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Direct query questions

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 I am in the process of switching a operation software they have proposed using direct query from a sql database for my data needs. 

 

This is the diagram they have supplied me with to explain how they will provide me with the data. 

 

I have limited database knowlege, can someone explain this to me

 

Also if im using direct query do i need to set up my own sqldatabase or can i connect directly to the distrubution database? 

 

Data Replication.PNG


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