OLTP vs. OLAP - What is the Difference?

In today's fast-paced environment, data is the driving force of every business. Every company, from small online businesses to large enterprises, relies on data to drive its decision-making. 

Though this data is usually consolidated in a relational database or single data store, it needs to be analyzed to aid business processes. This is where data processing comes in.

Most companies mainly use two types of systems for data processing: online transaction processing (OLTP) and online analytical processing (OLAP). The main difference between OLAP and OLTP is that OLTP processes real-time transactions, whereas the OLAP database provides valuable insights and answers queries.

OLTP and OLAP are essential systems for a business to manage its various data processing systems. But how do the two systems differ, and how can businesses use them for data processing?

This guide explains all about OLTP vs. OLAP, their key differences, their advantages, and how to use these systems for your business. 

What is the difference between OLTP and OLAP?

Before you understand the differences between OLTP and OLAP systems, you need to understand each system's meaning, features, and applications.

What is OLTP?

The OLTP system is an operational system that administers day-to-day online transaction data. It is a fast-processing system that quickly processes large amounts of short transactions through a 3-tiered architecture. Each transaction has a separate record and is organized in the form of rows or tables. 

Examples of OLTP

A common example of OLTP is the data system used in online stores. If two customers simultaneously place an order for the last item in stock, the customer whose transaction processes first will receive the product. The system will update the inventory and cash transactions regularly to ensure orders are placed only for products in stock. 

Similarly, OLTP systems are used in several other places, such as:

• Online banking
• ATM kiosks
• Online booking systems such as airlines, hotel reservations, etc.
• Retail store checkouts
• User database updates such as new addresses, password changes, and so on.

Features of OLTP

• It processes large data volumes with a short response time.
• It administers lifecycle-related data.
• The system is available round-the-clock to process transactions in real-time.
• It has high concurrency, which supports a large user population.
• The system focuses on transaction management rather than data analysis.
• It maintains database consistency by normalizing data in a single schema.
• It can process small transactions -usually a mix of DML work and queries.

Application of OLTP systems

OLTP systems are used in all sectors and departments that deal with large volumes of customer transactions. Some of the applications of OLTP systems are:

• They are used in the banking sector to keep track of cash withdrawals, deposits, interests, and other financial transactions.
• Hospitals and other healthcare departments utilize them to manage appointments, diagnosis, prescriptions, and other patient-related data.
• Retail stores manage inventory and process customer payments through OLTP systems. 
• Schools and educational institutes manage student records such as scores, fee payments, and activities using the OLTP systems.
• They are also used in communication management to keep track of call records, networks recharges, etc. 

What is OLAP?

OLAP is a system that has data analysis capabilities and is used for business intelligence functions. Through OLAP, companies can perform complex data calculations, data mining, and forecasting. Usually, data is sourced from large data stores, warehouses, or OLTP databases. It can process data from different sources simultaneously through its multidimensional data analytics. 

Examples of OLAP

An OLAP vs. OLTP example is predicting product demand in an electronics store. The store uses OLTP to process everyday transactions, such as purchases, inventory, and so on to collect data for analysis. This data is put through OLAP systems to analyze previous purchases, fast-moving products, price ranges, and other custom attributes to understand which products might work best in a discount sale. 

OLAP meaning can be best understood by its usage in:

• Sales analysis
• Consumer trend analysis
• Financial predictions
• Product or website personalizations
• Product recommendations, and so on.

Features of OLAP systems

• OLAP manages data consolidated in other databases and processing systems.
• It focuses on analyzing and interpreting given data and not processing real-time transactions.
• The system allows users to view and process data from multiple perspectives.
• The system is a mediating data source between data warehouses and front-end operations.
• It consistently analyzes data even if dimensions or data sources are altered. 
• It is highly accessible and enables users to interpret the same data in multiple ways simultaneously. 

Applications of OLAP

The characteristics of OLAP systems find applications in sectors that require data analysis, aggregated data interpretation, and representation to direct their business decisions. Some common OLAP applications are:

• Stores use OLAP to manage inventory by analyzing customer data to predict sales, product performance, and other attributes.
• OLAP helps companies predict their investment outcomes, profits and losses, and expenses through financial analysis.
• Companies also use OLAP to interpret customer data to identify new markets through demographics, new trends, and customer interests.
• The system is used for customer relationship management by understanding their previous behaviors and personalizing their customer journey according to interests.
• Businesses also utilize OLAP architecture to fuel their marketing decisions by targeting the right customer groups with the right advertisements.
• It can also be used in healthcare to analyze patient profiles and predict outcomes like duration of stay, resource utilization, medical inventory tracking, etc.

Difference between OLAP and OLTP: A comparison

Here is a detailed comparison of OLAP / OLTP differences based historical data on different parameters.

Advantages and disadvantages: OLTP vs. OLAP

While OLTP and OLAP systems have different purposes in a business use case, each system has its own advantages and disadvantages for business analysts. Businesses must carefully analyze OLAP and OLTP differences to create optimal usage for data processing.

Advantages of OLTP

• OLTP is an efficient way to manage daily transactional data.
• It provides better customer experiences by processing individual data with ease.
• Businesses can easily scale OLTP systems as they have the capacity to handle large amounts of data. 
• It is operational throughout the day to keep data discrepancies to a minimum.

Disadvantages of OLTP

• A short downtime in the system, either due to hardware or software failures, drastically affects business processes. 
• The system can be difficult to manage as a large user volume can result in constant data modifications. 

Advantages of OLAP

• OLAP systems create a single platform for analysis, interpretation, and forecasting to help with business decisions.
• OLAP keeps data analysis ready, so every query gets answered at a fast pace.
• OLAP calculations are not only fast but also accurate and consistent.
• Data is more secure in OLAP, making confidential data analysis easier. 

Disadvantages of OLAP

• The efficiency of OLAP systems depends on the modeling procedures. Since traditional OLAP systems follow complex modeling, the IT department must maintain and update the systems regularly.
• Data analysis works best with the collaboration of various departments. However, with OLAP tools, this may not always be possible. 
• OLAP systems might be expensive as they need complex hardware and software. 

Choose the right systems for your business

Knowing OLTP vs. OLAP systems is crucial in choosing the right software infrastructure for any business. This article explains OLTP and OLAP, their features, usage, and advantages.

Both OLTP and OLAP systems are valuable for data processing. OLTP helps process day-to-day transactions, and OLAP helps analyze this data for business intelligence. Depending on the usage and requirements, you might benefit from an OLTP, an OLAP, or both. 

For example, businesses that deal with high volumes of transactions every day need a more robust OLTP system. Similarly, businesses that depend on analyzing large amounts of data need to build better OLAP systems. 

Determine your business requirements and choose the right technology to be processing data and empower your business decisions with OLTP and OLAP systems.

Learn how our tools help non-technical users to the complex data analysis do drag-and-drop analysis on their own and create rich OLAP on their data warehouse.