What is a Data Warehouse?
A data warehouse is a computer system designed to give
business decision makers instant access to information.
The warehouse copies its data from existing systems
like order entry, general ledger, human resources and
stores it for use by executives rather than programmers.
Data warehouse users use special software that allows
them to create and access information when they need
it, as opposed to a reporting schedule defined by the
information systems (IS) department.
What are the business benefits of data warehousing?
Immediate information delivery
Data warehouses shrink the length of time it takes
between when business events occurrence and executive
alert. For example, in many corporations, sales reports
are printed once a month - about a week after the end
of each month. Thus, the June sales reports are delivered
during the first week in July. Using a warehouse, those
same reports are available on a daily basis. Given this
data delivery time compression, business decision makers
can exploit opportunities that they would otherwise
miss.
Data integration from across,
and even outside, the organization
To provide a complete picture, warehouses typically
combine data from multiple sources such as a company's
order entry and warranty systems. Thus, with a warehouse,
it may be possible to track all interactions a company
has with each customer - from that customer's first
inquiry, through the terms of their purchase all the
way through any warranty or service interactions. This
makes it possible for managers to have answers to questions
like, "Is there a correlation between where a customer
buys our product and the amount typically spent in supporting
that customer?"
Future vision from historical
trends
Effective business analysis frequently includes trend
and seasonality analysis. To support this, warehouses
typically contain multiple years of data.
Tools for looking at data in
new ways
Instead of paper reports, warehouses give users tools
for looking at data differently. They also allow those
users to manipulate their data. There are times when
a color coded map speaks volumes over a simple paper
report. An interactive table that allows the user to
drill down into detail data with the click of a mouse
can answer questions that might take months to answer
in a traditional system.
Freedom from IS department resource
limitations
One of the problems with computer systems is that they
usually require computer experts to use them. When a
report is needed, the requesting manager calls the IS
department. IS then assigns a programmer to write a
program to produce the report. The report can be created
in a few days or, in extreme cases, in over a year.
With a warehouse, users create most of their reports
themselves. Thus, if a manager needs a report for a
meeting in half an hour, they, or their assistant, can
create that report in a matter of minutes.
What can we do with a warehouse that we can't do
today?
Organizations turn to warehouses to answer a limitless
variety of questions and in almost all fields. Data
warehouse applications include:
Sales Analysis |
- Determine "moment in time"
product sales to make vital pricing and
distribution decisions
- Analyze past product sales to determine
success or failure attributes
- Evaluate successful products and determine
key success factors
- Use corporate data to understand the
margin as well as the revenue implications
of a decision
- Rapidly identify a preferred customer
profile based on revenue and margin
- Quickly isolate past preferred customers
who no longer buy
- Identify daily where product is in
the manufacturing and distribution pipeline
- Instantly determine which salespeople
are performing, on both a revenue and
margin basis, and which are behind
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Financial
Analysis |
- Compare actual expenses to budgets on
an annual, monthly and month-to-date basis
- Review past cash flow trends and forecast
future needs
- Identify and analyze key expense generators
Instantly generate a current set of key
financial ratios and indicators
- Receive near-real-time, interactive
financial statements
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Human Resource
Analysis |
- Evaluate trends in benefit program use
- Identify the wage and benefits costs
to determine company-wide variation
- Review compliance levels for EEOC and
other regulated activities
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Other Areas |
- Warehouses have also been applied to
areas such as: logistics, inventory, purchasing,
detailed transaction analysis and load
balancing.
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How can you estimate the ROI of a warehouse?
Many companies make the mistake of trying to put a value
on their data warehouse. The truth is the value of the
warehouse stems from the new and changed business processes
that it enables. Thus, in developing a warehouse it
is extremely important to envision who is going to use
the warehouse, how they will use it and why using it
will improve upon the current process. It is not unusual
for well considered and designed warehouses to generate
first year ROIs of 100 to 400 percent. The value of
the the new business processes can be determined by
comparing the costs with the expected benefits.
Costs |
Costs include
items like: |
- Hardware, software, development personnel and consultant costs
- Operational costs like ongoing systems maintenance
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Benefits
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Benefits typically
fall into two categories, new revenue and
reduced costs
Added Revenue |
- Hardware, software, development personnel
and consultant costs
- Operational costs like ongoing systems
maintenance
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Reduced costs |
- What costs of current systems will be
eliminated?
- Is the new process intended to make
some operation more efficient? If so,
how and what is the dollar value?
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What can't a warehouse do?
What can't a warehouse do? Warehouses gather and report
data that already exists. Therefore, a warehouse cannot
create more data. If a company wishes to analyze its
customers by zip code but addresses are not captured
by the company's systems, a warehouse will not solve
the problem unless some method is found to gather this
address data. In addition, if a company's data is 'dirty'
in that current systems are not recording the correct
information or optional fields, the warehouse will not
correct that data. The warehouse is useful in identifying
where data problems exist but corrections to those problems
must be made in the systems that capture the data.
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