A fresh new look at EDW

10 reasons why you need an enterprise data warehouse

T
a

he ability to capture and turn data into useful business

intelligence

in one consolidated enterprise data warehousecan dramatically increase a companys competitiveness and efficiency by enabling it to realize its goals through sound decision-making. Key strategic initiatives such as

customer relationship management, supply chain management, business performance management, business analytics and enterprise resource management all require

single view of corporate data.

You cant accomplish most of the major strategic initiatives out there without

an enterprise data warehouse, says Hugh Watson, professor of MIS and a C. Herman and Mary Virginia Chair of Business Administration at the University of Georgia. It provides the required decision support infrastructure to compete in the marketplace. Examples abound of companies that took commanding leads within their respective industries through enterprise data warehouse

strategies. Wal-Mart imple-

mented a data warehouse years ahead of its competitors to reduce overhead, improve delivery mechanisms and understand its business from top to bottom, explains Dan Linstedt, chief technology officer for Core Integration Partners. Harrahs Entertainment Inc. also beat its competition by establishing a unified brand identity across its properties based on the its enterprise data warehouse. But as Wal-Mart, Harrahs and other

knowledge of customers gleaned from successful companies know, success is

not just a matter of having a single view and the right data analysis tools. There must also be communication and cooperation among all areas of the business. A data warehousing project is something that has to be viewed from both an IT perspective and a business perspective, says Richard D. Hackathorn, president of Bolder Technology, Inc. It has to be a

partnership among the people who understand the

technology and the people who understand the business. No matter which side of that equation you fall on, you must be able to understand the companys strategic goals and overall vision in order to effectively manage any decisionmaking process. To illuminate the many issues facing todays companies and provide sound advice on the topic of enterprise data warehousing, Teradata Magazine contributing writer Joe McKendrick interviewed several industry

thought leaders. What emerged

from those discussions were 10 sound reasons for adopting an enterprise data warehouse strategy. Some might surprise you; others will sound familiar. Either way, our list is sure to enlighten you. Read on.

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Why go EDW?

Get a single view of the business

MANY COMPANIES SIMPLY DONT HAVE A TRULY CONSISTENT VIEW of their businesss basic data points, including who their customers are, what channels are most effective for reaching customers, whats going on in the supply chain and what is the overall profitability of key products. Thanks to the widespread advance of technology in all phases of production and administration, companies often have all the data to answer these questions. However, decision makers often are unable to sort, analyze or extract any value from the information right under their noses. Ive dealt with companies that actually cannot compute the profitability of products they sell, says Herb Edelstein, president of Two Crows Consulting. Thats because some work is done in one country, shipped to another country and sold in another. Each business unit has different markups for overhead and different pricing methods. Add to that such factors as differing currencies and fluctuating rates, and its clear how a fragmented view of the business can hamper a companys ability to realize its long-term goals. Data fragmentation and inconsistency also take their toll in areas beyond profitability analysis, such as the ability to track product movement between various types of systems. A manufacturer generated 16 widgets yesterday, but inventory only accounts for 14 today. What happened there? Did you lose two of them between the manufacturing floor and the warehouse for shipping? asks William McKnight of McKnight Associates, Inc. Those operations are probably managed by two different application systems that are generating numbers valid from each point of view, but certainly not from the enterprise point of view. Enterprise data warehouses provide a This notion of a consolidated repository for the storage of data from multiple source systems across the entersingle view of the prise. Regional sales managers see the same business is a nebulous numbers as the finance department. The call center sees the same customer records concept, but it drives as the stores. Youre not going to have difROI in that you are ferent versions of customer data, different more efficient as an versions of product information or different versions of sales figures, says McKnight. organization. This notion of a single view of the business William McKnight is a nebulous concept, but it drives ROI in that McKnight Associates, Inc. you are more efficient as an organization. To some industry experts, an organization using an enterprise data warehouse is similar to a well-synchronized symphony orchestra. Everyone gets the same sheet of music, says Claudia M. Imhoff, president of Intelligent Solutions, Inc. If we have a particular calculation that is enterprisewide, then everyone looking at it is going to get the exact same number. As with all great

Enterprise data warehouses allow the same copy of data to be reused across applications and end-user groups.

music, each musician may interpret his or her part of the score differently, Imhoff adds. But the final result is still based on the same original source. I can look at a piece of Mozarts music and put my own expression or spin on it. Likewise, I can take numbers from an enterprise data warehouse and apply my own filters, calculations and unique characteristics to it. My results may differ from someone elses, but at least we started from the same set of numbers, and we know how we differ. Many experts see the ability to capture a single view of the business as the most important benefit of an enterprise data warehouse, outweighing all other advantages. Staying alive in your industry is a huge motivation, says Linstedt. If a business doesnt have an enterprise data warehouse then they dont have a complete view of their business and how competitive they are compared to other companies in their market. Colin White, president of BI Research, says, You have to tie the information in the warehouse to business goals, and then assign people to manage that process. Thats where the management piece comes in. Its not only measuring performance. Its analyzing it. Thats only possible if there is a consolidated version of all relevant data from which to evaluate progress.

Enjoy faster, better decision-making

A TYPICAL EXECUTIVE REQUIRES QUICK DATA ACCESS to make dozens of strategic decisions every day. However, data might not be available because its locked up in an application system or residing in another departments format. Worse yet, the decision maker might not know if the necessary data is even available, and that will certainly hinder his or her ability to lead the organization in the right direction. Distributed data will slow down access to critical information, says Larissa Moss, president of Method Focus, Inc. With multiple data marts or data distributed across support systems, it takes a while to find the right data and use it correctly. Enterprise data warehouses can help move data to the right decision makers faster than distributed data management systems. The speed and the quality of decisionmaking is what really counts, Moss adds. Thats what differentiates one company from another. Thats really where your competitive advantage is. Indeed, as Swiss health insurer CSS Versicherung found, the ability to make decisions quickly makes all the difference. Before implementing a data warehouse, the company was unable to calculate premiums thanks to a slew of disparate systems and sluggish processing. In the insurance business, if you cant calculate a premium, you dont get the customer. Consolidating all the necessary information into one central repository reduced the process to mere hours and increased customer retention rates, helping the company maintain its position as Switzerlands leading health insurance provider. Another advantage for companies turning to enterprise data warehouses is that the same copy of data can be reused across applications and end-user groups. You dont have

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to build a new database every time you have a new requirement, Moss says. Data in an enterprise data warehouse is stored at an atomic levela very low, decomposed and detailed levelso it can be used any way that you want, she says. Summary data is often misleading or even flawed, but detailed data leads to accurate results and higher quality decisions. Better insight into a companys customers, products or processes ultimately leads to better oversight, and thats good for the bottom line.

Why go EDW?

Improve the quality of the data

POOR DATA QUALITY AND THE RESULTING IMPLICATIONS CAN IMPEDE BUSINESS performance in many areas. The Data Warehousing Institute estimates that data quality problems cost U.S. businesses more than $600 billion a year. Many data sources become dirty as a result of data entry mistakes, system upgrades and data transfers. One division might have compiled data in a format that meets its particular needs, but the format could be useless or require another business unit to rework it considerably. Such disparity negatively affects decision-making and the businesss ability to compete or meet its strategic goals. Consider the U.S. Air Force. Before it implemented an enterprise data warehouse, it found that accessing information could take weeks or months, and even then reliability was suspect due to a variety of operational stovepipes scattered across the entire organization. Now, with state-of-the-art data integration in place, the Air Force can quickly and confidently make accurate decisions that have the potential to affect countless lives. An enterprise data warehouse improves data quality since data is extracted from verifiable sources and is cleansed, rationalized and integrated before further analysis. If you have the data only in one placein an enterprise data warehousewith only one set of reconciliation required back to its source, then you can be much more assured that the data wont be corrupt or inconsistent, Moss says. Theres only one central database from which to get the data, rather than three, four, five or six databases, leaving users to wonder which ones right and which ones wrong. The issue of data quality also addresses new regulations affecting the way companies manage and report datamost notably, the Sarbanes-Oxley Act and the Health Insurance Portability and Accountability Act in the United States, and Basel II internationally. Relying on multiple and unreliable data sources for financial and patient data could spell trouble for many organizations in an era in which government bodies closely scrutinize corporate activities. Industry experts argue that business benefitsnot the heavy hand of governmentshould drive efforts to ensure data quality and consistency. Nevertheless, the need for compliance makes enterprise data warehouses a logical solution. The justification for an enterprise data warehouse will come from the CEOs office, says Imhoff. To comply, companies need to get their business intelligence environments in order. You need to have everybody using the same numbers. Theres this onslaught of data thats going to be dumped in executives laps, and they need it done in a reliable, consistent and efficient fashion.

An enterprise data warehouse is essential to a robust business intelligence approach.

Enhance reporting and business intelligence

AN EXTREMELY BRITTLE AND EXPENSIVE ARCHITECTURE has traditionally supported business intelligence, according to Neil Raden, president of Hired Brains, Inc. He explains that the original data warehouse concept was really simpleone big data repositorybut in reality its become much more complex, with layer upon layer of tools, applications, interfaces, etc. Because of that complexity, many data warehouses are unable to adapt quickly enough to meet business needs. As a result, he says, the part that business intelligence users see is not much more than a series of small data marts with OLAP cubes in front of them. People fiddle around with that data, then they either pull extracts directly from the operational systems or somehow get extracts from the (data) marts and pull these things into the spreadsheetsor spread martsand thats where they do all their thinking. That isnt working and its costing companies a fortune. In addition, data marts and business intelligence tools often deal with summarized information and, therefore, cant address specific questions, such as how a promotions sales lift compares to the impact it has on other product lines. Raden says, Traditional data warehouse methodologies have never been particularly useful for business intelligence. They focus exclusively on data, data movement, data models and databases. Enterprise data warehouses, however, answer a businesss need for analysis by storing critical business data in a format that can address just about any type of ad-hoc business query by any business user. There are a slew of average, or even mundane, business questions that businesspeople could ask every day, says Raden. Most of those questions cant be answered with data marts. Its not that the questions involve answers that require thousands of pages of data or that they involve data mining or anything esoteric. Its that detailed data has attributes that do not survive summarization. Those attributes hold the latent value of the data warehouse, not their aggregations. As an example, Raden describes a database that may have millions of rows of data, and the answer to a particular question may be found in 100 of those rows. But you dont know which 100 its going to be, he says. And theres no way to pre-summarize these questions. With a high-performing enterprise data warehouse, you can sift through and scan huge tables, and gain efficient throughput. You can begin to address a variety of questions. Industry experts concur that an enterprise data warehouse is essential to a robust business intelligence approach. Theres a lot of very interesting things that can be done with data mining and exploration, but if you dont have an enterprise foundation, theres only so much that you can see, says Bill Inmon of Inmon Associates, Inc. Its the difference between looking out the windshield of your car and seeing a mile down the road, and sitting in an airplane with a 30,000-foot view. The broad view enables you to see more with better perspective, which in turn leads to new ideas, new questions and new benefits that would otherwise be out of reach.

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Why go EDW?

Increase efficiency and productivity

ORGANIZATIONS OFTEN END UP WITH NUMEROUS AND REDUNDANT IT and data management groups to support the multiple databases and data marts that have sprung up across the enterprise. That situation requires additional staffing to reconcile among these entities, forcing many IT managers in many organizations to constantly go back to clean up data and reconcile reports, Moss explains. The more databases and more applications you have, the more you have to keep in sync. While numerous technologies have evolved to more efficiently move data across the enterprisesuch as storage area networks and enterprise application integrationthese often are brute force approaches, says Jill Dych, partner with Baseline Consulting Group. These days there are lots of ways to store and access data, she says. But storage is the easy part. Fewer companies have mastered the administration of that data. Centralizing cross-functional data facilitates a formal and sustainable data management strategy. For most firms, managing information is the real challenge. By centralizing and consolidating IT functions, enterprise data warehouses can increase efficiency and productivity across the organization, enabling every department and every employee to achieve goals more quickly. Productivity has often been neglected in IT, says Moss. Weve gotten so used to needing a lot of people to support our systems. By paring down the number of distributed data marts and other data sources that need to be supported across the organization, companies can dramatically streamline their data processes and free up resources for other projects.

Reduce overall business costs

GOING HAND IN HAND WITH THE INEFFICIENCIES OF MAINTAINING separate islands of data across the organization is the staggering cost of such environments. The AMR Research report Five High-Value Infrastructure Projects for the 2003 Budget (September 2002) states, The cost to maintain a data mart is between $1 million and $2 million. Yet surprisingly, between 35% and 70% of these costs are redunThere are lots of ways dant across data marts. to store and access data. Everybody knows theyre spending But storage is the easy extra money to maintain this redundancy, but I dont think people realize just part. For most firms, how much, says Moss. People also dont managing information realize the long-term costs and implications of poor decisions, especially in an era of is the real challenge. slim margins and cutthroat competition. Jill Dych
Baseline Consulting Group

Data warehouses arent just for storing historical data. Now they can have a profound impact on operational decision-making.

Businesses can quickly realize savings as they move from distributed data environments to enterprise data warehouses. Many companies have hundreds of data marts, each of which must be separately maintained by full or part-time IT staff. In addition, each data mart location requires server hardware, storage arrays and network connectivity and software licenses. The cost of processing, storage, programming and analysis is much greater when you have silos of information, says Inmon. These silos are very expensive in lots of ways, and youre able to consolidate those expenses and have economies of scale when you have integrated information. Moss agrees. With one enterprise data warehouse, instead of a multitude of data marts, you require less storage because data is not duplicated in different places. You can also be assured that there are fewer data-related errors, a benefit with trickle up effects that ultimately increase profitability and ROI. RBC Financial Group quickly realized its initial goals of reducing costs by eliminating data duplication and redundant processes through the implementation of an enterprise data warehouse. It was only after the solution was in place that the bank saw other benefits ranging from improved branch operations and customer service to simplified data analysis projects and more effective e-business. All of these results save money, to be sure, but the benefits go far beyond the bottom line to include increased customer satisfaction.

Meet unexpected business demands

SINCE NEW CHALLENGES ARISE EVERY DAY IN BUSINESSES, the ability to meet new demands with the right data is critical. However, most databases, data marts and BI tools are most useful for routine business decisions, not for on-the-spot quandaries. For example, a customer wants to return Earthquakes are a product. Customers arent supposed to return productsthats not in the not in the business business plan, quips Hackathorn. plan. There are hundreds, How do you handle that? Earthquakes if not thousands, of or a blackout in the Northeast arent in the business plan either. There are hununexpected demands dreds, if not thousands, of unexpected on a business every day. demands on a business every day. How How do you react to do you react to those things? An enterprise data warehouse provides the those things? type of environment that enables end-users to Richard D. Hackathorn rapidly address arbitrary questions. You can give Bolder Technology, Inc. the tools to people to enable them to ask the questions in the specific context of that problem and solve it as they need to, says Hackathorn.

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An international airline found this out firsthand in the fall of 2001. Earlier that year, the company had implemented its enterprise data warehouse to streamline its passenger reservation information systems. The new system was up and running just in time for the airline to respond to the challenges presented by the events of September 11 and the economic collapse of one of its major markets. A unified view of the companys customers, routes and activities enabled the airline to post profits in a year that was undisputedly the toughest ever for the industry. Historically, data warehousing has been designed for strategic decision-making the big decisions that deal with the larger issues, goals, directions of the enterprise, says Hackathorn. That could involve whether to open up a new manufacturing plant, whether to outsource something or whether to shut down branch offices. However, the small decisions are where the revenue is and where the profitability of your business comes from. You may get one or two or three big decisions a year, but every day, youre making thousands, if not millions, of small decisions. Businesses dont live in a serene climate, Hackathorn continues. Its more like being on top on Mount Everest where the weather changes every five minutes. It can become deadly very quickly. So we have to adapt the organization, the management and the underlying systems to address those trends.

Why go EDW?

Deliver value quickly

BUILDING AN ENTERPRISE-WIDE DATA MANAGEMENT STRUCTURE is a complex undertaking, often fraught with frequent delays and uncertain return on investment. After all, widely distributed data marts didnt spring up over night and they consume considerable financial and staff resources. Going back to the drawing board can seem daunting in terms of time, effort and costs. However, once an enterprise data warehouse is in place, companies see much faster returns from the application deployments that follow. The initial build workdata modeling and ETLis easy when compared to establishing sustainable processes for ongoing definition, cleansing, approval, certification and usage monitoring of this data, says Dych. These activities are much more straightforward to formalize and practice when the data is already stored and managed in an enterprise data warehouse. Companies who begin their CRM projects have a much better chance of delivering the proverbial quick win via information thats already been institutionalized through an enterprise data warehouse. Theres higher ROI involved with quick wins than starting from scratch. An enterprise data warehouse can quickly address critical business issues and generate value. As youre building your enterprise data warehouse, youre setting up standards for your organization as well as your whole metadata infrastructure, says Edelstein. You can still build a data mart within this metadata infrastructure and extend the enterprise data warehouse to incorporate it. That way, you can generate lots of deliverables within three to six months, while at the same time still building the enterprise data warehouse.

An enterprise data warehouse can serve as the catalyst for organizational transformation and enable business growth.

Answer any question, any time

WHILE DATABASES STARTED OUT AS ELECTRONIC FILING CABINETS, they now handle a number of roles critical to the enterprise. Not only do databases serve as a historical archive, but they also are monitoring and analyzing performance from a variety of sources and helping decision makers make tactical course corrections. Many companies, however, have been forced to maintain such functionality on separate database systems. Companies without an enterprise data warehouse will likely have a database for strategic decision-making, another database for tactical decisionmaking and another database for the operational or activity monitoring type of decision-making, says Moss. Wouldnt it be nice if you could combine them all in one? Such a combined capability can be made possible with an enterprise data warehouse. It doesnt matter which type of question you have, you will be able to get your answer from one single source. No reconciliation necessary, no inconsistencies to resolveyoure done, says Moss. Manufacturing giant 3M was so diversified that reporting was a nightmare. Company analysts were faced with thousands of monthly reports from different systems operating in different environmentsall generating different answers to the same questions. Once the company turned to a consolidated enterprise data warehouse, it quickly realized tens of millions of dollars in savings thanks to a single view of the entire business that enabled faster, better decision-making. Since their inception, data warehouses have primarily served as stores for historical data. It doesnt matter which Now, enterprise data warehouses can have a profound impact on operational decisiontype of question you making. White believes that having the have, you will be able ability to conduct all decision-making to get your answer from within a single environment is key to managing business performance. one single source. No You can use the information in the reconciliation necessary, warehouse to look at trends and patterns over a long period of time, he explains, but no inconsistencies to theres also tactical analysis, which involves the resolveyoure done. launching of tactical campaigns to meet these Larissa Moss long-term strategic objectives. An enterprise data Method Focus, Inc warehouse enables this process.

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Why go EDW?

Enable organizational transformation

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Related links
-> Read part two of our three-part series on EDW -> Read part three of our three-part series on EDW

STAYING AHEAD IN COMPETITIVE MARKETS REQUIRES THE AGILITY AND FLEXIBILITY to change, sometimes drastically and often unwillingly. Businesses regularly need to reengineer, refocus or simply shake up their corporate cultures and processes to become more responsive to customers and markets. Acquisitions and mergers also change the business landscape. Outdated and hard-to-reach customer and operational data stores often constrain efforts to reinvent and build the business. The introduction of an enterprise data warehouse can serve as the catalyst for organizational transformation, which will enable business growth. You can use the enterprise data warehouse to change how you compete in the marketplace, says Watson. It can fundamentally change your business model. For example, Watson cites the case of a major bank that needed a new strategy to compete in a highly competitive marketplace. The bank had already cut costs and found that new product rollouts werent working because competitors easily copied the products. It decided the best strategy was to concentrate on individualized, oneto-one marketing with customers. An enterprise data warehouse enabled the bank to pursue such a strategy. Their new business model was one where they would know their customers better than anybody else, Watson relates. Instead of competing in the way they used to compete, they started to compete based upon knowledge of their profitability with products and customers. They were able to better leverage their distribution channels to meet their clients needs. By providing fine-grained, detail data on customer preferences and purchasing patterns, enterprise data warehouses are revolutionizing the way companies are interacting with their customers. As a result an organization can more quickly adapt as customers and markets change. Organizations have to make themselves better day by day, week by week, explains Hackathorn. Theyve got to construct systems that are able to better react to changes in the marketplace. The enterprise data warehouse is the catalyst for enabling that to happen. An enterprise data warehouse also is a valuable tool for another form of organizational changemergers and acquisitions, Inmon points out. One bank that went through a very large merger needed to create a consolidated financial statement. They used a data warehouse to capture that information, he relates. Without the enterprise data warehouse, it would have been impossible for the two banks to merge their operational systems and produce a consolidated statement. However you achieve it, the end goal is to have all of your companys data integrated so that you can see results, experience benefits and generate value from your greatest asset: information. And that is perhaps the greatest benefit of all. Joe McKendrick, research consultant and author, contributes to Evans Data Corp., IDC, Gartner and Faulkner Information Systems, as well as journals such as Database Trends & Applications and Enterprise Systems.