Master data management is particularly important in today's increasingly complex and harsh global business landscape in part due to demanding suppliers, trading partners and customers as well as financial challenges and government regulations. Despite the current economic crisis, analyst firms have declared MDM to be recession-proof as businesses strive to dramatically reduce costs, meet compliance reporting mandates, deliver increased sales and marketing effectiveness, and provide superior service to customers and suppliers. MDM and its variants - customer data integration, product information management and data governance - all significantly contribute to these tactical business priorities.
Capitalizing on MDM in tough times, however, requires an understanding of five key underlying business and technology trends. As a literary parallel, the unlikely heroes of The Hitchhiker's Guide to the Galaxy always managed to cope in a crisis ... eventually. In today's crisis, Arthur Dent and Ford Prefect would face an intergalactic credit crisis involving such complex financial derivatives that even the infinitely powerful computer Deep Thought would be baffled - despite having already found the answer to the Great Question of Life, the Universe and Everything. Our contemporary crises include the necessity to put our economic and organizational houses in order. What is our level of Basel II compliance and associated enterprise counterparty risk? Who are our most profitable customers? Which products or divisions are most unprofitable? What is the e-pedigree of key components in our e-supply chain? MDM is the answer, along with its derivatives CDI, PIM and data governance.
The successful management and governance of master data is both opportunity and challenge for most enterprises. Despite significant challenges, the business goal of delivering trusted data throughout the enterprise shouldn't be downplayed or ignored because the competition most likely has already begun their drive to this end goal. Instead of envisioning MDM as a "game change" strategy (which it often is), the pragmatic business will acknowledge that although enterprise MDM is a multiphase, multiyear, evolving business capability, it is an essential business strategy for keeping the enterprise sound in the increasingly competitive 21st century. The business goals of the agile and recession-proof corporation mandate delivery of trusted, high quality and timely customer, product and other vital master data.
Data from the MDM Institute's quarterly "MDM Reality Check" survey shows some retrenchment in scope and funding, yet ongoing firm commitment to MDM programs (and individuals).
Enterprise MDM is a major IT initiative being undertaken by a large number of market-leading Global 5000-sized enterprises. Both as an IT discipline and an integrated set of technology solutions, MDM continues to evolve at a rapid pace. The following excerpt from the MDM MarketPulse in-depth report, "Enterprise Master Data Management: Market Review & Forecast for 2008-12," advises which actions enterprises should take to generate business value and achieve competitive advantage from five key trends.
MDM Trend #1: Steady evolution away from data-centric hubs into application hubs.
Enterprise MDM solutions are steadily but rapidly evolving away from data-centric hubs into full-blown application stacks. In other words, MDM is becoming less of a standalone technology infrastructure as the emphasis is increasingly on relationships between domains, user interface and integration with other emerging and adjacent technologies such as RFID, entity analytics and business intelligence. This application hub focus concerns more than integration with existing customer relationship management and enterprise resource planning systems. MDM is the type of infrastructure solution that will leverage all other systems, such as other application stacks, other CRM and ERP instances as well as other data feeds. Finally, such hubs are increasingly integrating more than applications within a line of business and are fundamental to integrating the actual lines of business.
MDM Trend #2: Elemental movement toward enterprise MDM in multiple phases.
Enterprise MDM is strategic and, therefore, the appropriate focus across multiple lines of business, several channels and across many years. Such enterprise MDM becomes a reality of multiple factors - especially when the enterprise desires to leverage one MDM product or platform across domains. Both IT and business management are increasingly focused on the longer term, i.e., two to five years down the line. Therefore, these same IT strategists are looking for vendors who can provide solutions that span more than one phase. Savvy customers are starting to ask for an integrated platform that supports multiple domains across various phases. An example of multiple phases is where the tactical project might start with just a registry-architected solution, perhaps with batch and very little service-oriented architecture. At some point in the 12-to-18-month horizon, most organizations outgrow registry architectures and require much more of a full-blown hub architecture. MDM Trend #3: Futile dogmatic resistance is fading against the power of multiples. MDM is increasingly concerned with the notion of "multiples" - multiple data domains, the multiple relationships among them and multiple usage styles. Even a tactical MDM project will require facets of an enterprise MDM solution set; for example, a financial service provider will need to master more than "customer" as it looks to master "product" in post-phase one stages. Additionally, product-centric MDM tactical projects quickly move to address customer master attributes such as pricing and entitlements. To be simplistic, it is important not to paint one's self into a corner. Typically, all projects start with A, B and C, but they must be able to grow or they create yet another data silo. MDM architects need to think broadly in terms of styles (operational, analytical and collaborative) as it quickly becomes evident that the business requirements will bleed into more than one data domain and deployment style - "think global, and act local."
Increasingly, the notion of multiples includes more than a singular master domain (e.g., customer or product). Even the definitions of the domains are getting more sophisticated. For example, only several years ago "location" was a point in space, however, now it includes which party of assets occupy that location. Moreover, the attributes of a domain/entity are becoming more complex.
MDM Trend #4: Inexorable shift to formal data governance structures. One of the greatest challenges is the political arena (governance), which necessarily accelerates or brakes the critical momentum of both tactical and enterprise MDM. While tactical MDM marts may be successful via judicious efforts of data stewards who focus on the data quality of a singular domain, when the business utilization of master data expands across departments and lines of business, then the governance framework is essential. Each and every consuming and producing organization has a duty or role in the governance of master data. For example, once it is determined that master data is a corporate asset, that data must be protected across its lifecycle, including critical issues such as accessibility and compliance. Unfortunately, most of the marketed MDM solutions do not adequately address this formal requirement.
In fact, most vendors will point to their data steward console as the acme of their data governance capabilities. In reality, what's needed are formal processes, assisted by workflow software, to enable formalized decision-making, documentation and delegation regarding the rules rendered as part of the governance lifecycle. Another gaping hole in data governance capabilities of the majority of MDM vendors is their inability to directly store and execute such governance-generated procedures as part of the MDM logic that controls the software, which in turn should enforce the governance. True data governance mandates the integration of people, process and technologies via a formalized framework. These formal structures are inevitable as they are the key enablers of data governance policy functions - much more so than paper-based methodologies and accelerator frameworks.
MDM Trend #5: Rapid growth of the MDM market into midmarket as well as across industries and geographies.
The market for MDM solutions is significantly and quickly expanding across geographies, industries and price points. This in turn is making MDM capabilities affordable to midmarket enterprises (small to midsized businesses). The steady growth of the MDM market into this midmarket further makes it economically viable to apply the solution across a broad range of industries and geographies. Three to five years ago, the typical MDM solution cost in excess of $1 million just for the software and an additional $3 to 4 million for the implementation services during the first year. During 2009, price points and product packaging (we should say "repackaging") provide more modest MDM functionality and accordingly less complexity, which supported market pricing in the sub-$500,000 range. Overall, MDM matured from "early adopter IT project" status to a mainstay Global 5000 business strategy during the past several years. These new price points are reflective of various types of projects and the related product capabilities, i.e., enterprise MDM initiative versus very specific business solution. Moreover, market dynamics further drove price differentiation as the market became more sophisticated and understood the price-to-value ratio of hybrid versus registry versus toolkit versus full-fledged MDM application. For the Global 5000 enterprise (and increasingly the small to medium-sized business), approaching enterprise MDM as an IT infrastructure development project is career challenging. There is very little economic rationale in building such custom middleware (with associated high maintenance costs) when commercial off-the-shelf software meets the performance, reliability and scalability requirements of organizations of most every industry and size.
The value of enterprise MDM can be intuitively recognized in a range of business initiatives - from short-term fixes to a narrow set of problems, such as capturing customer privacy preferences across product lines to long-term enterprise-wide initiatives to delivering infrastructure agility by embracing SOA. Most enterprises and solutions vendors are finding near-term success with the single-faceted approach inherent with the third generation of MDM solutions. Increasingly, however, these same enterprises are determining that this myopic strategy of focusing solely on a single data domain and usage style is detrimental to the longer-term business strategy of integrating supply, demand and information chains across both intra- and extra-enterprise boundaries. Coming to market during 2009-10 are multientity MDM solutions, characterized as the fourth generation of MDM solutions that address the requirement for multiple domains and styles as well as the roles of the consumers. MDM programs and IT positions are considerably "recession-proof" as businesses strive to dramatically reduce costs, meet compliance reporting mandates, deliver increased sales and marketing effectiveness and provide superior service to customers and suppliers.
Survival of our businesses (as well as future prosperity, market leadership and business process transformation) during economic crises is dependent upon achieving a single view across the enterprise of key assets such as customers, products, suppliers and employees.
To learn more about applying MDM to achieve competitive advantage, attend the MDM SUMMIT Americas 2009, August 24 - 26, 2009, San Francisco. Click here to register: http://mdm-summit.com/MDM/
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