Why are companies rushing into data warehousing? Why is there a tremendous surge in interest? Data warehousing is no longer a purely novel idea just for research and experimentation. It has become a mainstream phenomenon. True, the data warehouse is not in every doctor’s office yet, but neither is it confined to only high-end businesses. More than half of all U.S. companies and a large percentage of worldwide businesses have made a commitment to data warehousing.
In every industry across the board, from retail chain stores to financial institutions, from manufacturing enterprises to government departments, and from airline companies to utility businesses, data warehousing is revolutionizing the way people perform business analysis and make strategic decisions.
In the 1990s, as businesses grew more complex, corporations spread globally, and competition became fiercer, business executives became desperate for information to stay competitive and improve the bottom line. The operational computer systems did provide information to run the day-to-day operations, but what the executives needed were different kinds of information that could be readily used to make strategic decisions. They wanted to know where to build the next warehouse, which product lines to expand, and which markets they should strengthen. The operational systems, important as they were, could not provide strategic information. Businesses, therefore, were compelled to turn to new ways of getting strategic information.
Over the past two decades, companies have accumulated tons and tons of data about their operations. Mountains of data exist. Information is said to double every 18 months. If we have such huge quantities of data in our organizations, why can’t our executives and managers use this data for making strategic decisions? Lots and lots of information exists. Why then do we talk about an information crisis? Most companies are faced with an information crisis not because of lack of sufficient data, but because the available data is not readily usable for strategic decision making. These large quantities of data are very useful and good for running the business operations, but hardly amenable for use in making decisions about business strategies and objectives.
The fact is that for nearly two decades or more, IT departments have been attempting to
provide information to key personnel in their companies for making strategic decisions.
Sometimes an IT department could produce ad hoc reports from a single application. In
most cases, the reports would need data from multiple systems, requiring the writing of extract programs to create intermediary files that could be used to produce the ad hoc reports.
Most of these attempts by IT in the past ended in failure. The users could not clearly define what they wanted in the first place. Once they saw the first set of reports, they
wanted more data in different formats. The chain continued. This was mainly because of
the very nature of the process of making strategic decisions. Information needed for
strategic decision making has to be available in an interactive manner. The user must be able to query online, get results, and query some more. The information must be in a format suitable for analysis.
What is a basic reason for the failure of all the previous attempts by IT to provide strategic information? What has IT been doing all along? The fundamental reason for the inability to provide strategic information is that we have been trying all along to provide strategic information from the operational systems. These operational systems such as order processing, inventory control, claims processing, outpatient billing, and so on are not designed or intended to provide strategic information. If we need the ability to provide strategic information, we must get the information from altogether different types of systems. Only specially designed decision support systems or informational systems can provide strategic information.
At this stage of our discussion, we now realize that we do need different types of decision support systems to provide strategic information. The type of information needed for strategic decision making is different from that available from operational systems. We need a new type of system environment for the purpose of providing strategic information for analysis, discerning trends, and monitoring performance.
This new system environment that users desperately need to obtain strategic information
happens to be the new paradigm of data warehousing. Enterprises that are building data
warehouses are actually building this new system environment. This new environment is
kept separate from the system environment supporting the day-to-day operations. The data warehouse essentially holds the business intelligence for the enterprise to enable strategic decision making. The data warehouse is the only viable solution. We have clearly seen that solutions based on the data extracted from operational systems are all totally unsatisfactory.
Basically, datawarehouse is a simple concept, it involves different functions: data extraction, the function of loading the data, transforming the data, storing the data, and providing user interfaces.
The end result is the creation of a new computing environment for the purpose of providing the strategic information every enterprise needs desperately. There are several vendor tools available in each of these technologies. You do not have to build your data warehouse from scratch.