Online Analytical Processing (OLAP): Business Analysis Explained

Online Analytical Processing, commonly known as OLAP, is a computing approach that allows users to easily and selectively extract and view data from different points of view. It is a critical tool for business analysis, as it enables analysts to extract and view data from various perspectives, providing valuable insights for decision-making processes.

OLAP is a category of software tools that provides analysis of data stored in a database. These tools allow users to analyze data from multiple dimensions, thereby providing a comprehensive view of data. This comprehensive view, combined with the ability to easily manipulate data, makes OLAP a powerful tool for business analysts.

Understanding OLAP

OLAP is a term that refers to a set of techniques that provide answers to analytical queries that are multi-dimensional in nature. The complexity and multi-dimensional aspect of these queries are what sets OLAP apart from other processing systems. OLAP tools enable users to interactively analyze the data in many ways, including through detailed and complex, multi-dimensional analysis.

The primary objective of OLAP is to provide a user-friendly environment for answering data-related queries. It does this by organizing large business databases and supporting complex analysis. It also provides a platform for business modeling, which goes beyond mere data access and includes data discovery.

Components of OLAP

An OLAP system consists of several components, each playing a crucial role in data analysis. The first component is the OLAP server, which is the core of the system. It is responsible for storing the multidimensional data and processing the queries. The server can be either relational OLAP (ROLAP), which uses a relational database to store and manage data, or multidimensional OLAP (MOLAP), which uses a multidimensional database.

The second component is the OLAP client, which is the user interface. This can be a standalone application, a web browser, or a part of an existing application. The client allows users to interact with the OLAP server, issuing queries and receiving results. The third component is the metadata repository, which stores information about the data, such as the data model, aggregation rules, and other data characteristics.

Types of OLAP

There are three main types of OLAP systems: Relational OLAP (ROLAP), Multidimensional OLAP (MOLAP), and Hybrid OLAP (HOLAP). Each type has its strengths and weaknesses, and the choice between them depends on the specific requirements of the business.

ROLAP works directly with relational databases. The base data and the dimension tables are stored as relational tables and new tables are created to hold the aggregated data. It offers the highest level of scalability but has performance limitations due to the large volume of data.

MOLAP, on the other hand, requires the pre-computation and storage of information in the cube, the main data structure used by MOLAP. It delivers excellent query performance and is capable of performing complex calculations. However, it lacks the scalability offered by ROLAP.

HOLAP is a combination of ROLAP and MOLAP. It tries to combine the strengths of both ROLAP and MOLAP. HOLAP tools can utilize both relational and multidimensional storage, depending on the needs of the application.

OLAP and Business Analysis

OLAP plays a critical role in business analysis. It provides a platform for analysts to extract meaningful information from raw data, which can be used to make informed business decisions. The multi-dimensional aspect of OLAP allows analysts to view data from various perspectives, making it a powerful tool for uncovering trends and patterns that might not be immediately apparent in raw data.

Business analysts use OLAP for tasks such as budgeting, financial reporting, and forecasting. It allows them to analyze data in a way that is not possible with traditional relational databases. With OLAP, analysts can perform complex calculations on large data sets in real-time, making it an invaluable tool for business intelligence.

OLAP Cubes

An OLAP cube is a data structure that allows fast analysis of data. It can also be defined as a mathematical abstraction of the multiple dimensions of data. In other words, an OLAP cube is a way to represent a multidimensional database.

A cube can be considered a multi-dimensional generalization of a two- or three-dimensional spreadsheet. For example, a company might wish to analyze some financial data by product, by time-period, by city, by type of revenue and cost, and so on. Each of these aspects of the data constitutes a dimension.

Benefits of OLAP in Business Analysis

OLAP provides numerous benefits in the field of business analysis. One of the main benefits is its ability to provide a multidimensional view of data. This allows analysts to view data from various perspectives and provides a more comprehensive understanding of the data.

Another benefit is the speed of calculation. OLAP tools can perform complex calculations on large data sets in real time. This is particularly useful in business analysis, where timely and accurate information is crucial for decision-making.

Finally, OLAP tools are user-friendly and do not require a high level of technical knowledge to use. This makes them accessible to a wide range of users, from business analysts to executives, who can use these tools to extract valuable insights from data.


Online Analytical Processing (OLAP) is a powerful tool in the field of business analysis. It provides a platform for extracting meaningful information from raw data, enabling businesses to make informed decisions. Its ability to provide a multidimensional view of data, combined with its speed of calculation and user-friendly interface, makes it an invaluable tool for business analysts.

Whether it’s for budgeting, financial reporting, forecasting, or any other business analysis task, OLAP can provide the insights needed to drive business success. With its ability to uncover trends and patterns that might not be immediately apparent in raw data, OLAP is a critical tool for any business that relies on data for decision-making.

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