Do the Benefits of a Data Warehouse Outweigh the Cost?

Any organization that’s invested in an analytics tool like Power BI or Tableau knows that they’re only as good as the data you feed them. Challenges such as disparate sources, inconsistent data formats, and slow legacy systems all block insights from your business intelligence software and data analytics tools.
A common solution to this challenge is a data warehouse that enables data management, analytics, and advanced data science. The data warehouse helps organizations to facilitate data-driven decision making, find cost savings, improve profitability.
No matter the industry, size of the organization, technology involved, or data savviness, companies often ask: how do the benefits of a data warehouse justify the cost?
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The Costs of Building a Data Warehouse
The first major investment involved with a data warehouse will be either hiring a consulting firm to develop your modern data warehouse or dedicating internal resources to the task.
By hiring data consultants, you introduce additional costs in consulting fees, but yield results much quicker and therefore save time. If you choose to create an internal task force for the job, you reduce upfront costs, but altering day-to-day functions and the inevitable learning curve lead to longer development timelines.
The second investment is almost always necessary: you will need a tech stack to support your modern data warehouse. This may simply involve expanding or repurposing current tools or it could require selecting new technology. It’s important to note that pricing is different for each technology and varies greatly based on your organization’s needs and goals.
This project typically involves paying for storage, computing time, or computing power, in addition to a base fee for using the technology. In total, this can typically incur a yearly starting cost of $25,000 and up. To make it easier, each of the major data warehouse technology stacks (Amazon Redshift, Snowflake, and Microsoft Azure SQL Database) offer cost estimating tools. With a clearer understanding of what your costs will look like, let’s jump into why they are worth it.
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Using a Data Warehouse Costs Less than a Traditional Analytics System
While the figure above is a considerable sum to invest in data analytics, many of your current technology investments will be phased out, or the costs will be reduced using modern technology.
Plus, your IT team will handle fewer cumbersome maintenance tasks due to automatic clustering, self-managed infrastructure, and advanced data security options. This allows your IT team to focus on more important business needs and strategic analytics.
With the volume and variety in data organizations track, it’s easy to find yourself stuck with messy data held in siloed systems. Modern data warehouses automate processes to eliminate duplicate information, reduce unnecessary clutter, and combine various sources of data together. All of this enables you to save money by storing data efficiently.
Think of it this way: if your data experts struggle to find key information, so does your technology – the extra compute time and storage costs more than you would expect. In contrast, implementing a system that stores your data logically and in a streamlined manner greatly reduces these costs.
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Advanced Analytics Offers Significant Competitive Advantage
While it is more difficult to quantify the ROI here, dashboards and advanced analytics greatly enhance your employee’s ability to perform well and save money. Regardless of your industry, using a modern data warehouse to drive analytics empowers employees to perform better in several ways:

Dashboards dramatically decrease the time employees spend finding and organizing the data. For many of our clients, reports that once took analysts weeks of effort are now able to automatically aggregate in seconds.
Accurate data empowers better decision-making and yields creative problem-solving. You have the right information quicker.
Real-time analytics enables you to quickly respond to significant business events. This gives you a competitive edge since you can easily retain customers, spot inefficiencies, and respond to external influences.
Predictive analytics save you money by finding opportunities before you would need to act.

Developing a full-scale data warehouse requires time and money that may not be available at the moment. Yet the benefits of a data warehouse are necessary to remain competitive, and there are ways to build a modern data warehouse quickly and without the large upfront investment.
A modular data warehouse contains key strategic data and ensures that you gain the advantages of analytics almost immediately. On top of that, it provides a scalable foundation that you can add data to overtime until you incorporate all the data necessary for your business functions.
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About the Author:
Fred Bliss, CTO, Insights Practice, 2nd Watch.
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