OLTP vs OLAP - Automating Business

Published by MBA Skool Team, Published on September 10, 2011

Business around the world are increasingly using IT to streamline their processes and use it in the main line of business in functions like finance, sales, marketing, operations and hr. There are many kind of IT systems present today. Even a spreadsheet being used to capture quotes or orders by a company is an example of IT but let's talk about more advanced business it implementations like ERP or a custom applications.

IT in Business- OLTP and OLAP

Such systems help the businesses do work more efficiently. There are systems which store your data or transactions and then there are systems who actually help you take decisions based on the data you have. The former are referred to as OLTP(online transactional processing) and the latter is called OLAP(online analytical processing).

Let us try to understand it on basis of example. A typical sales organization makes a lot of quotes and orders in a day or business cycles. These all quotes and orders are transactional data. They are kind of placeholders for a particular data. A typical order will have the customer data, product data, pricing details, discounts and shipping addresses. All this data is very particular to a transaction. Now let's assume there were 500 orders created in a month for various customers and various geographies and the senior executives wants to understand the trend or pattern. E.g. Orders created for the north west territories. Or total number of orders created by a particular sales representative to judge his/her performance. The systems which gives you ability to play around with the data to come out with something meaningful are typically called OLAP systems.

OLTP systems are characterized by large data related to some or many business process of an organization. The main expectation from an OLTP system is fast data writing and querying. Data integrity is also one of the foremost requirements. OLTP should be able to handle multiple transactions per second. OLAP on the other hand deals with consolidated data over a period of time. It takes data from OLTP systemsand tries to make sense out of it. It provides multi-dimensional views of various kinds of business processes in an organization. The kind of operations done by such systems are quite complex in nature. OLAP helps in problem solving, planning and decision making. Analytics, mining and business intelligence are typical additions to OLAP.

In an organization, OLTP is typically used by people lower in the organizational hierarchy e.g. A sales person would use an OLTP for creating quotes, customers or orders. He would be required to work on a daily basis with such system for doing regular business and job related activities.
On the other hand, OLAP is used by mid to senior level executives who need to see the higher level data presented in one shot. E.g. If the sales head of an organization wants to see the seasonal dip in sales per territory,he needs to refer to the OLAP system and not OLTP one.

These typically the it systems are not just OLTP or just OLAP. OLAP is dependent on OLTP anyways for the raw transactional data. More and more companies are going for the OLAP implementation along with OLTP.

IT is becoming tightly coupled with the business as the days pass by. No business is able to survive these days without proper IT implementation.
OLTP and OLAP both are helping businesses in their own way. But are they enough to provide the competitive edge ?

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