and information systems in the Spears School of Business at Oklahoma State University (OSU). Prior to his appointment as an assistant professor at OSU in 2001, he worked for Knowledge Based Systems, Inc., in College Station, Texas, as a research scientist for five years, during which he led a number of decision support and other information systems–related research projects funded by federal agencies such as DoD, NASA, NIST, and DOE. His research has appeared in major journals including Decision Support Systems, Communications of the ACM, Computers and Operations Research, Computers in Industry, Journal of Production Operations Management, Artificial Intelligence in Medicine, and Expert Systems with Applications, among others. With Prof. David Olson, he recently published a book on advanced data mining techniques. He is an associate editor for the International Journal of RF Technologies: Research and Applications, and he serves on the editorial boards of the Journal of Information and Knowledge Management, International Journal of Intelligent Information Technologies, Journal of Emerging Technologies in Web Intelligence, and International Journal of Service Sciences. His research and teaching interests are in vi About the Authors vii decision support systems, data and text mining, knowledge management, business intelligence, and enterprise modeling. Dave King (Ph.D.) has over 25 years of experience leading the development of decision support, performance management, and enterprise system software. Currently, he is the senior vice president of New Product Development at JDA Software, Inc., in Scottsdale, Arizona. He joined JDA in 2004 after serving a number of years as the senior vice presi- dent of Product Development and CTO for Comshare, Inc. Dr. King has authored a num- ber of articles and books and is the coauthor of Electronic Commerce: A Managerial Perspective (Prentice Hall). He also serves on a variety of industrial advisory and univer- sity boards including the MIS Advisory Board at the University of Georgia and the Technopolis Advisory Board at Arizona State University. BRIEF CONTENTS Preface xv Chapter 1 Introduction to Business Intelligence 3 Chapter 2 Data Warehousing 29 Chapter 3 Business Performance Management 81 Chapter 4 Data Mining for Business Intelligence 131 Chapter 5 Text and Web Mining 189 Chapter 6 Business Intelligence Implementation: Integration and Emerging Trends 231 Glossary 275 Index 283 viii CONTENTS Preface xv Chapter 1 Introduction to Business Intelligence 3 Opening Vignette: Norfolk Southern Uses Business Intelligence for Decision Support to Reach Success 4 1.1 Changing Business Environments and Computerized Decision Support 6 The Business Pressures–Responses–Support Model 6 1.2 A Framework for Business Intelligence (BI) 8 Definitions of BI 8 A Brief History of BI 9 The Architecture of BI 10 Styles of BI 12 The Benefits of BI 12 Event-Driven Alerts 15 1.3 Intelligence Creation and Use and BI Governance 16 A Cyclical Process of Intelligence Creation and Use 16 Intelligence and Espionage 17 1.4 Transaction Processing versus Analytic Processing 17 1.5 Successful BI Implementation 18 The Typical BI User Community 18 Appropriate Planning and Alignment with the Business Strategy 19 Real-Time, On-Demand BI Is Attainable 20 Developing or Acquiring BI Systems 20 Justification and Cost–Benefit Analysis 20 Security and Protection of Privacy 21 Integration of Systems and Applications 21 1.6 Major Tools and Techniques of Business Intelligence 21 The Tools and Techniques 21 Selected BI Vendors 21 1.7 Plan of the Book 22 1.8 Resources, Links, and the Teradata University Network Connection 23 Resources and Links 23 Cases 23 Vendors, Products, and Demos 24 Periodicals 24 The Teradata University Network Connection 24 The Book’s Web Site 24 ix x Contents Chapter Highlights 24 Key Terms 25 Questions for Discussion 25 Exercises 25 End of Chapter Application Case 26 References 27 Chapter 2 Data Warehousing 29