Good data is the cornerstone of any efficient operation — it uncovers valuable insights, informs decision-making and improves processes. It also records and tabulates activities and serves as a reference of record for all operations. But as companies collect more data, one of the biggest challenges they face is organizing and making sense of it all.
This is where a database comes in.
Whether you’re a frontline employee, a manager or a senior executive, learning about databases can help ensure that you have the right setup to fit your needs.
In this article, we’ll explain what a database is and how it works. We’ll also cover the different types of databases available and how they’re used. Finally, we’ll look at the most popular database management systems on the market.
A database is an organized collection of data stored in a computer. The most common types store data in rows and columns in a series of tables. This makes storing, managing and retrieving the data you need easier.
Databases power nearly everything you do online and even offline to a certain extent. When you browse a social media platform like Facebook, data in your feed is pulled from a massive database. When you go grocery shopping, data about your purchases are entered into a database where they can be accessed and analyzed for insights.
The type of data stored in a database depends on the application that’s using it. For example, a database for an online store might store:
- Customer data (names, addresses, etc.)
- Product data (colors, prices, etc.)
- Business data (sales, inventory, etc.)
- Market data (competition, weather, etc.)
We can classify processing this data in two ways:
- Transactional: Transactional data is data your company creates during regular operations — purchases, returns, inventory, etc. This data is typically captured using Online Transaction Processing (OLTP) systems.
- Analytical: Analytical data is data that informs decision-making. It helps your company find new insights and make more accurate forecasts. This data is typically stored in Online Analytical Processing (OLAP) systems.
Transactional databases are meant to record activities in real-time, record-by-record and form the backbone for digital applications of all kinds. Meanwhile, analytical databases are used to analyze data by aggregating and summarizing huge numbers of records at a time.
No matter what type of data you’re working with, it’s important that you choose the right type of setup to fit your needs. For example, you’ll use an analytical database to store data like sales performance and inventory levels to run queries and create reports.
A typical database is made up of five major components: Hardware, software, data, procedure and database access language.
Let’s take a look at these components in more detail.
Hardware refers to the physical devices that house a database. It includes computers, servers, hard drives, processors and networking devices.
Database software lets you create, edit and manage files contained in your database. It handles reporting, multi-access control and security. Database software also includes the operating system and the network software used to share the data.
Data is the actual information that you’re storing in a database. There are three types of data you can store:
- Structured: Structured data follows a well-defined structure; it’s formatted and easily searchable. Examples include product names, prices and weights.
- Semi-structured: Semi-structured data doesn’t follow a strict format or conform to a set data model. However, it still has some structural elements to it like tags and metadata.
- Unstructured: Unstructured data can’t be easily arranged or formatted to fit conventional data models. Examples include video, audio and images.
Data access language
Data access language is the programming language that you use to access, update, delete and retrieve data in a database. The most common database language is Structured Query Language (SQL), which was originally developed in the 1970s by IBM.
Finally, procedures are a set of rules or instructions that you set for a database. These define how specific actions should be carried out.
As more companies shift their processes to digital platforms, databases increasingly play a vital role in handling mission-critical data.
Here are some of the different ways that companies use databases.
No matter what type of application you’re building, it needs a database. Take a simple calendar app — you’ll need a database to store data like events, start and end dates, notes and more.
Record business transactions
Companies deploy transactional databases to record transactions in real time. These types of databases are typically row stores, meaning that data is stored in rows instead of columns.
Here’s a simple example of a transactional database:
Businesses like retail stores, banks and restaurants use these types of databases as they offer a flexible solution for storing and managing data.
Manage customer data
As your company grows, relying on spreadsheets to track customer information just isn’t practical. Ninety-one percent of companies with 10 or more employees now use customer relationship management (CRM) software.
CRM systems serve as a database that companies can use to manage and organize customer-related data. It’s all organized in one place, making it easier for teams to find the data they need without needing to switch between spreadsheets.
Support business intelligence
Business intelligence helps companies gain valuable insights from their data and make informed decisions. Examples include analyzing performance metrics to find ways to optimize processes.
To support these initiatives, companies rely on analytical databases specifically built to aggregate and process large volumes of data. They allow analysts to run queries and create detailed reports.
There are two main types of databases: relational and non-relational.
Understanding the strengths and weaknesses of each will help you choose the right one for your company.
A relational database is also known as a SQL database. Relational database systems were first conceived and named in 1970 by Edgar F. Codd at IBM. They use SQL to manage data and perform queries. The data in a relational database is organized according to a schema — a “blueprint” that describes how it will store data.
Relational databases are organized in rows and columns in a series of tables. The data within these tables relate to each other, hence why it’s called relational! For example, one table might contain customer information, and another table might contain related information like purchase orders.
Information from multiple tables in a relational database are linked through “primary keys” — a unique value that identifies specific rows in a table. When a primary key is added to another table to link information, it’s called a “foreign key.”
The primary key for this table is “CustomerID:”