The Strategic Nature of Master Data Management
By David Butler on Aug 06, 2010
THE STRATEGIC NATURE OF MASTER DATA MANAGEMENT
Over the years, IT landscapes have grown into complex arrays of different systems, applications, and technologies. This fragmented environment has created significant data problems. These data problems are increasing the cost of integration; breaking business processes; reducing the ROI in existing applications; impeding the deployment of new applications; corrupting analytics; and costing corporations billions of dollars a year. The accumulative effect is to put the CIO into a straight jacket. Maintenance and integration costs leave less than 5 cents on the IT dollar for deploying systems that can improve the situation. Master Data Management (MDM) attacks this data fragmentation problem at its source on the operational side of the business. When MDM deployments are coordinated with the data warehousing / analytical side of the business, the improved data quality benefits accrue to Enterprise Performance Management and all Business Intelligence (BI) systems. This makes MDM the glue that ties analytical systems to what is actually happening on the operational side of the business. MDM enables Business Process Optimization, increases the ROI from existing applications, reduces the costs associated with new application deployments, supports data governance, and acts as a foundation for SOA and BI. This puts MDM at the strategic center of an ideal information architecture. This approach is proving itself to be very successful in leading companies around the world.
MDM AS A FOUNDATION FOR SERVICE ORIENTED ARCHITECTURE
SOA is a modern technology for adding business process flexibility to existing IT infrastructures. Forrester considers MDM the most "strategic entry point for SOA" bringing the most strategic value to the business. But the anticipated improvements are never realized when data quality issues abound in the underlying applications. In fact, Gartner has pointed out that, without quality data, "...SOA will become a veritable 'Pandora's box' of information chaos within the enterprise." MDM cleans, standardizes, de-duplicates, augments, governs and shares golden master records with all operational applications and business processes. In combination, SOA and MDM can literally revolutionize IT and enable centralized shared services over existing application infrastructures. Organizations that deploy these two technologies together are realizing significant sustainable competitive advantage as their IT groups once again become centers of innovation.
MDM AS A FOUNDATION FOR BUSINESS INTELLIGENCE
Business Intelligence systems are designed to help organizations understand their operations, customers, financial situation, product performance, trends and a host of key business measurements. This information is used to make decisions about organizational direction. Poor intelligence results in poor decision making. The costs can be enormous. Most organizations and analyst now agree that the basic reason the reporting is wrong is that the operational data feeding the analytical engines is filled with errors, duplications and inconsistencies. If the poor quality reporting is to be fixed, it has to be fixed at its source - under the applications that run the business. This is the Master Data. The solution to this overarching problem is Master Data Management. MDM holds the single version of the truth for key business entities (customer, supplier, product, location, etc.). These are in fact the key dimensions around which analysis is executed. In addition, MDM holds the cross reference and hierarchies for these dimensions. MDM feeds the dimensions, hierarchies and cross reference to the Data Warehouse and other analytical systems such as operational dashboards and reporting tools. Without MDM, BI is running on the old garbage in garbage out paradigm, no matter how sophisticated the BI software may be.
Support for Data Governance
Good governance is a growing concern for organizations around the world. Business Policies lead to Information Policies that lead to Data Policies that require strong controls. Data Governance and Master Data Management need each other for the full potential if either to be realized. Over the years, significant progress has been made on the Governance organizational front, but tools to actually implement the information policies developed by data governance committees were not available. MDM on the other hand, incorporates the tools to enforce data standards, but lacks the ability to know what those standards should be. The data stewards in IT execute rules, but only the data governors from the business units can define what the rules ought to be. Together, they complete the link from corporate policy to data controls. Business and IT are brought into sync.
Reducing costs, increasing flexibility, getting more out of everything already installed, and aligning Business and IT, is not an easy task for any CIO, but with Master Data Management, success is achievable.