Importance of Database in Business Administration - Essay Example

Importance of database in business administration Executive Summary Business administration becomes a complex task when activities are multifaceted and widespread. To coordinate and manage all business activities suitably, it is essential for organizations to develop suitable database systems which record all business related information in a meaningful manner. Such information is later on utilized by managers to take important business decisions and to control business activities. Databases are particularly used for formulating reports and communicating the same to external stakeholders. The current research paper is an effort towards understanding how databases facilitate organizational management and administrations. A brief summary regarding the evolution of database in the commercial world has been included. Additionally, the use of databases and their contributions towards managing information has been analyzed. Table of Contents Introduction 4 Background 5 Literature review  6 Discussion 9 Meeting market needs 9 Predictive tools 10 Developing business intelligence 12 Access and relationships 13 Conclusion 13 Reference List 15 Introduction Modern day organizations irrespective of their type, size and nature of activities, depend heavily upon databases for managing the day to day information transmission needs. Accurate data recording and updating is crucial in achieving organizational success. Databases are largely maintained in organizations for tracking sales, movement of materials, maintaining invoices and accounting reports. Computerized networks and systems are essential for preparation and maintenance of databases (Watson and Hewett, 2006). Databases not only facilitate information storage but also assist in promoting the relationships that exists between employees, mangers and other external factors. Organizational databases are developed and maintained in a manner such that all related parties of the business can access it at any given time. Databases form an important source of information for taking managerial decision making. The manner in which an organization stores information determines how quickly they are able to perform tasks, provide information to clients and consumers and provide directions to employees. The most common types of databases which organizations use are Oracle, Microsoft Access, SQL, Paradox and DB2. The type of database an organization selects to maintain depends upon its requirements and nature of data (Hoffer, 2004). Broadly, databases can be of two types: desktop and server based database. Desktop databases are mainly related to single user applications. Server databases are based on multi user applications and are based on mechanisms which promote reliability and data consistency. Such databases require high performance servers and speedy network access. Hence they are priced more as compared with the desktop databases. Organizations must assess their overall information needs and accordingly select a proper database management system. Organizational administration and management of activities crucially depends on the type of database which is selected (Benoit, 2005). It facilitates in providing timely directions to employees and establishment communication across the organizational chain. Often organizations recognize the importance of scalable server based database post implementation of the desktop or the server based database. To avoid such difficulties, organizations may consider crucially evaluating the different database management systems and determining which one is most suitable for organizational administration (Lee, Lee and Kang, 2005). While selecting a database for organizational administration, it is essential to consider the tasks and decisions for which the system would be used. Hence, managers are required to consider aspects such as users of the database management system being implemented for, how often would they be modified, the type of IT support that would be provided to the database, hardware availability, individuals present for maintenance of the database, access points offered and security provided to the database. Complex organizational information management and administration essential may require databases such as Oracle or SQL. The current paper mainly evaluates how organizations make use of different databases for maintaining sound organizational performance and transmission of information. Hence, analysis has been carried out considering the significance of server databases (Coronel, Morris and Rob, 2009). Background Database management concept was developed in the early 1960’s in the U.S. One of the pioneers in the field was Charles Bachman whose initial research works were directed towards the development of a suitable information storage system for organizations (Coronel, Morris and Rob, 2009). With the invention of the database management concept, organizations across the globe began searching for effective ways in which databases could be managed to increase productivity. As economic and commercial activities began conquering new horizons, information procurement and storage became a crucial aspect for most organizations. It can be stated that the complexity of the commercial world had developed the necessity to enhance the information management capabilities of an organization. Until the early 1960’s, database management mainly consisted of magnetic tapes and punched cards (Connolly and Begg, 2005). During the late part of the era, two essential models had arisen namely, CODASYL and the hierarchical model. CODASYL is based on the network model proposed by Bachman, whereas, the hierarchical model was developed by North Americans Rockwell, and later taken up by IBM. The hierarchal model soon became the basis of most organizational activities of IBM (Bongio, et al., 2003). CODASYL and IMS were largely viewed upon as engineering solutions based upon the type of technology available during the era. During the 1970, the concept of relational models began to take shape. The relational models emphasized that a better and a more effective hardware and software technologies are necessitated for enhancing the capabilities of an organization. The first database product for micro computers were PC-/DDOS/MS-DOS and CP/M (Watson, 2008). The late 20th century focussed on the development of distributed database and machines. These discoveries however had little impact upon the market. Another significant discovery of the period was Functional Data Model. The functional data model gained high recognition in respect of fraud detection, genetics and molecular biology. Apart from these, the Functional Data Model could not be of much use. Soon enough in the 1990’s attention was shifted to the object oriented databases (Eisenberger, et al., 2002). This model could handle more intricate data than the relational system. Object oriented database can easily process information related to engineering, software or any other kind of spatial data. Very soon in the 2000’s, the XML databases started becoming popular. The XML database aided removing the differences which existed between data and the document. The XML database was rapidly adopted by commercial organization as it facilitated holding all types of information at one place. Database management systems over the last decade have evolved radically, brining in frequently new systems which facilitate in better organizational management. XML database management facilitates holding all types of data at a single place irrespective of their nature (Bartol and Srivastava, 2002). Literature review  Organizational administration is a complex activity requiring managers to constantly access and evaluates pools of data. An efficient database system facilitates quick access and provides accurate information to managers so that effective decisions can be taken. As per the research work conducted by Choo (2002) in their book “Information management for the intelligent organization: the art of scanning the environment” it is stated that firms are required to develop databases on the basis of the internal and external environment needs. Alternatively Ibarra, Kilduff and Tsai (2005) have stated in that databases in organization are mainly selected on the basis of the nature of information they deal with. Organizations are required to develop and maintain databases in a manner such that a number of users can access the system at the same time (Choo, 2002). Updating databases are also a necessity so that new forms of information can be effectively processed. In order to maintain a proper database, information must be suitably divided into a number of categories, grouped together and stored. Hence, proper policies in respect of processing of data must be implemented so that information can be stored in the database in desired form. Information is commonly stored in the form of texts, number and images (Ibarra, Kilduff and Tsai, 2005). The type of database an organization chooses also depends upon the financial strength of the organization. Server based databases are cost intensive and are mainly implemented in large organizations. Even though such a database in financially heavy upon the firm, they remain successful in providing adequate administrative solutions (Antonioletti, et al., 2005). One of the most significant advantages of the server based solution is that it provides adequate flexibility, as observed by the studies conducted by Jeyaraj, Rottman and Lacity (2006). Managers can store any type of data and access it at any given time. This is facilitated by the application programmer interfaces which enhance customization abilities of the database (Alvesson and Kärreman, 2001). Moreover, most databases can adopt diverse operating systems. The flexibility of the database also depends upon the manner in which the programmers implement different paths. Organizations may choose to prohibit too much flexibility so that crucial information is not accessed by all (Tippins and Sohi, 2003). Managers also may store data in diverse forms to meet differentiated decision making needs. The performance of a database depends upon the hardware platform, speed of the processor, bandwidth connection, and technologies that can prevent fraud. Most server based databases can be run using clustered servers. Modern, large scale organizations have massive data storage requirements. Hence, they are required to be run on multiple servers and shared operating systems (K. C. Laudon and J. Laudon, 2004). The higher the implementation of programmer friendly applications, the greater ease managers finds in regulating activities. Databases must also be flexible enough to be able to modify the scalability factor. However, to be able to manage the scalability aspect, it becomes essential to be able to alter the hardware systems (Witziers, Bosker and Krüger, 2003). Gompers and Lerner (2000) had stated that databases are effective in properly administrating financial transactions and especially maintain records in respect of receivables and payables. Jeyaraj, Rottman and Lacity (2006) have supported such an observation by stating that databases in most multinational organizations are seen to be widely used as a support system for managing data in respect of financial transactions. Administrating organizational activities using a structured database assists in maintaining staff related information, resource utilization data, organizational productivity and past activities related information. Modern large scale and multinational organizations require establishing database systems that can be accessed from any part of the world. Such large scale database management systems also necessitate the implementation of adequate security so that there is no breach of information (Gompers and Lerner, 2000). The information stored in databases not only reflects past activities but also acts as the basis for future processing and developing information output. According to the analysis conducted by Brodersen, et al (2004), real time data communication is also facilitated when the database management is efficient. However it was pointed by Witziers, Bosker and Krüger, (2003) that not all types of database management systems facilitates real time communication. How effectively databases supports communication depends upon the programming steps and the knowledge of the users. Since data storage and transfer can be done easily, distance between organizational subunits does not matter much. As a result, easy communication is possible with structured and controlled access. It can be stated that in many organizations data communication systems became the foundations for developing applications which aid in operational activities. Organizations began developing technologies which are compatible with the database system that they use, so as to achieve better administration (Bertino and Sandhu, 2005). Efficient database management has revolutionized the manner in which business gets conducted across the world. Organizations began to expand as internal systems of control were more firmly established (Thomas, Sussman and Henderson, 2001). Organizational administration which was facilitated through the development of database management led towards proper utilization of resources. Database management in organizational management is particularly used for tracking the process of production and distribution (Lee, et al., 2002). Additionally, the inflow and outflow of cash and other important resources can also be controlled through database management. Mangers, based on the information they obtain from various databases prepare different types of reports and take important decisions related to productivity. Since information transfer occurs through virtual networks, the extent of information sharing and its speed is immense (Brodersen, et al, 2004). This saves much time and cost in organizational administration. Such an advantage could not be procured if there had been no database system that would store information in the first place. Database development has facilitated making business activities more organized and portable (Haustein and Härder, 2004). The various computer hardware equipments and software applications which support the needs of database management have made information storage less space consuming and costly. Also important information can be carried along using virtual networks or compact computer hardware devices. Information resources are extremely vital for organizational administration and database systems have adequately facilitated in meeting the needs of information storage (Alavi and Leidner, 2001). Apart from controlling and storing information regarding production operations and usage of vital resources databases are also used for maintaining employee details, tracking sale and movement of goods from production centre to the hands of consumers and for facilitating quality management. Databases are also used for checking whether planned organizational activities are being implemented properly (Malhotra, 2000). Databases are often equipped with applications and technical systems which track deviations, delays and mismanagement. Accordingly, corrective actions are taken and it is ensured that resources are not wasted. Such timely management of errors and their corrections ensure that quality of work and products are satisfactory. Administrative activities on the basis of databases however, require that employees possess sound knowledge of software applications and their uses (Jeyaraj, Rottman and Lacity, 2006). Training must be provided to both employees and mangers in respect of the manner in which companies use their server databases, maintain records, provide updates and other functions. This increases the cost of hiring as not all employees possess sound knowledge of managing databases. Although installation of databases may provide cost advantages in the long run, at the initial stage they are considered to be cost intensive. For such reasons it is often seen that small firms are unable to take advantage of such systems. Smaller firms may also not possess the technical knowledge which is essential for the management of such server oriented databases (Layne and Lee, 2001). Discussion Meeting market needs Corporate databases play a crucial role especially to meet consumer targets and to deliver timely services. Databases have therefore evolved into becoming key organizational assets which allows coordinating different activities. Organizations which are driven by the vision of meeting deadlines on time and obtaining maximum efficiency give much importance to their databases (Bose, 2004). The customer database is seen to play a special role in administrating the activities related to the marketing department. It is also believed by many institutions that such customer based databases allow them to reshape and redefine their business activities so as to achieve better performance. Such databases not only facilitate recording information but they also facilitate in enhancing communication with customers and clients. The direct interaction with external stakeholders helps in understanding the needs of the target market better. This would provide a greater competitive advantage over those firms who do not possess adequate database or have adopted them lately (Sher and Lee, 2004). Databases also play an important role in organizing the marketing mix strategies. For instance, mangers can use their sales database to understand the reasons behind why certain products are fast moving and those which are not. Accordingly, necessary organizational strategies can be adopted to improve product features and enhance overall sales. Therefore, business organization does not require spending overly on advertisements to induce consumers to buy products. Analyzing the information which is acquired from databases may aid mangers to develop strategies that adequately meet the needs of the market (Coronel, Morris and Rob, 2009). Hence, database management leads to the development of adequate business intelligence saving much finance and other resources. The historical data which organizations procure from databases can be used for developing future strategies. Several segmentation and data modeling efforts lead to better presentation and report making. Databases are also used for maintaining the relationship which organizations have with customers through strategies such as sending emails and automated messages to clients. Administrating the needs of the market therefore becomes easier with the existence of a suitable and well managed database (Haldin-Herrgard, 2000). Predictive tools Data has over the years been successful at replacing human intuition, especially in the context of business. Managers administrate business activities not on the basis of prediction or mere observation, but on the basis actual data. Crucial decisions which determine an organizations future are related to such database. In organizational administration, there are essentially two components of any decisions (Ambler, 2012). The first component is the structured part which depends upon the information which is obtained through various databases. The second component is the unstructured part which is based upon the intuitions and risk taking abilities of mangers. Databases support structured decision making by providing important data in respect of past performances. The database systems which facilitate such decision making are essentially of two types, namely the expert systems and the decision support systems. The expert systems relies less on human interference for producing valid results and recommendations. The system quantifies the data and provides the necessary output when asked. In order to receive accurate results, the data requires to be recorded in suitable formats (Payne and Frow, 2005). However, not all suitable decisions can be taken simply on the basis of the data output provided by the expert system. The information requires to be suitably aligned with other data forms and decisions are taken accordingly. Usually mangers implement the expert system to facilitate employees to procure direction regarding their day to work processes. This removes management interference and supervision for day to day work. A suitable example in respect of the expert system is the Oracle database which has been popular since the early 21st century and widely used in industries (Stair and Reynolds, 2011). Oracle administrators used the database for mining data and filter the same using automated workload depository and metadata applications. Such tools enable predicting and controlling the manner in which resources are used and analyze the same using database management systems. The decision support system unlike the expert system requires human intervention for producing valid results (Obrien, and Marakas, 2005). Hence, the system only provides the required data based on which users can take the necessary decision. Administrating organizational activities using the decisions support system and the expert systems result in taking more logical decisions. These are also important tools for predicting the long term results of different activities. Such systems also establish trends in respect of movement of important resources and facilitate taking a number of strategic policies and plans that leads to enhanced business performance (Attaran, 2004). Developing business intelligence Effective database management supports the managers to utilize resources optimally. Data mining features provided by databases can be cited as an important tool in this respect. Organizations such as, Amazon, depend upon their database to analyze the purchase behavior of consumers and accordingly put forwards options that direct future purchases. This is done by processing the data of customers, extrapolate them and make on point suggestions. Netflix and other web based interfaces also make use of such intelligence provided by databases to predict customer behavior (Ramakrishnan and Gehrke, 2000). Databases are also crucial for managing employee performance. The productivity of employees can be processed to predict future trends and accordingly determine the chances of their leaving the job and the consequences of the same. Resource management and their behavior can be controlled and managed with the support of databases. The trend in respect of data storage and data mining began since the onset of online commerce. Since business did not directly interact with consumers, it became difficult to analyze their association with business and predict future behavior (Zhang, et al., 2001). Hence, companies began to store data in different forms in respect of business clients and customers and accordingly take strategic decisions. Through suitable database implementation, organizations can cleanse and summarize information. Data cleansing refers to removal of errors automatically so that the stored information can be ready to use. Redundancy and carelessness often cause employees to cause errors while providing input for the database. Such errors can be easily removed through various applications. Database cleansing facilitates mangers to refine information and maintain its quality (Connolly and Begg, 2005). Standardization of information is crucial so that decision making becomes simpler. Another crucial role played by databases is facilitating data summarization. Databases may contain a million inputs in respect of a particular aspect such as the total customer or the volume of sales over a given period. Managers cannot waste much time to procure simple information such as the total volume of sales for a given period. Data summarization facilitates grouping of information and presenting the same in a meaningful and to use manner (Davenport and Short, 2003). Access and relationships Database management depends upon the use of programming language for their implementation and successful utilization. Such a program language is known as structured query. Access and updates and removal of information are possible through such structured query (Ceri, Gottlob and Tanca, 2012). Databases are not only accessed by internal organizational members lone. They are also accessed by external groups such as to procure product details from company websites Therefore, programs such as Microsoft SQL server allow outside networks to connect with organizations database and extract necessary details. Such access makes it easy for organizations to reach out to a large number of consumers with minimal administration. Safety of information is guarded with the help of various programs and application. Hence, management supervision in communicating information is not required, easing administrative activities (Alavi and Leidner, 2001). Organizations are required to modify their activities and operating systems from time to time to meet the needs of the market. This makes much of the old data useless. Database facilitates the easy removal of information and updating the same with new information. Traditional information systems do not provide such facilities. Additionally databases also facilitate the establishment of quantified relationships between various factors such as resource utilization and sales. Database supports organization to build and maintain information in a flexible form throughout its lifetime (Maier, 2002). Conclusion Information storage is an area of constant innovation in the modern business environment. Different mechanisms of data storage are often see to provide companies with competitive advantage over other firms, as they provide businesses with unique ways of accessing, processing and utilizing data. Efficient data management systems enable mangers to take quick decisions which facilitate over coming competition. As data size and sections increase with the growing potentials of businesses, the need for innovative data management systems gets developed. The importance of database as an organizational resource has grown immensely. Managers depend upon such database to control and coordinate all business activities. Administrating even the most complicated activities has been simplified. Relational databases apart from information storage also assist in communication. Databases have particularly aided in the growth of business outsourcing. Many developing nations have reaped huge economic benefits through procuring outsourced businesses activities. Outsourcing would have been a distant dream without the establishment of adequate database management tools. Reference List Alavi, M. and Leidner, D. E., 2001. 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