This article originally appeared on the BeyeNETWORK.
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On a seminar tour recently, the question arose: What are the motivating factors for building a data warehouse?
It is simply true that undertaking a data warehouse is no small effort. There is the cost of hardware. There is the cost of software. There are the consulting and development costs. There are disruptions to the organization. There is thebusiness intelligence software. An organization has to really want to build the data warehouse. Data warehouses just do not happen accidentally or magically.
So what is it that drives an organization to build a data warehouse?
The first driving factor is competition. When a data warehouse is built properly, the organization is in a position to:
- Look at information on a flexible basis,
- Look at in formation quickly, and
- Look at information inexpensively.
There are many ways that this advantage in information translates to a competitive advantage. Some of the ways are:
Running the operation more efficiently. With good information, the day-to-day costs of operations can be trimmed to a minimum.
Market share. With good information, the organization can start to bond with the customer, forming a personal relationship. This results in customer loyalty, which in turn results in protected market share.
Sensitivity to competition. With good information, the organization can quickly become aware of the intrusion of new products and new forms of competition. Without good information, the organization must find out about marketplace success of the competition the hard way – by losing money and market share.
Pricing. With good information systems, price sensitivity can be detected. The point at which consumers become skittish about a product becomes obvious.
Packaging. With good information systems, the organization can gather information about which forms of packaging are the most effective.
These are just the most obvious ways in which good information systems enhance the ability of the organization to run leaner and meaner, protect its own market share and start to encroach on the market share of a competitor, but there are other motivations for the building of a data warehouse. These other motivations may be considered to be mutant variations of the first form discovered.
One of the other motivations for the building of a data warehouse is that of allowing the organization to operate on a basis of solid information. Sometimes, an organization is said to be running its business by spreadsheet (this is a derogatory term, although it may not appear to be so to the uninitiated). Accounting, finance, sales, marketing and engineering each have their own spreadsheets. And no spreadsheet has any resemblance to any other spreadsheet.
When there is management by spreadsheet, finance thinks the company is heading for bankruptcy. Sales thinks the company is prospering. Accounting thinks the company is breaking even. Not only is there no agreement as to what is happening in the company, there is no rational way to reconcile the many different opinions. Management can get away with making decisions by spreadsheet for only so long. At some point, it is predictable that bad decisions will be made based on blatantly incorrect data.
It is the data warehouse that provides the foundation for making consistent and sound decisions all around the company. When a company tires of management by spreadsheet, it has the motivation to build a data warehouse.
But there are other powerful reasons why building a data warehouse is important to a company. One of those reasons is the speed with which information can be generated. With a data warehouse, data has been gathered and integrated. The hard work has already been done for the analyst. The result is that a data warehouse greatly speeds the rate at which analysis can be done. Organizations that are tired of waiting an interminable amount of time for new analysis have a great motivation for building a data warehouse.
Yet another motivation for the building of a data warehouse is that of the need for storing historical data. When an organization has applications, it is normal to find only a scanty amount of historical corporate data. There is a good reason for this paucity of historical data. That reason is that when the application developer wants to enhance the performance of the application, the developer removes as much unnecessary data as possible. By trimming unneeded data, there is a natural boost to performance. Therefore, it is normal for there to not be much historical data in the applications of the corporation. But there is real value in historical data. It then becomes natural for the historical data to find a home in the data warehouse.
Thus, there are many motivations for building a corporate data warehouse.
Bill Inmon is universally recognized as the father of the data warehouse. He has more than 36 years of database technology management experience and data warehouse design expertise. He has published more than 40 books and 1,000 articles on data warehousing and data management, and his books have been translated into nine languages. He is known globally for his data warehouse development seminars and has been a keynote speaker for many major computing associations.