What Is a Database?
A database, in the most general sense, is an organized collection of data. More specifically, a database is an electronic system that allows data to be easily accessed, manipulated and updated.
In other words, a database is used by an organization as an electronic way to store, manage and retrieve information. The database is one of the cornerstones of enterprise IT, and its ability to organize, process and manage information in a structured and controlled manner is the key to many aspects of modern business efficiency.
However, databases go way beyond simply storing data. As we’ll see later, the inherent logic and efficiency in how the data is stored and retrieved can provide an incredibly powerful business tool to an organization. This is especially true when databases are properly exploited for their reporting and business intelligence capabilities.
The Use and Importance of Databases in Today’s World
So what kinds of organization requires a database and can benefit from its use? Well, the short answer is any business or organization that needs to keep track of large numbers of customers or products. By "large" we mean more than can be stored by a human brain - a lot more.
At this point, a skeptic might still argue that there are countless mom-and-pop stores whose owners keep track of inventory and profit/ loss using the trusty ledger and calculator, and are doing OK. That’s true, but the use of an electronic database can still pay off, even for very small businesses. For instance, a ledger cannot run a simulation to extrapolate profits if say, the shop were to increase the price of ballpoint pens by 2 cents. A database can do that. The ledger cannot run a report tracking down re-order levels for all items to show the store owner which items should be restocked at what times during the year. A database can do that too. A database can even automatically alert the business owner via email or text message.
The most significant benefit of databases, however, is still limited to large organizations with customers and products numbering in the hundreds of thousands, millions, or tens of millions, and the need to store large numbers of individual data items for customers. For instance, a commercial bank needs the personal details of all of its millions of customers, such as name, date of birth, address, Social Security number, etc. Each customer in turn spawns another collection of data depending on the products he or she has signed up for, such as account type, account number, account balance, mortgage amount, credit card loan, repayment period and so on. A third collection of data relates to the customer’s specific transactions, such as the time of transaction, amount, balance left, bank charges, loan amount left to repay, etc.
Clearly, a single customer can generate a huge amount of data in a very short time. Multiply this by millions of customers, and it’s easy to see why having an efficient data storage and retrieval medium is not only a good idea, but is also absolutely essential in preventing the bank’s operations from grinding to a halt.
But wait. Organizations managed just fine before the advent of computers and these new-fangled databases, didn’t they? Sure. But if you’re not unconvinced of the power of databases based on the ability to increase efficiency and transaction speed, consider this: Your competitors will be more efficient and offer better service than you do as a result of their use of database systems.
Commercial banks are a prime example of the use of databases in today’s organizations. Other industries whose operations are heavily reliant on databases are insurance companies, hospitals and health care, schools and colleges, manufacturing, telecommunications companies, and hotels and the hospitality industry.
Databases are indeed what the term says - the base or pool of (related) data upon which an organization’s data systems should be built. Indeed, it is not a stretch to say that without databases, the computer in the workplace would be little more than a more efficient typewriter!