MDM: Subject-Area Data Integration
I frequently describe MDM as subject area data integration. The whole point of mastering and managing data is to simplify data sharing, since confusion only occurs when you have two or more instances of data and it doesn’t match. It’s important to realize that mastering data isn’t really necessary if you only have a single system that contains one copy of data. After all, how much confusion or misunderstanding can occur when there’s only one copy of data? The challenge in making data more usable and easy to understand exists because most companies have multiple application systems each with their own copy of data (and their own “version of truth”). MDM’s promise is to deliver a single view of subject area data. In our book, Customer Data Integration: Reaching a Single Version of the Truth (John Wiley & Sons, 2006), Jill Dyché and I defined MDM as:
“The set of disciplines and methods to ensure the currency, meaning, and quality of a company’s reference data that is shared across various systems and organizations.”
As companies have grown, so to have the number of systems that require access to each other’s data. This is why data integration has become one of the largest custom development activities undertaken within an IT organization. It’s rare that all systems (and their developers) integrate data the same way. While there may be rigor within an individual application or system, it’s highly unlikely that all systems manipulate an individual subject area in a consistent fashion. This lack of integrity and consistency becomes visible when information on two different systems conflict. MDM isn’t a silver bullet to address this problem. It is a method to address data problems one subject area at a time.
The reason for establishing a boundary around subject area is because the complexity, rules, and usage of data within most organization tend to differ by subject area. Examples of subject areas include customer, product, and supplier. There can be literally dozens if not hundreds subject areas within any given company.
Figure 1: Different Data Subject Areas
Do you need to master every subject area? Probably not. MDM projects focus on subject areas that suffer the most from inaccuracies, mistakes, and misunderstandings, for instance, customers with inaccurate identification numbers, products missing descriptive information, or an employee with an inaccurate start date. The idea behind master data management is to establish rules, guidelines, and rigor for subject areas data.
The rules associated with identifying a customer are typically well defined within a company. The rules associated with adding a new product to the sales catalog are also well defined. The thing to keep in mind is that the rules associated with product will have nothing to do with customers. Additionally, most companies have rules that limit what customer data can be modified. They also have rules that restrict how product information can be manipulated.. The idea behind MDM is to manage these rules and methods in a manner where all application systems manipulate reference data in a consistent way.
Implementing MDM isn’t just about building and deploying a server that contains the “master list” of reference data; that’s the easy part. MDM’s real challenge is integrating the functionality into the multitude of application systems that exist within a company. The idea is that when a new customer is added, all systems are aware of the change and have equal access to that data.
For instance, one of the most universal challenges in business today is managing a customer’s marketing preferences. When a customer asks to opt out of all marketing communications, it’s important that all systems are aware of this choice. Problems typically occur when a particular data element can be modified from multiple different locations (e.g., a web page, an 800 number, or even the US Postal Service). MDM provides the solution for ensuring that the master data is managed correctly and that all systems become aware of the change (and the new data) in a manner that supports the businesses needs.
MDM and M&A
A lot of our new clients have asked us to build MDM business cases to support their merger and acquisition strategies. Specifically, they’re looking to support the following four activities:
- Recent corporate mergers
Collectively, these activities can roll up into a category called corporate restructuring. Contrary to popular belief, restructuring isn’t just a financial challenge. It includes realignment of marketing activities (for instance, reconciling promotions and re-aligning diverse product sets), sales (reorganizing territories and compensation plans), and operational issues (company locations, product inventories).
Most companies approach restructuring as a one-time-only activity in which an army of analysts tries to reconcile financial structures from organizational hierarchies, to budgets, to the accounts themselves. The fact is these activities aren’t just part of high-profile M&A events. They occur every year as companies go through their annual budget processes. During a corporate restructuring the process usually takes longer than the acquisition itself.
Three principle MDM features lend themselves to this restructuring work: matching, grouping, and linking. MDM excels at matching “like” items from disparate sources, tracking and managing hierarchies and groupings, and linking disparate data sources to enable ongoing data integration. The point is that the act of merging organizations also means consolidating details across the companies. Most people consider this a one-time-only activity. The fact is, it must be an ongoing process.
When one company buys another, it’s typical to allow the acquired company to continue to operate using the same systems and methods it always has. The acquiring company simply needs to know how to integrate the information into their existing business. Consider Berkshire Hathaway. They acquire companies frequently, but don’t change how they run their business. They simply know how to reconcile and roll up the details.
Ideally, corporate restructuring means establishing a process to allow organizations to continue their operations using their existing systems. IT systems reconciliation simply cannot get in the way of running business operations. All too often, the answer is, “Replace their systems with ours.” This statement means that the new organization should reengineer its business. This simply takes too long.
MDM provides a company the capability to link the data content from disparate systems within and across companies. I’m not talking about linking Linux with Windows, I’m talking about matching and linking business content across dozens or even hundreds of systems. This way invoices continue going out, sales people continue getting commissions, and customers can still get product support in a seamless way.
Next time you’re discussing corporate restructuring and someone says the word “re-platform,” ask the question, “If we can link and move the data to continue to support core business processes, then we wouldn’t have to disrupt our operational systems, right?” Matching and linking the data across core systems can save a lot in terms of software and labor costs. But improving it where it lays? Priceless.