February 2007

Insights into Master Data Management

Master Data Management (MDM) is quickly coming to the forefront of the IT project pipeline for almost every corporation. One question that must be asked is: Is Master Data Management simply a new buzzword for the consistency of specific, standard corporate information, or is it truly a new concept on how an organization should approach and manage their critical information? As companies look to invest in such a potentially broad, risky, and significant corporate initiative, SEI would like to offer our insights on the business case, various approaches, and potential challenges to engaging in such an effort. Over the next several SEI Quarterly Communications we will be presenting articles to help our clients navigate the challenges to an organizational Master Data Management implementation and assist in maximizing the business value for their organization.

Through 2010, 70 percent of Fortune 1000 organizations will apply MDM programs to ensure the accuracy and integrity of commonly shared business information for compliance, operational efficiency and competitive differentiation purposes. – Gartner

With such a significant investment by corporations to implement MDM programs, we should look to explore this topic in further detail. Before we get too far, we should probably ground everyone on a few basic concepts and definitions. Master data can simply be defined as the specific categories of information required by an organization to appropriately manage their relationships, for example: Customers, Suppliers, Products, and Partners. Master Data Management would then be the practices, processes, and associated technologies of providing the Business Enterprise with the capability to define and link this master data in a secure and high quality manner. Organizations create, assimilate, store, maintain, and use a variety of different types of data and information. MDM is then the process of centralizing and managing this core reference data (master data) that is needed to uniquely define key objects within an organization. These master data objects typically do not change frequently and are often referenced by users, business processes, systems, business applications, application services, and trading partners by their key identifiers.

Organizations continue to increase automation and collaboration with better business process management and increased Service-Oriented Architecture (SOA) adoption, spanning the entire enterprise. Universal and persistent access to accurate, up-to-date data has emerged as a major obstacle. Each area or department of the company typically has developed processes, applications, tools, and techniques to create, store, and maintain its own master data to serve its own needs. Though it provides them with an effective control mechanism over establishing consistent semantics within, it hinders the seamless flow of a single, consolidated view of information across the organization. As companies grow, these disparate silos of data become more difficult to manage and integrate. Accordingly, there is a growing acknowledgement that this approach does not provide for a good long-term strategy. This is where MDM steps in. To further understand this concept, let’s look at how an MDM solution would fit into a corporate technical infrastructure in the figure below:

Primary Master Data Categories Customers Suppliers Products Partners Employees Location Region Organization chart Territory Chart of Accounts
	Source: DM Direct Special Report By Abhay Singhal and Sreedhar Srikant

The above diagram highlights the integration with operational and analytical systems, but there are obviously various approaches to tactical implementation; we will explore these approaches and associated technologies in our next article. In general, implementing an MDM solution focuses on easy access to a single, consolidated view of information that is interpreted uniformly across all boundaries. A well-formed and executed MDM strategy is aligned with the organizational information management objectives and is perceived to be at the heart of true enterprise-wide business process and application integration.

Why should an organization pursue an MDM implementation?

Let’s evaluate the business value of taking on such a significant effort. Simply put, it provides many business benefits such as:

Enables ownership of master data by the business, not IT
Provides standard definitions of business information through the entire organization
Improves the consistency, quality, and reliability of information
Allows for better integrated end-to-end processes across the organization
Enables better data quality, resulting in decreased data volume, and replication
Enables data unification, the underlying foundation for SOA business applications
Enables faster and more accurate business intelligence reporting
Provides insight into data resulting in improved cross-marketing, selling, and customer retention opportunities
Enables a consolidated view of enterprise performance
Facilitates regulatory compliance

“Organizations use Master Data Management for consistency, simplification, and uniformity of process, analysis and communication across the enterprise.”

Provided by: Gartner, Mastering Master Data Management, July 25, 2006

Examples of the potential business impacts of taking an MDM approach:
Reduced Time to Market
Single system for product information and promotions		Provides rich, accurate consumer communications via online and traditional channels
Supply Chain Improvements
Single, accurate and agreed upon definition of products and suppliers		Eliminates duplication, increases buying power, and provides insight into supplier relationships
Revenue Increases
Single 360 degree view of customers		Improves customer relationships by anticipating customer needs, providing targeted offers, and improving customer service
Better Integration
Elimination of information silos		Reduces integration costs, enables collaboration, and improves productivity. Simplifies integration of new systems

MDM will leverage your corporate data assets to maximize your business objectives.

As one reads through the list above, it is apparent that this approach can bring significant business value. To quantify and/or qualify the specific need for an MDM solution within your own organization could be somewhat industry specific, such as: impact to sales, impact to margins, impact to systems integration, etc..., but if for no other reason than it simply makes sense to have a standard approach to the way your organization gathers, stores, and distributes master data. Now to answer our initial question: Is MDM simply a new buzzword for data centralization? In short, yes, but it’s also a collection of best practices on how to approach it.

Hopefully, we’ve been able to present a concise perspective on the topic of Master Data Management and why organizations are pursuing it as essential to driving additional business value. Before initiating this type of effort, it would be wise to understand the various implementation approaches and subsequent impacts for an organization. Stay tuned for our next article in which we will be presenting different approaches to an MDM solution with respect to an organization’s current architecture and technologies.