Master Data Management: A Complete Guide from A to Z
According to Gartner, “Master data management (MDM) is a technology-enabled discipline in which business and IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency and accountability of the enterprise’s official shared master data assets...” This insight takes you through everything that exists about MDM. So, read on!
What You’ll Learn From This Insight:
1. Data Management: The Beginnings
One of the early facilitators of data management was Enterprise Resource Planning (ERP) software, whose beginnings can be traced back to the 1960s. It was coined as ‘ERP’ much later in the 1990s by Gartner. Aimed at attaining efficiency in business management, ERP comprises of a suite of integrated applications to gather, stock, manage, and decipher data from numerous business activities. It fuels the automation needs of the back office and front office functions and is behind collaborative initiatives like supply chain management (SCM), customer relationship management (CRM), business intelligence (BI), and a variety of e-business technologies.
Over the years with industrial systems, technology systems evolved— and the value of information and data became paramount. As data continued to grow exponentially, IT leaders who dealt with the abundance of information realized that ERP was not enough. Suddenly, CRMs fell under the ambit of the IT department due to huge advancements in sales, marketing, and customer service technology. They evolved into a significant force and provided a customer “master” record. Have a look at the diagram from Gartner to see which types of master data an organization in the manufacturing industry deals with and which software is used along the product and process life cycle.
2. Emergence and the Need for the Enterprise
Enterprise master data management looks at fixing complexities across IT landscapes owing to the usage of different applications, technologies, and systems through nipping the data quality issues in the bud. Systems such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Order Management Systems (OMS) and even Supply Chain Management (SCM) functions having their own sets of siloed master data can jeopardize operations, compromise analytics, cost enterprises dearly, sending profit margins into a tailspin. Enterprise MDM emerges as an answer to the data quality and consistency problem for enterprises, as it creates a “golden record” of data that accumulates data from numerous data entry points. It is carried out by combining the operational side of the business, along with data warehousing and business analytics.
3. What Is Master Data Management (MDM)?
According to Gartner,“Master data management (MDM) is a technology-enabled discipline in which business and IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency and accountability of the enterprise’s official shared master data assets. Master data is the consistent and uniform set of identifiers and extended attributes that describes the core entities of the enterprise, including customers, prospects, citizens, suppliers, sites, hierarchies, and chart of accounts.”
Master data management (MDM) is an amalgamation of sound data management practices, including applications, technologies alongside key stakeholders, partners, and business clients. It involves consolidating, cleaning as well as augmenting corporate master data and synching it with business processes, analytical tools to implement the policies, services, procedures across the enterprise infrastructure to ease the capture and integration of data in a timely, consistent and complete manner. The ultimate goal of MDM system is to significantly improve operational efficiency, enhance data reporting, and help businesses make smarter decisions.
What is a Master Data Management Program?
A master data management (MDM) program sources data from multiple systems and offers a single view of it by consolidating all the data in a “golden” record. For instance, in the case of customer data, the records of the customers may not be identical at various points like- order entry, customer service, or shipping. That’s due to inconsistencies in name, residence, and other characteristics. MDM standardizes all the customer data into a unique set of master data assets that can be used in all connected systems. This not only helps organizations to remove duplicate data but do away with redundancies and incongruities so that for everyone, be it, operational staff, data analysts, or decision-making executives, there’s one and only one picture of every individual customer. An MDM program can be applied to customer, product or any other kind of data.
What is a Master Data Management System?
A master data management system promises authoritative, dependable data to enterprises, suitable to their needs and aims. It is influenced by mainly three factors: a) the domain of all master data, b) the way enterprise system operates currently, c) the implementation style needed for the deployment in question.
As a general practice, the MDM system deployments do not happen in a full-fledged, full-throttle manner simultaneously for all domains of data. Instead, it takes place in phases, where initially, the scope is restricted by only focusing on the critical areas needed to ensure ROI remains free of any impediments in the shortest span-of-time. The implementation is then extended to other systems, and the scope of implementation is expanded. Likewise, more domains are included in the fold, and the method of use may evolve along the way to create business value further. An MDM system can be executed in a multidisciplinary, multi-geographical environment.
4. When MDM is Required? Why is it Needed Now?
It all starts when different departments, while making changes to data through the value chain, create their own version of it, store it in silos and reintroduce that modified data back into the system, leading to duplication, redundancies, ultimately hampering enterprise productivity and overall output. The most definite signs that you need an master data management are:
- Unclear Picture of Data – If the enterprise data is lying across disparate locations, systems, applications, and other sources, it can never give out a complete picture of the data, leading to unnecessary complications.
- Finding Data Turning Troublesome – If there are no inter-domain associations between departments (suppliers, product teams, sales, and marketing) knowing which data is the right data will only get challenging.
- Dipping Customer Satisfaction – Customer dissatisfaction can be a consequence of inconsistent, incomplete, low-quality data that can result in abandoned carts, bad reviews, and can severely hurt the brand image.
- Increasing Unstructured Data – Unstructured data doesn’t have an already defined schema or data model. It can be textual or non-textual but can be a cause of concern as it can lead to huge ambiguities.
- Suffering Business Intelligence – Incorrect or incomplete data can never be the source of accurate analysis; it can never give you the right insight into market trends, customers’ minds or tell you how to use the data to your benefit.
The primary reason why master data management is needed now is due to the meteoric rise in the amount of data. IDC has predicted that 175 zettabytes of new data will be created by the year 2025. With such proportions, data managers can only imagine how data related complexities are going to intensify. Every business will aspire to:
- Drive innovation
- Improve supplier and partner relations
- Decrease time-to-market
- Enhance compliance and risk management
- Reduce costs/Increase margins
- Improve decision making
- Increase revenue growth
- Enhance customer relations/service
- Develop internal/operational efficiencies
- Boost business process agility and outcomes
5. What is a Multi-domain MDM?
As the interest of enterprises spiked in other data domains such as digital assets, channel/partner and vendor/supplier data, geospatial and hierarchical data, the need for a multi-domain MDM came to the fore. A multi-domain, multi-vector MDM hence began to be looked at as enabler of digital businesses from collecting data in a single domain to connecting data in different domains.
Multi-domain MDM solutions assist enterprises in exploring data associations, striking connections, defining entities, and generating newer possibilities to grow.
This progression towards multi-domain MDM was validated by Gartner’s 2018 Magic Quadrant for MDM when 58% of their reference customers showed an inclination towards multi-domain MDM.
6. Who Needs Master Data Management?
It was earlier believed that master data management was only the burning need for large-scale enterprises—that were saturated with scattered data across geographies or participated in mergers and acquisitions—which need wide-ranging data integration.
However, with the surge of data and its effects on significant aspects of business, even smaller companies can no longer afford disparate data management initiatives that lead to fragmented customer experiences. Especially when the market size of MDM is likely to grow to USD 22 billion by 2023, according to a forecast by MarketsandMarkets. Therefore, MDM is today necessary for all business-critical functions like marketing, customer care, product management, sales, supply chain, finance, warehousing, among others.
a) Who’s Involved in an MDM Initiative?
At a broader level, master data management initiatives are undertaken by individuals responsible for data governance, data stewardship, and IT administrators.
- Data Governance Council: does the work of charting out data definitions, access rights, standards, quality rules, as well as executing those rules to enable proper data controls across the organization.
- Data Stewards: are the ones in charge of enforcing policies and guidelines on the instructions of data governance council. They are the ones who cleanse, fix, and manage data with the MDM solution. They hail from support function in organizations, and not necessarily from the IT.
- IT Administrators: are the ones who give suggestions on solution designing, emphasize probable limitation of the system, and extend help in managing, setting-up, and configuring the solution.
b) Who Are the Stakeholders in MDM?
It’s imperative to single out the chief stakeholders before MDM implementation begins. The size and structure of the stakeholder teams will always vary according to the scale of the data or scope of business. However, a general hierarchy could be:
- MDM Council: These are the topmost people in the enterprise, the C-suite/senior executives who create the plan, see how it fits with the IT, look at the fulfillment of future needs, and run the show. The ownership lies with them.
- MDM Steering Team: It comprises of data stewards, and a diverse group of experts from various divisions representing departments in-charge for defining processes, setting expectations, and monitoring program execution as per business needs.
- Solution Architect: Is someone who is responsible for developing the entire solution landscape, using the best technologies for various interfaces and design by following the best practices.
- Program Manager: Is someone who is entrusted with the delivery of the MDM program, by managing the complete team, including (but not limited to): leads of associated technologies; MDM consultants responsible for separate master data entities like the product, customer or vendor; development team; governance team.
c) Which Industries Are Making the Most of It?
7. What is Master Data Governance?
Plainly put, master data governance is a set of decisions, policies including accountabilities and rights for data-linked processes, carried out as per a pre-approved, formalized model to handle data ownership, privacy, compliance, access, security, sensitivity, risks—to enable organizations to leverage the data as best as possible.
A good master data governance strategy must include:
- Identification of shared resources that need to be managed.
- Delegation of responsibility for resources.
- Communication of how the governance structure is laid out and how the processes will be followed.
- Allocating decision making rights in relation with access to common resources.
- Handover of roles and responsibilities to distinct areas of any implementation, including policies and processes for any common resource.
The Data Governance Hierarchy
- Executive Level: Starting from the top, the executive layer involves the top-level management who are experts in developing policies and strategies; they’re mostly the top executives who supervise the governance of data from above.
- Strategic Level: This comprises of the individuals that set the policies in practice and offer a pre-meditated path to data. They are also liable for the resolution of escalated issues from a strategic perspective.
8. Key Benefits of Master Data Management
One of the most fundamental operational benefits that master data management achieves is making business departments create data once and enable its use everywhere, likewise updating data once and updating it everywhere. Enterprises can view all the actions and transactions via a structurally and semantically consistent view of master data (comprising of customers, products, vendors, etc.).
MDM enables enterprises to accomplish a variety of things like:
- Uncomplicate procurement processes
- Enhance compliance with privacy legislation
- Helps up-selling and cross-selling
- Gain accurate analytics and business intelligence
- Improve operational risk management
- Decrease overall costs
- Get high-quality data
- Improve employee productivity
- Optimize sales and marketing
- Boost customer satisfaction
- Smarter product management.
- Strengthen fraud prevention
- Decrease supplier onboarding costs.
- Streamline supply chain management
- Cost savings in mergers and acquisitions
However, on a macro level, a host of benefits can be unlocked through MDM by mixing high-quality data and smart business processes:
- Lower Total Cost of Ownership (TCO) and Faster time-to-market
With an MDM in place, adoption and implementation, along with existing maintenance and management costs, come down significantly. There is hardly any need for writing any code. The business rules, security, data stewardship functions, data model are all customizable. No matter which MDM style it is, it is supported by the same software instance. The implementation can happen on-premise, on cloud, or can be a mix of both. MDM’s ability to centralize, standardize, enrich, validate, and link master data records, is outstanding. Its adaptability to multiple regions, channels, languages without data duplication, along with automated workflows to deliver data consistently and quickly across any channel, and launch products swiftly, make faster time-to-market possible.
- Improve Enterprise-wide Efficiency and Higher ROI
MDM helps enterprises to function with amplified acceleration and agility. It boosts the association between applications, systems, and people by integrating disconnected processes to drive performance, manage workflows better, promote collaboration, and reduce risks. It converts duplicate, inconsistent, contradictory data into a single, authoritative form of truth—a golden repository of data. Efficient master data management has a direct bearing on your ROI, as all the data-oriented activities depend on the quality of your data and strong collaboration. Organizations can support vendors and employees with streamlined processes, saving time and resources; marketing and sales teams can target customers in the best possible way and keep adjusting to their expectations, hence maximizing the ROI.
- Enhance Decision-making and Great Customer Experience (CX)
MDM enables better reporting, compliance, and monitoring to drive optimal assessment of risk and opportunities. With a 360-degree view of data across the entire ecosystem, employees and decision-makers can swiftly analyze any glitches or effectiveness of the processes, helping them draw the right inferences to optimize productivity, market performance, vendor collaboration, and customers service. While on the one hand, MDM helps in offering superior, personalized, connected, consistent, and up-to-date product experiences to the customers to fuel engagement. On the other hand, the enhanced visibility into customer preferences through profiling, behavioral information, predictive analytics can not only offer them tailormade customer experience but work wonderfully for customer retention and loyalty.
9. What is Master Data Management for Products?
Master data management for products or product master data management focuses on how businesses manage master data of products by consolidating product data in a single version of truth or golden record for sharing across the enterprise. Product MDM ensures that the accuracy, transparency, and consistency of data is maintained across the entire value chain. It streamlines product data complexities, and creates competitive advantages for businesses, by bringing the right product data, at the right place, in front of the right audience.
Here are Some of the Most Obvious Advantages of Product Master Data Management:
Product master data management helps businesses by linking, synchronizing product data (or information) across heterogeneous data sources existing in multiple geographies via semantic reconciliation of product master data. It enables a single product view for the stakeholders of various business initiatives.
Product master data management improves multichannel delivery of information, increases supply-chain visibility, reduces the time-to-market, quickens new product/service introduction, improves custom analytics, increases enterprise collaboration, fuels innovation, and agility for nimble business process orchestration.
In essence, product master data management does the following for organizations:
- Fix siloed, duplicate, erroneous, doubtful product data.
- Share latest, up-to-the-minute product data across the enterprise.
- Manage products having complex attributes and hierarchies.
- Syndicate relevant, trustworthy product information across multiple customer facing sales channels.
- Get visibility into data, its disparities, relationship patterns—and make necessary rectifications.
- Easily onboard supplier data while offering automation of workflows.
- Maintain governance and regulatory compliance through appropriate audit trails and record accounts.
- Offer the ability to manage, enrich, model all facets of master records.
10. What is Open-Source Master Data Management?
While organizations have almost fully comprehended how MDM can power the fulfillment of corporate objectives, it may still appear to be a daunting undertaking for businesses as it challenges their existing data management status quo, brings architectural complexity, and demands time and expense. After all, MDM is a capital-intensive initiative.
A proprietary MDM software comes with a licensing cost, vendor lock-in, and limited scope of customization and flexibility. While large organizations with enormous resources needn’t have to worry, it’s the mid-level and relatively smaller enterprises that find themselves in a tricky situation.
That’s where open-source MDM scores a point. It decreases implementation complexity, expense, and finds solutions to your unique needs through limitless flexibility, time-to-value—comfortably steering you towards your enterprise MDM goals.
The Most Important Advantages of Open-Source MDM:
Freedom: For open-source MDM, the term ‘freedom’ acquires a lot of meanings. It means freedom from vendor’s restrictions to customize the source code, imparting users’ complete flexibility to leverage the solution as per enterprise needs. It refers to the freedom of interoperability between systems, applications by connecting diverse systems and people with the help of APIs. It also means freedom to seek help from lively, open-source communities where the best developers, MDM professionals, contribute from across the globe. Lastly, freedom means flexibility and the ability to innovate and operate at scale.
Low Cost: In open-source MDM software, the software provider doesn’t charge a penny from organizations for implementation, customization, or system maintenance. Organizations can pick and choose any IT service provider, negotiate for the service they want, or simply build an in-house team to deploy the solution. There are no extra costs for software upgrades or any hidden charges. Overall, this becomes hugely cost-effective in comparison to a proprietary MDM software, where every component in a solution has a price tag attached to it. All of this drastically brings down the total cost of ownership of an open-source MDM software.
Democratization: Open-source MDM is vastly more democratized in nature than the proprietary MDM. It is accessible to organizations irrespective of their sizes, willing to execute small to large-scale MDM projects. The open-source nature brings with it the invitation to be used in any IT environment for managing data and delivering value to any scale. Companies can adopt the advanced algorithms, high-end functionalities that are at par with industry maturity and momentum. Also, since it comes with no obligations, contracts, smaller companies too can dip their toes into it, and decide accordingly.
11. How to find the Right Master Data Management Strategy?
The most effective way to arrive at a master data strategy is by starting in a reversed order. Begin with your dream MDM scenario — your ideal solution.
Key pointers before you begin:
- Needless to say, no work can start without developing and formalizing a vision of how an MDM solution will support your enterprise.
- To achieve long-term value, your MDM initiative must have a direct link with your business drivers.
- You must carefully observe your IT project plan to ascertain which projects and programs would touch master data and bring them on the same page with your MDM initiative.
The Core of Your Strategy
For optimal results and to be advantageous for decision-makers, CIOs, CDOs, and other data and analytics leaders, first, a standard definition of what constitutes as mission-critical master data (tied to business outcomes) must be devised.
A common set of attributes for products, customers, suppliers, services, assets, employees, and locations must be arrived at. Technology is mostly not the number one issue for companies; it is to secure buy-in from top management and stakeholders.
A new mindset must be nurtured where applications that were developed and deployed in silos, data that was housed in individual systems, and legacy practices of maintaining data are discarded. High-integrity and high-confidence in master data are at the heart of every MDM strategy. It’s only around sound master data that all the major business processes and applications will functions.
In most organizations, MDM solutions broadly fall under three categories:
Operational MDM: This is a solution that focuses on handling transactional data used by operational applications. They mostly depend on integration technologies and offer real value to the organization. It is, however, devoid of the ability to impact analytics and reporting.
Analytical MDM: Here, the primary focus is to offer the best analysis and reports about how master data must be handled by business intelligence (BI) technologies and data warehouses. They also have a lot of value for businesses but have no bearing on the operational part of the system.
Enterprise Master Data Management: A combination of both operational and analytical master data is what constitutes of Enterprise Master Data Management (MDM). Operational data improves operational efficiencies, while the analytical part offers the right picture of the way business is performing.
Keeping your immediate needs in mind, you must carefully choose the solution. An MDM process involves data modeling, metadata management, mapping, and semantic reconciliation of the data so that issues are resolved between contradictory data sources, and an authoritative data source is established.
Implementation must also be carefully carried out. You may choose to adopt a single subject area (single-domain) approach, like MDM for product data to support supply-chain management (SCM) or global data synchronization. Or you may be inclined to go for an MDM led customer data application to support customer-related goals.
Various master data implementation styles can be adopted, keeping your priorities in focus.
There are four implementation styles suggested by Gartner, for faster delivery of benefits and value:
Lastly, being successful with an MDM and to measure its success—is difficult. Keep your eyes trained on business metrics, not data metrics. Do not make the mistake of taking it as a data integration project. It is a lot more than that. For a start, you can begin with small steps, analyze business outcomes, and expand over time.
Master data management (MDM) is a discipline that carries out data management by creating a golden version of the truth, known as the master data, and shares it uniformly, consistently, correctly, dependably across the enterprise. For MDM, data is sourced from all existing enterprise technologies, applications, departments, stakeholders, and partners.
A master data management system consolidates, streamlines, and disseminating dependable, authoritative data to meet enterprises’ data management objectives. An MDM system is usually implemented in a phased-out manner focusing on the most critical domains followed by the next ones; it is often executed in a multi-geographic, multidisciplinary environment.
An MDM fulfils the data management needs of businesses—from master data consolidation to dissemination, master data governance, and makes the best use of enterprise data to gain specific enterprise aims. On the other hand, ERP systems manage day-to-day enterprise business processes belonging to accounting, HR, supply-chain operations, compliance, CRM, etc., and allow seamless collaboration between them through an uninterrupted flow of data.
By creating a single, holistic view of data, MDM helps businesses to gain valuable insights from the data in real-time. They get a clearer picture of the prevailing market trends, helps in forecasting future demand, and improve overall reporting across the entire value chain. These insights are the building blocks of business intelligence and become the basis for critical business decisions.
MDM keeps the sanctity of data that flows across departments intact by keeping it accurate, complete, and consistent, warding off redundant and duplicate data. As a result, MDM increases enterprise productivity, reduces costs, enhances customer satisfaction, boosts compliance and risk management, strengthens relationships with partners and suppliers, and improves decision-making.
The master data council owns master data management (comprising of topmost executives, often the C-suite). They are responsible for the fulfillment of the aims and requirements that are expected from MDM implementation. The MDM steering committee assists them; it comprises of individuals from various departments from across the organization to execute and monitor the MDM program.
MDM works by creating a tailormade MDM strategy that includes a data governance plan and assessing current situation and future goals. Execution is carried out by identifying master data records from diverse systems across the enterprise landscape. This is followed by cleaning and standardization of master data to create a trusted, authoritative, golden record, which serves as a single version of truth throughout the enterprise.
Master data management can be implemented in a variety of ways depending on the organization’s needs. Some of the widely adopted styles of implementations that are also endorsed by Gartner are 1) consolidation, 2) registry, 3) centralized, and 4) coexistence. These implementation styles define whether master data should be subjected to centralized governance or a distributive approach.
Master data management may fail if its foundations aren’t solid. This happens when top stakeholders do not own or are not aligned with the MDM strategy and hence lack the involvement or the will to implement MDM. In such cases, the entire MDM execution is left to the IT department, and eventually, due to lack of interest or ownership, the project fails.
Some of the chief benefits of MDM are that it builds internal operational efficiency, boosts business agility, enhances customer and partner relations, improves decision making, decreases costs, facilitates compliance, mitigates risks, lowers time-to-market, encourages innovation, drives revenue growth, and produces accurate forecasts.
Master data management is essential as it offers a single unified view of the entire master data of an enterprise, which in turn helps in finding bottlenecks, fixing redundancies, improving the flow of business-critical information, governing data well, and offering deep insights to improve business processes and workflows.
There are three broad categories of Master data management:
- Operational MDM: This is concerned with the transactional part of MDM, which optimizes data accuracy and consistency among MDM domains.
- Analytical MDM: Pertains to utilizing the capacity of MDM for business intelligence, analytics, and insights.
- Enterprise MDM: An enterprise MDM combines both Operational as well as Analytical MDM.
Enterprises have realized the untapped power of data, its core capabilities, and the possibilities of innovation and growth associated with it. So, implementing master data management becomes a building block for developing data-led competencies and aiming for high growth. Besides, as businesses deem MDM to be necessary for optimal operations, its scope is enormous.
MDM and data warehousing both store and consolidate data in different manners. However, data warehousing is mostly restricted to the operational and transactional aspects of data and contains the last update as its current view, while MDM offers the best representation of both internal and external data. Therefore, MDM in data warehousing is largely about operationally and transactionally dealing with master data.
Data management is a business practice that helps in managing, including consolidating, enriching, maintaining data, and putting it to further use in order to achieve various enterprise objectives.
On the other hand, data governance helps organizations chart out policies related to data access, handling, security, and compliance to facilitate data’s desired use. It falls under the ambit of Master Data Management.
Master data management is a business practice that involves consolidating, cleaning, and enriching corporate master data by including various business applications, partners, people, departments, key stakeholders, and business clients on the same page to achieve organizational goals.
Metadata management refers to handling the data belonging to digital assets that are being managed, such as image names, dimensions, and tags. It facilitates searchability, file management, asset organization and management.
Data managed in MDM pertains to essential business data objects in various applications and systems like analytical data, transactional data, hierarchical data, unstructured data, as well as data about entities, locations, things, alongside connected attributes, metadata, roles, associations, taxonomies, and descriptions within an enterprise ecosystem.