IT has the power to deliver a complete view of the enterprise.
by David Butler, November 2011
Aaron Zornes has a pet peeve. His two daughters frequently receive credit card offers from a major airline. As an analyst, Zornes is a “road warrior,” and this is an airline he flies so frequently, he’s achieved the top level of VIP status there. His daughters have often accompanied him on trips. “The airline has the information that they’re four and six years old,” he says.
Clearly that information—readily available to the reservations department—has not reached the department that sends out credit card promotions. As chief research officer of the MDM Institute, it’s a problem Zornes knows well. “It’s the typical issue of having data silos within large organizations,” he says. “But it’s important to be able to get that single view of an asset, whether a customer or an employee or a supplier.”
Getting that single view is the big promise of master data management (MDM). MDM consolidates an organization’s critical data—the data that must be consistent across business applications such as customers, suppliers, locations, products, services, and assets. It cleans, standardizes, and governs this data, creating a single authoritative view of each business entity. It then feeds this data back to applications, business processes, and analytical systems to ensure maximum operational efficiency and accurate reporting.
Can MDM Live Up to Its Promise?
In an innovation-driven industry, many novel technologies are created, but only a few come of age. Business-to-business marketplaces were going to transform the way companies sourced their raw materials. Virtual reality would transport us into endlessly flexible computer-generated worlds. Internet currency promised to exchange our real economies for bubble-fed online cash. And while each of these ideas had merit (and even exerted real influence over successful technologies to come), none really lived up to the promise of the hype.
For enterprise IT departments, the claim made by proponents of MDM has been just as bold: that MDM can fix the systemic data quality problems within data warehouses and across applications; that MDM has the potential to unify operations and analytics into a complete information architecture; and that the financial benefits of MDM are enormous.
However, these claims are very much justified, according to Hema Kadali, director, information management, at PwC. Kadali is responsible for business intelligence and MDM and is an authority on Oracle technologies. “To me, all the front-office systems such as CRM [customer relationship management], BI [business intelligence], and even ERP [enterprise resource planning] on the back end all generate and use data, and they need to be connected. In the end, MDM is the key contributor to making sure all these systems have the right master data and the right data quality. If you have bad data, you are going to make wrong decisions.”
If bad data poses serious risks, implementing MDM can bring meaningful benefits that can lead to measurable ROI. There are many areas where MDM can contribute to the bottom line. One of the biggest is increased revenue due to cross-selling and up-selling opportunities that better customer data allows. A second is improved customer service, especially for the most-valuable customers—now more easily identifiable. “If you’re a financial institution, a customer could walk in who has millions of dollars in investments with you, yet a minuscule checking account balance,” Zornes says. “If you don’t have a full view of that customer, he or she could receive poor treatment and wind up moving all those assets elsewhere.”
There are opportunities to reduce cost as well. For one thing, better vendor data leads to better vendor management. “At one retailer, we reduced the number of vendor records from 100,000 to 20,000,” Kadali reports. With a more complete view of each vendor’s relationship with your company, managers can better take advantage of volume buying and just-in-time provisioning, among other benefits.
And then there are cost savings from improved operational efficiency as well. In a world where IT is consistently urged to “do more with less,” MDM makes it possible to do just that. “Information is the key for any business decision,” Kadali says. “With MDM, you can have employees spend more time analyzing business issues and making business decisions and less time collecting and fixing information.”
Implementing MDM is especially beneficial in the aftermath of a merger. Most such deals are intended to take advantage of synergy: the idea is that a combined company can benefit from economies of scale and better serve customers than its separate components could. But these benefits can only be realized if the new larger entity can efficiently draw on shared customer and other data. “You need MDM to get the benefits promised to shareholders when you proposed the merger—by blending together product lines, sales forces, marketing organizations, and so on,” Zornes says.
In many cases, the hot button that drives companies to invest the time and effort needed to deploy MDM is regulatory compliance. Having a single source of quality data ensures that you have the information regulators require and can prove who has and hasn’t had access to it. Zornes points out, “In certain financial service industries, if you don’t meet the requirement of knowing specifically and uniquely who your customers are and, in turn, reporting that information to the government, you can be shut down. This has implications for banks and insurers especially, regarding Basel II and Solvency II regulations.”
In the late 1970s, operations and analytics were split into two separate processes in most organizations, because transaction throughputs suffered from the additional time required for processing queries. This created a divide between operations and analytics that resulted in significant data inconsistencies. Since then, many technologies have promised to fix this unintended US$600-billion-a-year data quality problem. But promises are easy—the real test is in the marketplace.
Oracle was one of the first vendors to bring MDM products to market in 2001. Many others followed. Some vendors offered customer data integration or product information management applications, describing them as “master data management” even though they only had one data domain in their solution.
As is normally the case, the market experienced a falling out and consolidation period. IBM bought DWL to acquire a customer data solution, Trigo Technologies to get a product data solution, and Initiate Systems to get yet another customer data solution. Dun & Bradstreet bought Purisma. Sun bought SeeBeyond Technology. Informatica bought Identity Systems and Siperian. And Oracle acquired Siebel, Hyperion, Silver Creek Systems, and Datanomic to fill out an MDM suite of applications and data quality tools.
Not all MDM vendors produced products that could actually live up to the big promise. By 2005 these failures produced skepticism in the market about MDM’s potential. “The hype was that MDM could solve all of a company’s data problems,” Kadali says. “And if you’re implementing a CRM or ERP solution from scratch, it probably is easy to connect the dots across the system. But if you have legacy systems that go back to the 1960s or 1970s, it’s hard to unhook all that and put in an MDM system. So MDM implementations should be pragmatic and focused on business issues.” But some early MDM proposals were more ambitious and open-ended, and business leaders balked at the prospect of expensive deployments scheduled to take a decade or more to complete. MDM naysayers abounded.
This is where many technology lifecycles end. If the promise is found to be hollow, the game is over. But for many, MDM did live up to its promise of quality data across the enterprise. Oracle customers, for example, were achieving dramatic ROI in their MDM initiatives. So MDM lived on, and although the consolidation phase has not ended, its peak is now behind us. Gartner currently recognizes 26 MDM vendors, including the three megavendors: Oracle, IBM, and SAP. This reflects a mature market.
Early MDM customer uptake spawned the creation of analyst organizations—Aaron Zornes’ MDM Institute is one example. In addition, existing institutions such as The Data Warehousing Institute (TDWI) began MDM practices. Gartner started its MDM practice in 2008, a big step forward for the market. MDM-related conferences have multiplied, and following a dip during the recession in 2009, customer attendance has skyrocketed.
Additionally, major systems integrators (SIs) are getting involved, a sure sign that a technology has arrived. In the early days of data warehousing, it was difficult to convince an SI like Capgemini to invest in any data warehousing initiatives. Today, every SI has multiple data warehousing practices. Similarly, in the early going, it was difficult to get a large SI to invest in MDM. But over the past 10 years, that picture has changed considerably. Oracle’s MDM group now has more than 60 partners, including the industry’s largest SIs.
The final tests of maturity for a technology are how many customers use it, how much are they getting out of it, and how central it is to their future plans. In all these regards, MDM is faring extremely well. Oracle alone has more than 1,000 MDM customers. Record-breaking year-over-year growth in sales has continued for several years, even during the recession.
Organizations in every industry are realizing significant and measurable ROI, sometimes as high as 105 percent. These improvements come from reducing risk, bringing corporate governance to master data, increasing compliance at lower costs, getting more out of existing systems, speeding mergers and acquisitions activity, increasing customer loyalty, accelerating new-product introductions, optimizing business processes, operationalizing data warehouses, increasing the accuracy of enterprise reporting systems, supporting service-oriented architecture (SOA) and cloud deployments, consolidating ERP and CRM systems, rationalizing the overall applications landscape, and countless other projects.
“With Oracle MDM solutions, we can share all the information and we can exchange it among departments,” reports Sang Man Lee, CIO at Korean Air. “MDM is at the very core of Korean Air’s ERP project and a mandatory factor to govern all the processes and standardization.”
“These days, not only CIOs but also CFOs want to make sure everyone in the organization has the right information and that it is trustworthy,” PwC’s Kadali says. “They understand how important data quality is. In the past, they weren’t always aware of master data management, but now they are. And if not the number one priority, it’s within the top five for most large organizations.”
It is not very often that a technology comes along that can measurably assist organizations across such a wide variety of top business and IT initiatives. MDM is one of these rare breeds. It is finding its way into every aspect of IT operations and facilitating the flexibility required for full IT and business alignment. In the near future, it will be hard to find an organization with an information architecture that doesn’t have one or more MDM hubs included. This is the hallmark characteristic of a technology that has indeed come of age.