PROPHIX CPM Blog

The Benefits of OLAP Technology

Published August 12, 2009 @ 11:39 by PROPHIX in Technology

Over the years, finance professionals have been replacing spreadsheets to move toward OLAP-based planning solutions. OLAP has become the leading analytical standard for management reporting, budgeting and forecasting, data analysis, and financial consolidations. Let’s explore what OLAP is from a business standpoint, what the benefits of OLAP are and how PROPHIX has taken it one step further to simplify using OLAP for business planning and analysis.

What is OLAP?

Online Analytical Processing (OLAP) is a technology that provides an interactive connection to business information. OLAP cubes are databases of information that replace the numerous spreadsheets you may be using today for business analysis and reporting. Executives gain insight into data through fast, accurate, and flexible methods to various views of business metrics that have been transformed from raw data into meaningful information.

No longer will spreadsheet errors and linkages be plaguing your financial reports and budgets. OLAP provides a direct link into underlying data sources for timely financial statement reporting and forecasting of results through budget planning and analysis.

Figure 1: Excel-Based vs. OLAP-Based Budgeting. OLAP-based budgeting no longer requires a myriad of complex, consolidated spreadsheets. The direct connection to and from your data sources, such as your General Ledger, gives users the ability to "interact" with data.

For example, variance reports comparing plan to actual can be automatically created and transactional source information can be viewed to truly understand the difference. At the click of the button, the Profit and Loss Statement can be dissected so you can quickly analyze sales by department or expenses by cost center.

Figure 2: Reports. At a click of a button, users can create reports that are specific to their needs. Data queries can range from the simple "who" and "what" questions to the more complex "what-if" and "why" queries. The data used to answer these questions is stored in a single database eliminating the need for complex linkage formulas.

OLAP analysis capabilities allow you to quickly answer questions such as:

• How do this month’s sales for Products A and B across the western region compare with sales a year ago?
• What is causing the significant discrepancy between this month’s actuals and budget variance?
• What would be the impact on the bottom line if I opened a new store in the Western Region?
• How do profitability ratios and liquidity ratios compare across entities?

Benefits of OLAP

OLAP applications for finance professionals offer many benefits to the budgeting and planning process. They put business context into underlying data sets and transform data into intelligible information for making business decisions—increasing timeliness, analysis and visibility along the way.

Eliminate manual tasks. OLAP eliminates the need to compile numerous spreadsheets since all data is shared on a centralized server across the organization; therefore, everyone is always looking at the same data. Even further, multiple roll-ups in OLAP allow users to view the same data from multiple points of view with a simple click of the button. Data is aggregated and summarized across multiple business units quickly and securely providing different consolidation and sub-consolidation levels on the fly.

Improve data analysis. Being multi-dimensional, OLAP business models allow users to analyze data across multiple business perspectives. The ability to analyze data in an ad hoc manner is inherent in the technology. The ability to drill through reported data to transactional details is also possible. OLAP gives users the ability to drag and drop and slice and dice the data to manipulate information to test different scenarios or find answers to business questions. Detailed as well as high-level consolidated data can be reviewed and analyzed within seconds.

Enhanced visibility. With multiple levels of security, from database-level to cell-based, users can have direct access to their own data, eliminating the need to rely on IT to create queries and produce reports. This puts information into the hands of the decision makers and brings confidence back to analyzing information. Stakeholders receive the right information at the right time.

In a survey conducted by DM Review, OLAP users were asked to assess the business benefits achieved from the technology. With a weighted score of 6.49, most users significantly improved their reporting processes.

Figure 3: Weighted Benefit Scores. Drilling Into OLAP Benefits, DM Review Magazine, March 2004

Summary

OLAP has become a best-of-breed technology for delivering financial information to key decision makers, and many application vendors continue to explore how to best implement this technology specifically for their users. With PROPHIX OLAP, the business modeling, analysis, and reporting capabilities have been implemented to cater to all types of business users. PROPHIX simplifies tasks, giving users more time for analysis and improving accountability.

To learn more about how PROPHIX leverages OLAP technology for better performance management, visit our Corporate Performance Management Solution page.

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