The market for master data management (MDM) solutions to address customer data is in tremendous flux and growing rapidly - e.g., IBM's September 2005 acquisition of customer data integration (CDI) software pioneer DWL. Further "buzz" proof is that during the past six months, leading industry analyst firms have recognized CDI as a vital IT strategy:

  • April 20, 2005 - Gartner recognized the importance of CDI with its first Magic Quadrant for CDI hubs.
  • June 13, 2005 - Forrester Research released their first Wave report on CDI.
  • June 30, 2005 - The CDI Institute's MarketPulse survey found more than two-thirds of Global 2000-size companies plan to evaluate commercial CDI solutions in the next 12 months.

Clearly, CDI is an increasingly critical business strategy as well as a competitive differentiator for the world's largest software vendors (IBM, Oracle, SAP, Siebel) with a flurry of best-of-breed vendors (Initiate Systems, Purisma, Siperian), systems integrators (Accenture, Alliance, BearingPoint, IBM Global Services) and data service providers (Acxiom, Dun & Bradstreet, Experian) all chasing this market.
While most enterprises have infrastructure initiatives based on the technology platforms of strategic IT partners such as Oracle/PeopleSoft, SAP and Siebel, more than 75% of the IT professionals recently surveyed by the CDI Institute are actively considering purchases "outside the family" to facilitate connectivity between customer-facing applications and processes.

Most large businesses (i.e., the Global 5000 largest firms) are moving toward being able to reconcile account administration by "customer view" across channels rather than line of business-centric "product line" view.  "Portfolio management" of the customer role is critical and is increasingly being met by off-the-shelf CDI capability. The good news is now there are off-the-shelf software packages available for such "customer hubs," and these have proven track records. All too often, the incumbent customer information file is the system of record used by all channels and lines of business in a primarily batch mode with minimal in-line analytics to facilitate the business goals of marketing, sales and service. Businesses are frustrated with their current customer data management processes and are turning to off-the-shelf CDI solutions to assist in dealing with these overarching business trends:

  • Increased competition,
  • Frequent regulation and deregulation cycles,
  • Shorter economic cycles,
  • Ongoing globalization coupled with consolidation via mergers and acquistions (M&A),
  • Ever increasing customer expectations in quality of service experience.

IT management within large enterprises will need to help their CxOs provide the next level of justification for these large-scale IT projects. In our monthly MarketPulse surveys, we regularly measure these nine justifications:

  • Achieve competitive advantage,     
  • Centrally manage privacy policies,     
  • Comply with federal or state legislation regarding shared data models/processes,   
  • Forecast and increase customer retention,     
  • Identify and reduce customer fraud,     
  • Increase customer satisfaction via end-to-end business processes,     
  • Integrate customer and product master databases resulting from M&A,     
  • Provide compliance and transparency for C-level executives,    
  • Reduce costs of manual customer data management.

However, we found that there were more specific and differing use cases driving the adoption of CDI:

  • Financial services providers: Consolidation, globalization and increasingly imperious customers who are demanding near real-time views of their investment portfolios,
  • Pharmaceutical/life sciences: Alignment of production with marketing, sales territory and quota alignment, escalating cost of marketing new drugs, regulation and sample management,
  • Communications services providers: Consolidation, deregulation/reregulation, increasingly "portable" customers, inability to cross-sell across product lines and need for rapid time-to-market of new service bundles and products (e.g., VoIP).

Outside the formal survey questionnaire (i.e., no hard survey data, but rather a "sense of the house"), it became clear that there are five primary justifications across all industries that constituted the "kick-start" rationale:

  • Marketing lift. The vast majority of the initial CDI justifications came from the pain felt in call centers where the customer service reps were unable to cross-sell/up-sell without the benefit of a customer view that spanned product-specific silos.
  • Executive fiat. Several of the 50 clients in our CDI Advisory Council were mandated by the CEO or managing director to deliver on a plan for "universal customer view" capability in a 6- to 12-month time frame.
  • SOA foray. A good number of the enterprise architecture teams with which we liaison considered the current service-oriented architecture (SOA) capabilities within the CDI frameworks (e.g., promote customer, retire customer) as a low-risk evolutionary step into their longer-term SOA applications architecture.
  • Streamlining customer data maintenance. Not surprisingly, routine customer data maintenance such as change of address or marital status is an issue which not only affects customer satisfaction (i.e., if "once and done" is not the current mode), but also can easily be measured in terms of the full-time equivalents it takes to provide such basic internal (and often duplicative) data maintenance.
  • Privacy preferences. Given that there is a critical need to be able to demonstrate adherence to the regulatory reporting concerning adherence to customer's privacy preferences, it makes extreme business sense to centralize such capability rather than risk any one division or product group being out of sync with the customer's request; moreover, centralized privacy preference management also lends itself to ease in auditing.

Suffice to say, the CDI teams believed it was a combination of the above five justifications that many times helped socialize and evangelize their customer master data management (MDM) strategies.
In this and future columns, we will focus not only on the technical aspects of CDI solutions but also related business best practices derived from surveys of and interviews with the likes of CTOs and enterprise architects engaged in large-scale CDI initiatives. The key to initial justification of most CDI projects represents the reality that these are ultimately large-scale and mission-critical infrastructure projects that eventually become the system of record for all the enterprise's master customer data assets. Rather than "big bang" wholesale demolition and replacement of existing master file systems, most large enterprises take the federation approach, wherein master customer data is migrated to a central registry or data hub over 12 to 24 months as application systems are replaced or updated. The exception is certain data fields which have a strong requirement for centralized management, such as privacy preferences.

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