Chapter 12: Business Intelligence and Decision Support Systems

(Prepared by Research Scholar: Amrita Patwa)

Business Intelligence is an umbrella term that includes architecture, tools, databases and
applications that have been implemented over several decades under different names by
various researchers and vendors.
Need for BI:

Provide measurable business value to smaller companies as costs declined

Increased pervasiveness
Used as a feedback mechanism
Improved data quality
Full visibility and real time excess to company data
Easy to create accurate, up to the minute report
Informed , fast decision making

The major component of BI are data ware house and marts, predictive analysis, data mining,
data visualization software and a business performance management system.
Characteristic and Objectives of Data Mining:

The data are cleared and consolidated in the data warehouse

Managing and synchronizing data to get the right result
The minors are empowered by data drill and other power query tool
Readily combined with spreadsheet and other software development tool
Massive search effort can be made for large amount of data

Data mining techniques are well suited to analyze financial time series data to find patterns,
detect anomalies and outliers recognize situation of chance and risk etc. Data mining tools are
interactive, visual and understandable and work directly on the data warehouse of the
organization.
Data Mining Applications:
There are some applications whose intend is to identify the business opportunity in order to
create a sustainable competitive advantage. Examples of such applications are retailing and
sales, banking, manufacturing and production, healthcare, broadcasting and marketing.
ISs have grown to support all managerial roles, particularly decisional role. It helps in the
identification of problem and opportunity and in the decision of what to do about them. The
two broad decision categories are problem solving and opportunity exploiting.
The need for IT support in managerial decision is basically to overcome certain issues such as

Too many alternatives , scenarios and risk to consider

Time pressure
Increased fluctuation uncertainty in the environment
Decision maker and information can be indifferent location. Bringing them all
together is difficult and costly
Need of an organization to conduct forecast

Decision making process consist of four systematic phases Intelligence, Design, Choice and
Implementation. There is a continuous flow of information from intelligent to design to
choice but at any time there may be a return of information to a prior phase. This decision
model is a simplified representation or abstraction of reality. The benefits of modeling in
decision making are as follows:

Cost of virtual experimentation is much lower

Simulated compression of time
Manipulating the model by changing variables is much easier
Cost of making mistake during experiment is much lower
Deals better with uncertainty and risk allows the analysis and comparison of a very
large number of possible alternative solutions.
Enhance reinforced learning

Decision making activities:

Structured decision( for routine and repetitive problems)
Unstructured decision (for problem having a lot of uncertainty)
Semi structured decision (falls between the two mentioned above)
Decision Support System (DSS)
Combined model and data to solve semi structure and unstructured problem with intensive
user involvement. It is an approach or philosophy rather than a precise methodology.
Characteristics of DSS:

Makes a system flexible and adaptable to changing condition and to the varying
requirement of different decision making situation
It allows user to enter their own data and to view how system will behave under
varying circumstances
It provide better understanding of sensitivity analysis model

Benefits of DSS:
1. Examine numerous alternative very quickly
2. Support forecasting
3. Provide a systematic risk analysis

4. Be integrated with communication system and databases

5. Support group work
Components of DSS:
1.
2.
3.
4.
5.

Database (contain data from multiple sources)

Model Base (contain completed models and sets of rule)
User Interface (covers all aspects of the communication between a user and the DSS)
User (the decision maker)
Knowledge base (provide the expertise to solve some part of the problem)

The DSS components are all softwares, they run on standard hardware and they can be
facilitated by additional software. One of the most popular tools for decision support is
simulation.
GDSS (Group DSS) is an interactive computer based system that facilitates the solution of
semi structure and unstructured problems when made by a group of decision maker by
concentrating on the process and procedure.
Automated Decision Support (ADS)
These systems are rule based system that automatically provides solution to repetitive
managerial problems. ADSs are closely related to BI and business analytics.

Business analytic models may be used to create and operate the business rules
Business rule can be used to trigger the automatic decision in BI application

Characteristics and Benefits of ADS:

Rapidly business rules to automate decision makers and deploy them into almost any
operating environment
Inject predictive analytics into rule based application
Combined business rules, predictive models and optimization strategy

ADS Application:
1.
2.
3.
4.
5.
6.
7.
8.

Product or service customization

Yield or price optimization
Routing or segmentation decision
Corporate regulatory compliance and fraud detection
Dynamic forecasting and SCM
Operational control
Customer selection ,loyalty and service
Human Capital
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