Data Warehousing 101 | What are Data Warehouses

A data warehouse is a large, centralized repository of structured, integrated data that is used for reporting and analysis. It is designed to support the efficient querying and analysis of data, and is typically used to support decision making, business intelligence, and other data-driven activities.

Data Warehousing System Typically Includes a Number of Components

• A database or data repository to store the data
• ETL (extract, transform, load) tools to extract data from various sources, transform it into a consistent format, and load it into the data repository
• A query and analysis engine to allow users to access and analyze the data
• A user interface for accessing and interacting with the data

Data warehousing systems are designed to support fast querying and analysis of large amounts of data, and are often used in business, government, and other organizations to support decision making, business intelligence, and other data-driven activities.

Purpose & Benefits of a Data Warehouse

The main purpose of a data warehouse is to support efficient querying and analysis of data for reporting and decision making. A data warehouse integrates data from a variety of sources, such as transactional databases, log files, and external data sources, and stores it in a central repository. This allows users to access and analyze the data using tools like SQL and BI (business intelligence) software.

Data warehouses provide several benefits over traditional transactional databases:

• Performance: Data warehouses are designed to support fast querying and analysis of large amounts of data. They use techniques like indexing, denormalization, and materialized views to optimize query performance.
• Integration: Data warehouses allow you to integrate data from a variety of sources, including transactional databases, log files, and external data sources. This allows you to get a more complete view of your data and answer more complex questions.
• Historical data: Data warehouses store historical data, which allows you to track trends and changes over time. This is important for tasks like performance monitoring, budgeting, and forecasting.
• Data quality: Data warehouses typically enforce strict data quality rules to ensure that the data is accurate, consistent, and complete. This is important for making informed decisions based on the data.
• User accessibility: Data warehouses provide a centralized repository of structured data that can be accessed by multiple users and tools. This makes it easier for users to find and analyze the data they need.
• Data security: Data warehouses often have robust security measures in place to protect sensitive data.

History of Data Warehousing

Data warehouses have a long history dating back to the late 1980s and have evolved significantly over time. Here is a brief timeline of the key developments in the history of data warehouses:

• 1987: Barry Devlin and Paul Murphy develop the concept of a “data warehouse.”
• 1990: Bill Inmon introduces the term “data warehouse” in a conference paper and publishes the book “Building the Data Warehouse.”
• 1991: The first commercial data warehouse product, called Prism, is released by Prism Solutions.
• 1993: Ralph Kimball introduces the concept of a “dimensional data warehouse” in his book “The Data Warehouse Toolkit.”
• 1995: Teradata launches its data warehouse product.
• 1997: The term “business intelligence” is coined.
• 1998: Netezza and Greenplum are founded.
• 2000: The first open-source data warehouse, MySQL, is released.
• 2005: Aster Data is founded.
• 2008: Hadoop is released, enabling the creation of data warehouses on low-cost commodity hardware.

As for the cost-effectiveness of data warehouses, it’s important to note that the cost of a data warehouse depends on a variety of factors, including the size of the data being stored, the complexity of the data model, and the hardware and software used to build and maintain the data warehouse. In general, data warehouses can be quite expensive to set up and maintain, but they can also provide significant value in terms of enabling fast and accurate analysis of large amounts of data. There are also a number of cost-effective options for building and maintaining data warehouses, such as using open-source software and commodity hardware, as well as using cloud-based data warehouse solutions.

How Data Warehouses Work

A data warehouse works by storing large amounts of historical data in a structured format that is optimized for fast querying and analysis. This typically involves organizing the data into tables and columns, and using indices and other techniques to speed up querying.

In a data warehouse, the data is often organized according to a star or snowflake schema, in which a central “fact” table contains the main data, and a number of “dimension” tables contain reference data that is related to the main data. For example, in a sales data warehouse, the fact table might contain sales data such as the date of the sale, the amount of the sale, and the customer who made the purchase, while dimension tables might contain data such as customer demographics, product information, and location data.

To query the data warehouse, users can use a tool such as SQL (Structured Query Language) to issue queries against the data. The data warehouse can then use its indices and other optimization techniques to quickly return the requested data.

Data warehouses can be used for a variety of purposes, including business intelligence, analytics, and reporting. They are particularly useful for analyzing large amounts of data over long periods of time, as they are designed to handle large volumes of data efficiently.

Types of Data Warehouses

There are several types of data warehouses, each with its own set of key features and characteristics. Here is a brief overview of some common types of data warehouses:

1. Enterprise data warehouse (EDW): This type of data warehouse is designed to support the needs of an entire organization. It typically includes data from a wide range of sources, including transactional systems, operational databases, and other data sources. An EDW is typically built using a multi-dimensional data model, such as a star schema, and is optimized for fast querying and analysis.
2. Operational data store (ODS): An ODS is a type of data warehouse that is designed to support the operational needs of an organization. It is typically used to store and manage real-time data from transactional systems, such as point-of-sale systems and customer relationship management (CRM) systems. An ODS is typically updated in near real-time and is used to support operational processes, such as order processing and customer service.
3. Data mart: A data mart is a smaller version of a data warehouse that is designed to support the needs of a specific department or business unit. A data mart typically contains a subset of data from the larger EDW, and is designed to support the specific needs of the department or business unit it serves.
4. Traditional data warehouses: These are the most common type of data warehouses, and are designed to store large amounts of historical data that can be queried and analyzed for business intelligence purposes. Traditional data warehouses typically use a relational database management system (RDBMS) and follow a structured, schema-on-write approach to data storage. Key features include support for structured data, fast query performance, and the ability to handle large volumes of data.
5. Real-time data warehouses: As the name suggests, these data warehouses are designed to store and process data in real-time, enabling users to access the most up-to-date information possible. Real-time data warehouses are often used for applications such as fraud detection, clickstream analysis, and other scenarios where timely access to data is critical. Key features include support for streaming data, low latency, and the ability to handle high volumes of data.
6. Cloud data warehouses: These data warehouses are hosted on a cloud computing platform, such as Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform. Cloud data warehouses offer several advantages, including elastic scalability, reduced IT overhead, and pay-as-you-go pricing. Key features include the ability to scale up or down as needed, support for structured and unstructured data, and integration with other cloud-based tools and services.
7. Big data warehouses: These data warehouses are designed to store and process very large volumes of data, including structured, semi-structured, and unstructured data. Big data warehouses often use non-relational database technologies, such as Hadoop and NoSQL databases, and may use a schema-on-read approach to data storage. Key features include the ability to handle very large volumes of data, support for a wide range of data types, and the ability to process data in parallel.
8. Data lake: A data lake is a large, centralized repository that allows you to store all your structured and unstructured data at any scale. Data lakes use a schema-on-read approach, meaning that the data is not transformed or organized until it is queried. Data lakes are often used in conjunction with big data analytics tools, such as Apache Spark and Apache Hive, to gain insights from large volumes of data. Key features include the ability to store and process large volumes of data in various formats, support for batch and real-time processing, and integration with a wide range of tools and services.

Read more – Data Warehouse vs Data Lake

Components of a Data Warehouse

A data warehouse typically has the following five components:

1. Data sources: Data warehouses collect and store data from a wide range of sources, including transactional systems, operational databases, log files, and external data sources.
2. ETL processes: ETL (extract, transform, load) processes are used to extract data from the various data sources, transform it into a format that is suitable for analysis and reporting, and load it into the data warehouse.
3. Data storage: A data warehouse stores the collected and transformed data in a central repository, typically using a database management system (DBMS) designed for fast querying and analysis.
4. Data modeling: The data in a data warehouse is typically organized using a data model, such as a star schema or a snowflake schema, which defines the relationships between the data and how it is organized.
5. Reporting and analysis tools: Data warehouses provide a range of tools and interfaces for reporting and analysis, including SQL-based querying tools, business intelligence (BI) software, and visualization tools. These tools allow users to perform complex analysis, create reports and dashboards, and explore the data in the data warehouse.

Data Warehouse Architecture

There are several different architectures for data warehouses, including:

1. Top-down or Inmon architecture: This is a traditional approach to data warehousing, which involves centralizing data from multiple sources into a single, unified repository. It emphasizes the importance of a well-designed data model and the use of a staging area to clean and transform data before it is loaded into the warehouse. Top-down architecture involves starting with the overall business goals and working down to the specific data and technical details. This approach allows for a clear understanding of the business needs and ensures that the data warehouse is aligned with the business strategy. However, it can be more time-consuming and may require a larger upfront investment. The Inmon approach emphasizes a top-down, enterprise-wide design and the creation of a “corporate information factory”.
2. Bottom-up or Kimball architecture: Bottom-up architecture involves starting with the existing data sources and working up to the overall business goals. This approach is usually faster and cheaper, as it builds on existing systems and infrastructure. This approach, developed by Ralph Kimball, emphasizes the importance of building a data warehouse that is optimized for querying and reporting. The Kimball approach emphasizes an iterative, bottom-up design process and the creation of “dimensional” data models for faster query performance. However, it may not be as well-aligned with the overall business strategy and may not fully meet the business’s needs.
3. Hybrid architecture: This approach combines elements of both Inmon and Kimball architectures, and is often used when an organization has a mix of transactional and analytical data requirements. It combines elements of top-down and bottom-up approaches. It starts with an understanding of the business goals, but also takes into account the existing data sources and infrastructure. This can provide a good balance between speed and cost on one hand, and alignment with business goals on the other.

Ultimately, the choice of data warehouse architecture will depend on the specific needs and constraints of your organization. It is important to carefully consider your business goals and the trade-offs involved in each approach before making a decision.

Also, read:

Best Practices for Data Warehousing

Five best practices for data warehousing:

1. Use a data governance strategy to ensure the quality and integrity of the data in the data warehouse. This can include processes for data cleansing, data quality checks, and data lineage tracking.
2. Use a data lifecycle management strategy to ensure that data is retained in the data warehouse for as long as it is needed, and then purged when it is no longer needed. This can help reduce the overall size of the data warehouse and improve performance.
3. Use security controls to protect the data in the data warehouse. This can include access controls, encryption, and other measures to prevent unauthorized access to the data.
4. Monitor the performance of the data warehouse and tune it as needed. This can include regular performance tests, index optimization, and other techniques to ensure that the data warehouse is running efficiently.
5. Use data visualization tools to help business users understand and work with the data in the data warehouse. This can make it easier for them to find insights and make data-driven decisions.

Five Tips for Effective Data Modeling and ETL Design in a Data Warehouse:

1. Start with a clear understanding of the business requirements for the data warehouse. This will help you design a schema that meets the needs of the business users.
2. Use a dimensional modeling approach for the data warehouse schema. This will make it easier for business users to understand and work with the data.
3. Use a staging area to temporarily store data during the ETL process. This can help ensure the integrity of the data as it is being loaded into the data warehouse.
4. Use incremental updates to load data into the data warehouse. This will help reduce the overall load time and make it easier to handle updates to the data.
5. Use data cleansing and transformation techniques to ensure the quality and consistency of the data being loaded into the data warehouse.

Five Strategies for Optimizing Data Warehouse Performance and Scalability:

1. Use a columnar database to store the data warehouse. This can improve query performance by only reading the columns needed for a particular query.
2. Use a data warehouse appliance or a cloud-based data warehouse to handle the complex querying and analysis required by the data warehouse.
3. Use data compression to reduce the amount of storage required for the data warehouse.
4. Use partitioning to divide the data into smaller, more manageable chunks. This can help improve query performance and make it easier to load and maintain the data warehouse.
5. Use denormalization to reduce the number of joins required in queries. This can improve query performance, but it can also make the data more difficult to update.

Data Warehousing in the Cloud

Cloud-based data warehouses can offer several benefits over on-premises solutions, including:

1. Scalability: Cloud-based data warehouses can scale up or down as needed, allowing for more flexible resource allocation and cost optimization.
2. Cost: Cloud-based data warehouses can be more cost-effective than on-premises solutions, as they eliminate the need for expensive hardware and maintenance.
3. Performance: Cloud-based data warehouses can offer faster query processing and data loading speeds due to their distributed architecture and the use of columnar storage.
4. Maintenance: Cloud-based data warehouses are maintained by the provider, which means that you don’t have to worry about software updates or hardware maintenance.

Some potential drawbacks of using cloud-based data warehouses include:

1. Security: Some users may be concerned about the security of their data in the cloud. However, reputable cloud providers have robust security measures in place to protect customer data.
2. Internet connectivity: Cloud-based data warehouses require an internet connection, which could be a problem for organizations with limited or unreliable internet access.
3. Lock-in: Cloud-based data warehouses can be difficult to migrate away from, as they often use proprietary APIs and data formats.

There are several cloud platforms that offer data warehousing services, including Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP).

• AWS offers a number of data warehousing solutions, including Amazon Redshift, which is a fully managed data warehouse service that uses columnar storage and parallel query processing to deliver fast query performance.
• Azure offers Azure Synapse, which is a cloud-based data integration and analytics platform that includes a data warehouse. It uses a hybrid architecture that allows users to access data stored in both structured and unstructured formats.
• GCP offers BigQuery, which is a fully managed data warehouse service that uses columnar storage and real-time analytics to deliver fast query performance.

Ultimately, the best cloud platform and service for data warehousing will depend on your specific needs and requirements.

Also, read:

1. Connect your Data Warehouse
2. All you need to know about Google BigQuery
3. Amazon RDS Pros and Cons

Few things to consider when choosing a cloud-based data warehouse:

1. Integration with other tools and services: Consider whether the data warehouse integrates with other tools and services that you use, such as ETL (extract, transform, load) tools or BI (business intelligence) platforms.
2. Ease of use: Some data warehouses may require a steep learning curve or specialized skills to set up and use, while others may be more user-friendly.
3. Support and documentation: Look for a data warehouse that offers good documentation and support resources, in case you run into any issues.
4. Pricing: Compare the pricing models of different data warehouses to determine which one offers the best value for your needs. Some data warehouses charge based on the amount of data stored, while others charge based on the number of queries run or the amount of compute resources used.
5. Use cases: Consider whether the data warehouse is a good fit for your specific use case. For example, if you need to perform real-time analytics, you may want to look for a data warehouse that offers in-memory processing or streaming capabilities.

Real-time Data Warehousing

Real-time data warehousing refers to the ability to process and analyze data as it is being generated, rather than batch-processing data on a periodic basis. This can be useful in scenarios where timely insights are critical, such as in fraud detection or customer behavior analysis.

There are several challenges and limitations to consider when implementing real-time data warehousing:

1. Data volume and velocity: Real-time data warehousing requires the ability to handle large volumes of data being generated at high speeds. This can be a challenge for traditional data warehouses, which may not be designed to handle such high levels of data ingestion.
2. Complexity: Real-time data warehousing involves multiple steps, including data ingestion, transformation, and analysis. These steps need to be coordinated and optimized in order to achieve low latency and high performance.
3. Infrastructure: Real-time data warehousing requires specialized infrastructure, such as in-memory databases or streaming platforms, which can be complex to set up and maintain.
4. Cost: Real-time data warehousing can be expensive, as it requires specialized infrastructure and often involves high levels of data processing and storage.

There are several strategies that organizations can use to achieve real-time analytics capabilities:

1. Use a real-time data warehouse: Some data warehouses, such as Amazon Redshift or Google BigQuery, offer real-time analytics capabilities through the use of in-memory processing or streaming.
2. Use a streaming platform: Streaming platforms, such as Apache Kafka or Amazon Kinesis, can be used to ingest and process data in real-time, and then feed the results into a data warehouse or analytics platform.
3. Use a hybrid approach: A hybrid approach combines batch and real-time processing, allowing organizations to ingest data in real-time and then perform batch-based analysis at a later time. This can be a more cost-effective option for organizations that don’t need to perform real-time analysis on all their data.
4. Use a combination of specialized and general-purpose tools: Some organizations may use specialized real-time analytics tools for specific use cases, such as fraud detection, while using more general-purpose tools for other types of analysis.

Ultimately, the best approach for achieving real-time analytics will depend on your specific needs and requirements.

Choosing the Best Data Warehouse

There are several popular data warehouses that are widely used in the industry today. These include Amazon Redshift, Google BigQuery, Snowflake, and Microsoft Azure Synapse Analytics (formerly SQL Data Warehouse). Here is a comparison of some key features of these data warehouses:

• Scalability: All of these data warehouses are designed to handle very large amounts of data and can scale up or down as needed. Redshift and BigQuery use a columnar storage model, which is particularly efficient for querying large datasets, while Snowflake and Synapse use a hybrid row-columnar storage model.
• Performance: Redshift and BigQuery are both known for their fast query performance, especially on large datasets. Snowflake and Synapse are also fast, but may not be as fast as Redshift and BigQuery on very large datasets.
• Ease of use: All of these data warehouses offer a SQL-based query interface, which makes them relatively easy to use for analysts and data scientists with SQL experience. Redshift, BigQuery, and Snowflake also offer a web-based console for running queries and managing the data warehouse.
• Integrations: Redshift, BigQuery, and Snowflake all offer a range of integrations with other tools and services, such as data visualization tools, ETL (extract, transform, load) tools, and data lakes. Synapse also offers a range of integrations, including integration with Azure services.
• Pricing: The pricing for these data warehouses varies depending on the specific features and resources you need. Redshift and Synapse offer a pay-per-use pricing model, while BigQuery and Snowflake offer a pay-per-query pricing model. It’s important to carefully evaluate the pricing for each data warehouse to determine which one is the most cost-effective for your needs.
• Data ingestion: All of these data warehouses support batch data ingestion, but they differ in terms of their support for streaming data ingestion. Redshift, BigQuery, and Synapse all support streaming data ingestion, while Snowflake does not.
• Data modeling: Redshift, BigQuery, and Snowflake all use a fully-managed columnar storage model, which means that the data warehouse handles data modeling and optimization tasks automatically. Synapse offers a choice between a fully-managed columnar storage model and a customizable row-columnar model, which allows for more fine-grained control over data modeling and optimization.
• Data security: All of these data warehouses offer a range of security features, including encryption at rest and in transit, authentication, and access control. Redshift, BigQuery, and Synapse are all compliant with various industry standards and regulations, such as HIPAA, PCI DSS, and GDPR.
• Geographic availability: The availability of these data warehouses varies by region. Redshift, BigQuery, and Snowflake are available in multiple regions around the world, while Synapse is currently only available in a limited number of regions.

Key Steps in Data Warehouse Implementation

Seven key steps in implementing a data warehouse, along with some of the deliverables for each step:

1. Planning and requirement gathering: This involves identifying the business needs and goals for the data warehouse, as well as the data sources that will be used. Deliverables for this step may include a project charter, a business case, and a requirements document.
2. Design and architecture: This involves designing the overall structure and architecture of the data warehouse, including the hardware and software components that will be used. Deliverables for this step may include a high-level design document and a detailed technical design.
3. ETL (extract, transform, and load) development: This involves creating the processes for extracting data from the various sources, transforming it into a format that can be loaded into the data warehouse, and loading it into the warehouse. Deliverables for this step may include ETL scripts, data mapping documents, and test plans.
4. Data modeling: This involves designing the structure of the data within the data warehouse, including the tables, columns, and relationships between the data. Deliverables for this step may include data models and schema diagrams.
5. Testing: This involves testing the data warehouse to ensure that it is functioning correctly and meets the requirements. Deliverables for this step may include test results and bug reports.
6. Deployment: This involves installing and setting up the data warehouse in a production environment. Deliverables for this step may include installation and configuration instructions.
7. Maintenance: This involves ongoing support and maintenance of the data warehouse, including the addition of new data sources, the modification of existing data structures, and the implementation of security measures. Deliverables for this step may include maintenance plans and documentation.

Use-Cases of Data Warehousing across Industries

Here are a few examples of how data warehouses are used to solve business problems across industries:

1. Retail: A retail company might use a data warehouse to analyze customer purchase history and trends, inventory levels, and sales data to optimize pricing, identify new product opportunities, and improve customer service.
2. Healthcare: A healthcare organization might use a data warehouse to analyze patient medical records, claims data, and population health data to improve patient outcomes, reduce costs, and drive efficiencies.
3. Finance: A financial institution might use a data warehouse to analyze market trends, customer behavior, and internal operations data to identify new business opportunities, optimize risk management, and improve decision-making.
4. Manufacturing: A manufacturing company might use a data warehouse to analyze production data, supply chain data, and quality control data to improve efficiency, reduce waste, and drive continuous improvement.
5. Government: A government agency might use a data warehouse to analyze data from various sources such as census data, tax data, and public records to improve policy-making, deliver better services, and increase transparency.
6. Telecommunications: A telecommunications company might use a data warehouse to analyze call data records, internet usage data, and customer data to improve network performance, optimize pricing, and personalize marketing campaigns.
7. Transportation: A transportation company might use a data warehouse to analyze data from GPS devices, sensor data, and maintenance records to improve fleet management, optimize routes, and reduce costs.
8. Online advertising: An online advertising company might use a data warehouse to analyze data on user behavior, website traffic, and ad performance to optimize ad targeting, improve campaign performance, and inform product development.
9. Education: An educational institution might use a data warehouse to analyze student data, course data, and teacher data to improve student outcomes, identify trends, and inform decision-making.
10. Real estate: A real estate company might use a data warehouse to analyze data on property listings, sales data, and market trends to optimize pricing, identify new business opportunities, and inform investment decisions.

These are just a few examples of how data warehouses are used to solve business problems across a variety of industries. The specific business problems that a data warehouse can help to solve will depend on the nature of the industry and the data available.

When should a Business Consider a Data Warehouse

A business should consider a data warehouse when it wants to set up a data function or has outgrown its current data management systems and needs a more powerful solution for storing and analyzing data. This might be the case if the business is struggling with point solutions that are unable to provide a holistic view of profitability, or if it lacks visibility into the return on investment (ROI) of its marketing efforts.

For example, in the case of an eCommerce business, there are several factors that might indicate a need for a data warehouse:

• The business has a large volume of data that is growing rapidly, and its current systems are unable to handle the scale and complexity of the data.
• The business has multiple data sources, such as customer data, sales data, and marketing data, and needs a way to bring this data together in a single, centralized repository. Read more – eCommerce data connectors
• The business has complex data analysis requirements, such as the need to perform sophisticated analyses on customer behavior or marketing campaign performance.
• The business needs to be able to access and analyze data in real-time, in order to make quick, informed decisions about its operations.

Overall, if an eCommerce business is looking to set up the right foundation for its data function and needs a more comprehensive, flexible, and scalable solution for managing and analyzing data, a data warehouse may be the right choice.

Conclusion

A data warehouse can indeed be a valuable asset for an organization as it provides a centralized repository of data that can be used for reporting and advanced analytics. It can help ensure data ownership, enable access to historical data, and serve as the foundation for building a robust data and analytics infrastructure. A cloud data pipeline and managed data service, such as the one offered by Saras Analytics, can help an organization set up and maintain a data warehouse, as well as handle other aspects of data management and analytics.