While the master data management market continues to enjoy healthy growth, the number of vendors in the space has shrunk, and MDM in the cloud is not yet delivering on its promises of business value.

Those were among the messages of Aaron Zornes, founder and chief research officer with the MDM Institute to the audience at the MDM & Data Governance Summit in Chicago this week.

The $38 billion MDM market is growing at a rate of 10 percent annually, with a typical customer paying $1 to $2 million on an MDM product, and spending three to four times that on related services. Those numbers make MDM providers attractive to investors and Zornes expects that trend to continue.

But that growth rate is actually down from its peak of 18 percent, impacted by a number of mergers that have taken place within the industry. The top four providers now represent one half of all revenue in the sector, and hold just under one half of the customers. Zornes estimates there were between 60 to 70 MDM vendors a decade ago.

A number of changes are taking place within the MDM market. A growing number of organizations are using multiple MDM products, while the top providers tend to focus on mission-critical services.

Data-as-a-service and software-as-a-service offerings are both increasing, but Zornes says they are a mixed bag when it comes to satisfaction. Many organizations don’t want customer data hosted in the cloud, and a number of recent data privacy mandates such as the General Data Protection Regulation reinforce those views.

For those organizations that are attracted to a cloud-based MDM product, Zornes says some MDM vendors actually misrepresent their presence in the cloud. Their pitches may sound “compelling,” but they are actually “problematic for both customer and employee data.”

Data governance integration also remains behind where it should be, Zornes believes. “Data governance integration with MDM platforms remains conceptual.”

One area that Zornes does have high hopes for is graph technology, which he says augments the value of MDM and data governance, but unfortunately doesn’t scale well. And machine learning is quickly “stealing the spotlight at the MDM and data governance party.”

Finally, there is growing focus on relationships not just data. That is changing the goal of a system of record to a system of engagement.