Lesson 2: Benefits of Data Warehousing

Companies build warehouses to help them make decisions and can use the information in a warehouse to spot trends, buying patterns, and relationships. Once a company builds a warehouse, company leaders have a consistent source for enterprisewide data that allows for fast answers to queries. The analysis phase of building a data warehouse might uncover previously unknown business intelligence that allows for better decisions. In this lesson, you will examine some of the benefits of data warehousing.

After this lesson, you will be able to:

• Describe some of the benefits of creating a data warehouse
• Describe some of the reasons to create a data warehouse

Estimated lesson time: 20 minutes

Why would companies go to the expense to create a warehouse? First and foremost, building a data warehouse can give companies a strategic advantage over their competition. This advantage can come from several sources:

• The ability to access enterprisewide data
• The ability to have consistent data
• The ability to perform analysis quickly
• Recognition of redundancy of effort
• Discovery of gaps in business knowledge or business processes
• Decreased administration costs
• Empowering all members of an enterprise by providing them with information necessary to perform effectively

The Ability to Access Enterprisewide Data

In many companies, collecting data from different departments can be a major challenge. Often, the information systems used by each department in an organization are chosen based on departments specific and immediate business needs. As a result, data can be isolated in various departmental systems that may be incompatible with each other, such as midrange and mainframe databases, LAN-based applications, and even spreadsheets and word processing files. The process of data warehousing provides significant benefits to companies that have these departmental systems. A warehouse moves all this data from heterogeneous sources to a central location. This practice allows the company, perhaps for the first time, to access all relevant business data. Data warehousing provides the benefits of a comprehensive enterprisewide information system without the expense, and it allows organizations to keep mature and effective departmental solutions in place.

The Ability to Have Consistent Data

Part of the process of moving data from various departments into a central warehouse is making it consistent. It is difficult to make decisions when data from one department cannot be compared with data from other departments; data is useful only if it is internally consistent. A data warehouse is the best way to source data marts and ensure consistency among them.

The Ability to Perform Analysis Quickly

After data is in the warehouse and is internally consistent, you can query it to perform analysis. This analysis usually means rearranging the data and performing data mining to look for trends that were previously unknown. Data warehouses help people better understand individual markets and see larger, widespread trends.

Recognition of Redundancy of Effort

By analyzing the different systems that will provide base data for a data warehouse, you can discover duplicate effort within an organization. For example, perhaps both the sales and inventory departments are maintaining a master parts list. Such duplicate effort is expensive, inefficient, and prone to error. Eliminating this redundancy contributes to profitability.

Discovery of Gaps in Business Knowledge or Business Processes

If after you have set up a data warehouse, it turns out that the necessary data is not being collected by any of the business processes, one of those processes can be modified to ensure that important business information is being collected. Gathering customer data is an excellent way to improve business. For example, using specific customer data with targeted promotions or special pricing for preferred customers can drive additional sales.

Decreased Administration Costs

It is difficult to engineer a system that is extremely good at both transaction processing and reporting and analysis. Systems that are intended to handle both operational and analytical processing must be balanced between these contrary objectives. Balancing them requires rigorous maintenance and constant monitoring. Further, the systems cannot be configured to favor the needs of either environment because the needs of the two environments are contradictory. Having separate systems that are biased to each environment actually simplifies the administrative tasks, thereby reducing administration costs overall.

Empowering Members of an Enterprise by Providing Them with Information

Often the best people to suggest improvements are the people closest to a given business process. Ironically, it is often those individuals who have the least access to information. Empowering the users to analyze data in ways that are meaningful to them allows them to discover new opportunities.

Lesson Summary

One of the best ways for an organization to achieve a competitive advantage is to use business knowledge more effectively. Data warehousing supports that objective by providing quick and easy access to consistent, enterprisewide data. Analysis of the data in the warehouse can provide benefits such as recognition of redundancy of effort and discovery of gaps in business knowledge or business processes, and it can empower members of an enterprise by providing them with information necessary to perform more effectively. With systems specialized in data warehousing, there can be decreased administration costs.