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CHAPTER 1

BUSINESS PROCESSES, DATA MODELING,

AND INFORMATION SYSTEMS

INTRODUCTION

Despite the rapid growth in networks and information technology, many companies today
are still using separate subsystems in their daily operations to support such specialized
functions as marketing information systems, accounting information systems, personnel
information systems, and so forth. When management professionals make decisions based
on information obtained within one functional area, those decisions, which are apt to be
made from a narrow perspective, may not be in the best interest of the company. Given the
current business environment, companies should carefully examine every step in their
business processes and question the necessity of each step. It is critical for companies to
use the power of modern information technology such as enterprise resource planning
(ERP) applications to improve company performance.
The database approach emphasizes the integration and sharing of data across major
functional areas based on the company's business processes. This approach requires a fun-
damental reorientation or shift in business processes, starting with top management and
affecting all employees. That is, the design of an information system is event-driven
according to business processes. The purpose of this chapter is to start from the top and
use data models to describe a company's business processes. Later chapters will use this
business-process-based data modeling approach to assist you in learning how to design a
relational database for a company. After completing this chapter, you should be able to:

• Identify resources, events, and agents (REA) in a data model
• Develop basic data models
• Recognize and evaluate the cardinalities in a data model

• Model a company's business processes using an REA diagram

BUSINESS PROCESSES AND DATA ~ODELING

Data modeling is the process of creating a logical representation of the structure of a
database based on a company's business processes. Data modeling is the most important
task in the development of an effective database that can provide useful information for
decision making. A commonly used business data modeling technique is called the entity-
relationship diagram (ERD). The ERD uses a graphical representation to identify and
document various entities and the relationships between those entities. Three major
components of an ERD are entity, relationship, and attribute. An entity is anything about