This is a Ventana Research Note written by Mark Smith from December 14, 2006.
Nearly every business needs master data management (MDM), but many are just beginning to understand why this technology is so important for improving accuracy and consistency of data. In October, Ventana Research completed a primary research program on master data management, surveying more than 500 qualified organizations to identify the maturity of MDM implementations as well as key trends and directions in its use. From the results of this research, including one-on-one interviews with participants, as well as from our own knowledge of master data management, information management in general and data governance, we have derived recommendations for best practices that organizations can use in implementing or evaluating MDM.
If it is implemented as a business and IT process, master data management can yield significant benefits, including improving the quality of business interactions, boosting satisfaction among customers, suppliers and other third parties, and avoiding costly errors. If it is not prepared for properly within a process context, on the other hand, the results can be widespread frustration and wasted effort in taking on new technology that does not deliver as expected. Sponsored by IBM and SAP and by media partners ASCET, BI Review, BusinessIntelligernce.com, The CFO Project, ICCM, Intelligent Enterprise, IT Business Edge, Manufacturing.net, SearchDataManagement.com, SearchOracle.com, SearchSAP.com and Technology Evaluation Centers, Ventana Research conducted research on MDM in July 2006, analyzing input from 515 qualified organizations in manufacturing, services and public sector industries. Based on that, we offer the following five best practices, based on our analysis, which your organization should consider to fine-tune existing deployments or to set requirements for starting to use MDM.
Conduct an organizational self-assessment.
To ensure you know the actual shortcomings in data management in your organization and to identify areas of opportunity, conduct a maturity assessment of the people, processes, information and technology that touch on MDM. You can apply the Ventana Research MDM Maturity Assessment(TM) to create a benchmark to compare your situation to those of the organizations analyzed in our research. Your level of maturity will suggest certain steps to take to improve your efforts in MDM. Our research found that more than 70 percent of organizations are at one of the two least developed levels of maturity; the odds are your MDM efforts also have room to improve.
Develop a business case and program for MDM.
To determine the value of MDM, calculate the cost of errors and identify the consequences of incorrect data to your organization. According to our research, 6 percent of organizations found errors totaling more than $11 million last year. Enlist executive leadership, define business drivers and benefits that you can correlate to the financial investment required and develop metrics that can measure progress. Look for areas where you can achieve benefits early and often to foster support for the necessary reinvestment every year.
Establish a data governance process and align MDM technology with it.
MDM is an ongoing process, not a project that ends, so ensure that MDM technology can align to your business processes, which should include data governance. Our research found that 49 percent of organizations currently have a data governance process, and among the 40 percent that said they do not have a process, 42 percent are planning to put one in place over the next two years. As you consider MDM technologies, give points to those that cause the least disruption and integrate most easily with your data governance process.
Define your business and technology requirements.
Many organizations believe they can address only one area of business data at a time, but in reality processes and systems touch each other. Do set a scope of requirements appropriate to your first and second phases of deployment, but plan for the longer term as well. To some organizations, for example, building a system themselves looks cheaper than buying from a vendor, but the costs of ongoing maintenance and improvements will be significantly greater after the first year. In our research, 39 percent of survey respondents said they will buy packages, 19 percent will build in-house and the remaining 42 percent don't know what they will do. Ensure that the critical component of MDM - the master data repository - is flexible enough across business and IT subject types and will interface to your operational and analytical systems. Develop an information management technology blueprint to ensure that your MDM effort will deliver sustainable benefits and the technology integration needed to attain them.
Rationalize existing systems and deploy MDM across the enterprise.
Our MDM research found that most respondents' companies have complex systems landscapes that include multiple instances for each type of enterprise application such as enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and data warehousing. In fact, 16 percent of organizations have more than 11 instances of ERP, and 11 percent of organizations have more than 11 instances of CRM. To ensure that master data is integrated consistently across systems will require creating interfaces to existing systems and rationalizing or eliminating legacy systems that may not conform to MDM. For the longer term, develop a strategy for moving toward a flexible data services architecture that can adapt easily to existing systems.
It is easy to underestimate the importance of master data management and give it less attention than it deserves. Wise companies will view it as a required component of their data governance processes and information management strategies. Organizations should seek out and absorb best practices and lessons learned from the innovators in MDM - which we found to be only six percent of organizations today. Our research provided a benchmark for assessing the maturity of the MDM industry and organizations that are using or evaluating it. Ventana Research recommends that companies take each of these best practice recommendations to heart; they can help you derive the full value and benefits from investment in this critical technology.
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