What is OLAP (Online Analytical Processing)?

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Traditional data processing systems struggle to provide quick and efficient analysis, often leaving businesses overwhelmed and unable to harness the full potential of their business data. Enters OLAP (Online Analytical Processing) cubes. It is a powerful solution that overcomes these limitations, enabling organizations to gain valuable insights and make data-driven decisions.

In this article, we will discuss OLAP systems, their structure, advantages, disadvantages, and more.

What is OLAP?

OLAP (Online Analytical Processing) specializes in handling analytical queries over large datasets. OLAP cubes serve as pre-aggregated data structures that facilitate efficient analysis. Think of OLAP cubes as multidimensional representations of data, enabling businesses to explore information from various angles. Comparatively, querying raw data directly would result in sluggish performance, hindering the decision-making process.

OLAP (Online Analytical Processing) serves as a crucial tool for analyzing information from multiple databases. It allows for grouping, aggregation, and joining of data, leading to faster analysis and data exploration. While OLAP cubes have been widely adopted, recent years have seen a decline in their usage due to the emergence of columnar databases, which offer superior performance and scalability.

The OLAP Cube 

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At its core, an OLAP (Online Analytical Processing) cube is a data structure designed for fast analysis of data based on multiple dimensions. 

OLAP cubes support various analytical operations that enhance data exploration. These include:

  • Slicing enables the selection of specific subsets of data based on one or more dimensions. 
  • Dicing allows for the selection of specific combinations of dimension values. Drill-down enables users to explore data at a more granular level by navigating hierarchies. 
  • Roll-up aggregates data to higher levels of summarization, facilitating broader analysis. 
  • Pivoting reorients the cube to view data from different dimensions, providing alternate perspectives.

Let's take an example to understand how an OLAP system works. Imagine you are managing a chain of retail stores, and you want to analyze sales data to gain insights into your business performance. You have data about sales revenue, products, stores, and periods (e.g., months or quarters).

To create an OLAP cube, you would start by identifying the dimensions of your data. In this case, the dimensions could be:

  • Time (e.g., months, quarters, years)
  • Product (e.g., categories, brands, individual products)
  • Store (e.g., locations, regions, individual stores)

The cube would then be structured with these dimensions forming the axes of the cube. Each intersection point within the cube represents a specific combination of dimension values. For example, one intersection point might represent the sales revenue for a particular product in a specific store during a month.

Now, let's say you want to analyze the sales revenue by month, product, and store. You could query the OLAP cube to obtain the total sales revenue for each combination of these dimensions.

For instance, you could perform the following analyses using the OLAP cube:

  • Slice: Extract data stored of sales revenue for a specific month across all products and stores.
  • Dice: Analyze sales revenue for a specific month and product category across all stores.
  • Drill-down: Analyze sales revenue for a specific year and product category, then drill down to view sales revenue for each month within that year.
  • Roll-up: Analyze sales revenue for a specific product category across all stores and months, then roll up to view the total revenue for all product categories.

Explanation of the Term "Cube" and Its Origin

The term "OLAP cube" originated from BI tools like Excel's Pivot Tables, which introduced the concept of analyzing data across multiple dimensions. While these tools enabled users to work with two dimensions at a time, the concept of a "cube" emerged by stacking pivot tables to introduce additional dimensions. This metaphorical cube became synonymous with the idea of multidimensional data analysis.

How are Online Analytical Processing (OLAP) Cubes Structured?

OLAP cubes structure data by aggregating metrics (facts) over dimensions. Dimensions play a crucial role in organizing data, with examples including time, geolocation, and product categories. Star or snowflake schemas are commonly used to model data within OLAP cubes. These schemas provide a blueprint for structuring data hierarchically, ensuring efficient navigation and analysis.

structure of olap systems

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Advantages and Disadvantages of OLAP Cubes


OLAP cubes offer numerous benefits, including 

  • Support for complex analytics queries, business intelligence, predictive scenarios, time-series forecasting, and data mining. 
  • They deliver faster query performance and ensure consistent metrics across analyses. 
  • OLAP cubes also provide consistency, enable "What if" analysis, offer search capabilities, facilitate business modeling, and enhance data visualization.


Despite their advantages, OLAP cubes come with a few challenges. 

  • Technical complexities and high overhead can pose hurdles during cube creation and maintenance.
  •  Accessibility and flexibility can be limited, especially when dealing with large and constantly evolving datasets.
  •  Additionally, schema complexity, constraints on dimensions, inability to access transactional data, and time-consuming cube updates are worth considering.

Handling Non-Additive Aggregates in OLAP Cubes

OLAP cubes face challenges when summing non-additive aggregates such as distinct counts. To address this, a common solution involves creating a table within the cube that includes NULL values for excluded dimensions. This approach ensures accurate calculations and provides a workaround for the limitations of traditional aggregation methods.

OLAP Cubes in Practice

Historically, OLAP cubes were served by specialized OLAP servers. However, with the rise of modern data warehouses, OLAP cubes have found a new home. Modern data warehouses offer scalability, parallel processing, and columnar data storage, enhancing the capabilities of OLAP analytics. In this context, OLAP cubes play a vital role in the "metrics layer" of a data warehouse, ensuring consistent and reliable metric calculations. Tools like Transform have emerged to streamline cube creation and management.

Alternatives to OLAP Cubes

While OLAP cubes have long been a cornerstone of detailed data analysis, alternative approaches have gained prominence. Software for data mining and exploration, such as ThoughtSpot, provides flexible and intuitive interfaces for querying data. Additionally, the Modern Data Stack offers flexible data pipelines, enabling businesses to explore data in real-time, eliminating the need for pre-aggregated structures.

Comparison to Spreadsheet Modeling Structure

To understand the value of OLAP cubes, it's essential to contrast them with the familiar structure of spreadsheets. Spreadsheets provide a two-dimensional array to organize data, while OLAP cubes extend this modeling structure to multiple dimensions. The aim is to strike a balance between user needs and logical model limitations, allowing for comprehensive analysis while maintaining efficiency

The Rise of the Online Analytical Processing (OLAP) Cube

OLAP cubes emerged as optimized data structures tailored for quick and detailed data analysis. They employ measures and dimensions to organize and summarize data effectively. By utilizing nested arrays to store information across multiple dimensions, OLAP cubes provide caching and persistence mechanisms for subsets of data, enabling swift retrieval. This revolutionized business intelligence practices and led to the creation of new cubes for various analysis scenarios.

Performance Challenges of an Online Analytical Processing (OLAP) system

‍Complex queries:

OLAP cubes involve analyzing data from multiple dimensions and properties, which can result in complex queries that require multiple unions and GROUP BY clauses.

High computational requirements:

Performing aggregations and calculations on large datasets with multiple dimensions can be computationally intensive and time-consuming.

Long query execution time:

The combination of complex queries and high computational requirements can lead to long query execution times, causing delays in retrieving results.

Resource-intensive operations:

Building OLAP cubes often involves multiple scans, sorts, and hashes of data, which can consume significant system resources and result in performance bottlenecks.

Memory limitations:

In the early days of OLAP, limited memory capacity was a challenge, forcing users to work with relatively small amounts of memory for business intelligence (BI) workloads.

Expensive hardware requirements:

High-performance OLAP workloads often require powerful hardware configurations to handle the computational demands and optimize query performance.

Cross-tabulation complexity:

Cross-tabulations, or pivot tables, in OLAP cubes, involve a combination of unions and GROUP BY operators, resulting in even more complex queries and longer processing times.

Data scalability:

As the volume of data grows, OLAP cubes may face scalability challenges, requiring optimization techniques to maintain acceptable performance levels.

Query response time:

Users expect quick and interactive responses to their queries. The performance challenges in OLAP cubes can hinder real-time or near-real-time query responsiveness.

Data integration and synchronization:

Keeping the OLAP cube synchronized with the underlying data source can be challenging, especially when dealing with large datasets and frequent data updates.

Problems with Online Analytical Processing (OLAP) Cubes

Advancements in computing power and memory affordability have questioned the necessity of additional steps involved in building and maintaining OLAP cubes. Analysts often find themselves dependent on data engineers for cube creation, posing challenges in terms of agility and autonomy. As a potential alternative, direct querying in relational databases such as SQL is gaining traction, providing real-time access to data without the need for pre-aggregated structures.

Alternative Approaches

If the need for an OLAP cube diminishes, there is an opportunity to eliminate complex data modeling efforts. Modeling data within the data warehouse as needed, and creating new tables or materialized views, provides a more flexible and adaptable approach. By embracing this alternative, business users can prioritize real-time insights and dynamic analysis thus improving business performance management.

Types of OLAP Systems

Types of OLAP (online analytical processing) systems

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There are various types of OLAP systems, each having its own characteristics and use cases.  Understanding the differences between these types helps organizations choose the most suitable approach for their specific needs.

These include :

1) ROLAP: ROLAP stands for Relational OLAP and involves working with data stored in relational databases. It leverages the power of SQL to perform analytical queries and provides a flexible and scalable solution. However, ROLAP may face challenges with large datasets and complex calculations, as it relies on real-time processing.

2) MOLAP:  MOLAP, or Multidimensional OLAP, uses array-based multidimensional storage engines. By storing data in a highly optimized format, MOLAP delivers fast query performance and is well-suited for complex calculations. However, MOLAP's main drawback lies in its limited scalability when dealing with large datasets.

3) Hybrid OLAP:  Hybrid OLAP, or HOLAP, combines the strengths of ROLAP and MOLAP. It allows businesses to leverage the benefits of both approaches, utilizing relational databases for real-time data and multidimensional storage for faster analysis. HOLAP provides a balance between scalability and performance, making it a popular choice for many organizations.

Other types of OLAP systems include Desktop OLAP (DOLAP), Web OLAP (WOLAP), Mobile OLAP and Spatial OLAP.


In conclusion, while OLAP cubes have experienced a decline in usage with the rise of alternative approaches, they remain a powerful tool for data analysis and data mining. The emergence of modern data warehouses, advancements in computing power, and evolving data practices have influenced the way businesses leverage OLAP cubes. By understanding the types, advantages, and disadvantages of OLAP systems, business users can make informed decisions regarding their data analysis strategies. OLAP cubes help in multidimensional analysis that plays a vital role in unlocking data insights and enabling data-driven decision-making in the dynamic world of big data.

Frequently Asked Questions (FAQs) - What is Online Analytical Processing(OLAP)?

What do you mean by OLAP? 
Online Analytical Processing, or OLAP for short, is a technology that enables users to analyze extensive data sets from various sources across several dimensions. This method allows individuals and organizations to extract valuable insights and make informed decisions with greater accuracy. 

What are the three types of OLAP? 

1. Multidimensional OLAP (MOLAP): It stores data in a multidimensional cube structure, optimized for fast slicing and dicing operations. MOLAP is Ideal for complex queries involving aggregation and complex analytical calculations across multiple dimensions.  

2. Relational OLAP (ROLAP): It uses existing relational databases as the data source, often requiring minimal data transformation. It is more cost-effective and less resource-intensive than MOLAP, especially for smaller datasets.  

3. Hybrid OLAP (HOLAP): Combines elements of both MOLAP and ROLAP, storing some data in a multidimensional cube for fast analysis and some in a relational database for flexibility and scalability.  

What is an example of an OLAP? 
An example of OLAP in the marketing domain could be Evaluating the effectiveness of marketing campaigns across different channels and target audiences to make better data-driven decisions. 

What are the advantages of OLAP? 

Some advantages of OLAP are mentioned below : 

  • It uncover hidden trends and relationships across various dimensions like time, product, region, etc., leading to deeper business understanding.  
  • It explores data interactively with slicing, dicing, and drill-down/roll-up operations, eliminating lengthy report-generation processes.  
  • It helps decision-makers with actionable insights based on comprehensive data analysis, leading to better strategic choices. 

What is an OLAP cube? 

An OLAP cube, also known as a multidimensional cube or data cube, is a data structure used in Online Analytical Processing (OLAP) to organize and represent multidimensional data in a way that facilitates efficient and interactive analysis. These cubes provide a means to store and retrieve aggregated data along multiple dimensions, allowing users to explore and analyze information from various perspectives. 

What is the difference between OLAP and OLTP? 

The major differences between OLAP and OLTP are:  
OLAP (Online Analytical Processing) is focused on analyzing large volumes of historical data from multiple sources to uncover trends, patterns, and relationships revealing hidden insights. It utilizes multidimensional data structures like OLAP cubes to perform multidimensional data analysis.

OLTP (Online Transactional Processing) is focused on efficient transaction handling in real-time, such as updating records, placing orders, and managing inventory. It uses normalized table structures in relational databases, optimized for efficient data insertion, updating, and deletion during transactions. 


What is the full form of OLAP? 

OLAP stands for Online Analytical processing.  


Why is OLAP important for businesses? 

OLAP is important for businesses due to the following reasons: 

  • To get a deeper understanding of their business data as it allows to explore data across multiple dimensions, revealing trends and performing multidimensional data analysis.
  • It provides faster and more efficient analysis  
  • Improved decision-making: With actionable insights and trend analysis it is easy to make data-driven decisions across various aspects of your business. 

What is OLAP architecture? 

The architecture of an OLAP system is multi-layered with each layer playing a crucial role in delivering efficient and insightful data analysis.  

  • OLAP tools: These are the interfaces users interact with to explore and analyze data, such as dashboards, report builders 
  • Query builder: Translates user actions and selections into understandable queries for the backend processing layer.  
  • OLAP server: The OLAP server acts as the brain of the system, processing queries, retrieving data from the data warehouse, and performing aggregations and calculations based on user requests.  
  • Data Warehouse It stores raw data from various operational systems in one unified place.

What is the full form of OLTP? 
The full form of OLTP is Online Transaction Processing. 

Written by
Rupal Sharma


What is OLAP (Online Analytical Processing)?