Data Warehouse vs Database: What’s the Difference and Why It Matters

Data warehouse and database are two types of data infrastructure, both allowing your business to store and access data. They differ in their purpose and how they handle data.

Data warehouse vs database: key difference

Database is older technology designed for the day-to-day operation of a specific function or department, while data warehouse is a newer technology that consolidates the data from across departmental systems for unified analytics of business operation. Your business needs several databases to store operational data, and a data warehouse to aggregate all data for analytics and reporting.

If a database is like a notebook where you can quickly jot down information for specific purposes, then the data warehouse is like a dashboard that combines the information from all notebooks (databases) so you can quickly search for the information you need.

Database

Purpose: stores real-time, current data to power an application.

Primarily designed for day-to-day operations and transactional processing, a database supports real-time CRUD (Create, Read, Update, Delete) operations for specific applications or functions.

In a medium to large business, each department likely has their own databases. For example, if you are an online retailer, each store maintains a specific database for order processing, a customer record, etc. A database is part and parcel of your daily operation. The data in a database only makes sense in that particular use case. If someone from another department asks for your data, they may not be able to integrate it with their own data, due to the different systems in place.

A good database has to make sure:

• There are no duplicates (data redundancy).
• Updating the data is efficient.
• The data is reliable and logically organized (data integrity).
• Can handle frequent, real-time updates of large volumes of transactional data.

If you want to search for something in the database, you should at least know the database well. Your colleagues from another department or management likely cannot use your database to analyze your operation, because they often do not know what to search for in the first place. Database queries are quick, simple, and specific, often by the people who already know what to look for.

Database is not a new technology. Some legacy databases require significant resources to scale up to the extent of a data warehouse. And even then, they may have poor query performance.

Data warehouse

Purpose: complex querying and analysis of aggregated data over time.

A data warehouse is primarily designed for the analysis and reporting of large volumes of historical data. It aggregates data from various sources (including databases) to provide a consolidated and unified view for business intelligence and analytics.

One data warehouse can handle data from many databases, providing a consolidated view of organizational data. It does so by organizing data in a star or a snowflake schema. This means, all information about one item is broken down into related, more focused segments that branch out from the main item, to avoid repetition and make everything more organized.

While databases store real time data, a data warehouse is designed to store a large volume of near real-time and historical data. The data is updated not individually like a database does, but rather in batch, with a frequency ranging from daily to weekly or even less often. This is the ETL (Extract, Transform, Load) process.

Even though you cannot expect instant updates, you can definitely enjoy fast, thorough responses to queries. A data warehouse has a much better query performance than a database. People from across your business can all use it without prior knowledge of the databases. There will be some duplicates or repetition in a data warehouse – but that is generally accepted for the sake of faster query performance.

A data warehouse is built for scalability, often handling terabytes to petabytes of data. It has the potential to become the single source of truth for your entire organization.

When does a business need a database versus a data warehouse?

A database is crucial for your business operation. Even at the beginning, you need a simple customer relationship management (CRM) system to keep track of leads, customers, and sales activities. As your business grows, you cannot keep using manual spreadsheets and paper notebooks! You need databases to manage your growing datasets. There are many cases where maintaining a database is a must if you want to be in business:

• Customer service: customer queries, feedback, support tickets
• Inventory: stock, restocks, sales.
• E-commerce: product listings, customer accounts, orders, payments, etc.
• Accounting: payrolls, expenses, etc.
• Regulatory compliance and security
• Marketing and sales campaigns

As your company grows and more departments are added, you will want to have a more consolidated, broader understanding of the entire organization, so that you can make decisions that affect several departments and the general direction of the company. Such comprehensive business intelligence is made possible with a data warehouse.

Here are some cases that signal the need for a data warehouse:

• You do not want to be constrained by the siloed operational databases. You want to facilitate mutual understanding and cooperation across departments.
• You need in-depth analytics, trend spotting and forecast, and complex reporting.
• You want to know how your business has performed historically to identify anomalies or patterns.
• Several people in your business need to make search queries at the same time, but that slows down the performance of your systems. You need to separate operational and analytical workloads.
• You want to make decisions based on high-quality data, data you can trust.
• You need to comply with regulations that require long-term data retention and reporting.
• You have a new business intelligence tool that requires structured, consistent data.
• You want to protect sensitive analytical data with robust security measures.

Consolidate your databases to a data warehouse with us

Your business likely already has databases; you may be considering the possibility of a data warehouse. We have worked with many businesses who have been where you are right now. Do not let the costs of investment keep you from scaling up your business – data is the new gold, and a data warehouse helps you realize your data’s untapped values. Let’s discuss how our Data Platforms and Analytics Service can help you get there.