Over the years, our businesses and institutions have accumulated a wealth of data, but due to the multitudinous ways in which it has been recorded and stored, the value of this data has fallen vastly short of its potential.
But recently a sea change has been taking place in the way we view data. Increasingly it is being regarded as the DNA of the business – the vital stuff that drives sound decisions. Today, leading public- and private-sector organizations are convinced that managing corporate data strategically is an absolute must to stay in the game.
The key to maximizing the value of organizational data lies in Master Data Management (MDM), an IT discipline that, according to Wikipedia, “focuses on the management of reference or master data that is shared by several disparate IT systems and groups. MDM is required to warrant consistent computing between diverse system architectures and business functions.”
A typical organization has around 50 disparate systems including backend transactional systems as well as customer-facing systems designed to support the fundamental order-to-cash business exchange. The resulting information environment is highly complex, and includes data stored in structured and unstructured formats, different languages and geographies, data repositories, operational data stores, data warehouses and data marts, content management systems and electronic mail.
What’s more, the data headache is set to intensify as most organizations will be handling close to 30 times more of it in 2012 than they did just two years ago.
What is MDM?
At its core, Master Data Management is a holistic way of thinking designed to bring order out of the data chaos that has persisted for decades. Sure, some organizations have met profit targets despite unruly data, but how far might these targets have been exceeded if the intrinsic value of the organization’s data had been fully exploited?
MDM can be defined as an enterprise-wide infrastructure for managing and harmonizing master data – that is, core business data categories such as customer and product – to ensure that information is integrated, coordinated, completely consistent, trusted and supportive of sound business decisions to enhance organizational value. In short, it is really about control and governance so that the right information is available the first time, at the same time, and in a cost-optimal way that reduces organizational risk.
Under the covers, MDM solutions consist of: server hardware; database, application and Web server software; middleware; sophisticated MDM software (including development frameworks), specialized data models, and a repertoire of business services. All of this is enveloped by data stewardship policies and business processes.
A conceptual view of MDM is shown in Figure 1, with the “master data hub” being the typical architectural style for implementations.
Impact of data complexity
Why do we need MDM? It starts with the need of almost all organizations to come to grips with an increasingly complex business model.
The business environment is rapidly changing, influenced by the on-going pressure to provide 24×7 operations, protect and grow market share, increase customer satisfaction and improve profitability. Added to this are various external pressures such as de-regulation, compliance, the need to link with partners, and the need for privacy of personal data.
In every organization, data cuts across divisions, business lines, functional areas, management layers, business/IT systems, and physical and logical layers. Furthermore, all transactions in the value chain are data generating points. This highly complex model is a reality that is not about to change anytime soon.
Unfortunately, many difficult issues arise from this model. These include:
- Business applications that are tightly ‘welded’ to technical platforms;
- Duplicated data and duplicated functionality, resulting in low data reuse;
- Lack of an enterprise-wide definition for much of the data used throughout the organization;
- No clear ownership or responsibility for data and proactive data management. The role of Chief Data Officer does not exist;
- Unsatisfactory levels of high data quality, resulting in compromised decisions and outcomes wherein the data is not to be trusted.
Establishing the value of MDM
In weighing the benefits of MDM, it is important to make the link between MDM solutions and business value, realizing at the same time that the business value of this approach is both dynamic and context and organization specific.
MDM value can be established through a five-point program designed to articulate and formalize business value so that the MDM end state can be realized. Establishing the value of MDM can be accomplished by focussing on the following:
- Readiness. One of the most important enablers of MDM value realization is the understanding of the organization’s current state of MDM readiness over four dimensions, ranging from organizational to technical.
- Value Proposition. The ‘opportunity horizon’ presented by the MDM initiative can be established through a top-down analysis of strategic objectives, business/IT strategy, prioritized imperatives and initiatives;
- Alignment. Evaluating the current state of an organizations’ MDM readiness against the portfolio of candidate MDM opportunities is necessary to help understand the capability that can be developed with minimal project risk and in the shortest timeframe possible.
- Platform. Developing the MDM direction for the organization is key to understanding both the end state as well as the relationships among the business layer, data layer, application layer and technology layer that must be altered over time.
- Action. Operationalizing the platform with a focus on short-term delivery while keeping an eye on the overall target is critical to the value-potential/value-realization link. Poor planning and execution have a habit of negatively impacting the bottom line while simultaneously tarnishing the reputation of the IT organization.
The need to take action
Our methods of processing data – collecting, recording, storing, reporting, summarizing, interpreting and synthesizing it – play a vital role in supporting the business decision-making process and maximizing organizational value.
It is incumbent on today’s organizations to manage key business data categories as a corporate asset. If they allow the status quo to remain – and data chaos continues to reign –these organizations may find their customers in the hands of their competitors and their long-term survival in peril.
MDM is not a fad that is destined to be replaced by some other buzzword tomorrow. This discipline alters an organization’s genetic makeup as it elevates the profile of data discussions to the highest levels of management. Embarking on the MDM journey provides an inflow of lasting benefits as the potential of strategically managing core business data categories is realized. Monetizing the value of MDM capability is not trivial, however, and is a necessary prerequisite to ensuring that the initiative is approved with the appropriate level of funding, that momentum is maintained throughout the program, and that business value is realized at the end.
Karim K. Hirji is a project manager within the World-Wide Master Data Management practice area of the IBM Software Group. He can be reached at email@example.com.