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Companies wishing to start a master data management (MDM) project may be unsure where and how to begin. After all, MDM is a journey and success or failure at the first step either defines or dooms the further evolution of the project. Recently, industry analysts have been recommending a cautious approach to starting with MDM – suggesting that companies start with a single data type (such as customer), implement MDM using a small footprint (such as registry style) or deploy MDM solely with a data warehouse to improve reporting. Inherently these technology focused approaches reduce project risk and relieve the data governance burden. Companies may readily adopt these approaches as perfectly reasonable starting points to their initial MDM implementation in hopes of mitigating risks. However, these same approaches may limit the scope and potential return on investment (ROI) from MDM since they do not attempt to solve the most pressing and difficult business problems.

Beware of Technology Focused Starts
A nearsighted focus only on the technology aspects of MDM may ultimately lead to minimal business adoption and therefore severely constrain the business ROI. The following business case scenarios illustrate how restricting MDM to a single master data type, registry style or to analytical usage will curb its usefulness in solving difficult business problems:

1) Restricting MDM to a single master data type may constrain the usefulness of the MDM solution. For example, an MDM solution that is deployed to solve buy and sell-side supply chain processes and more effectively manage the procurement of direct and indirect materials and the distribution of products needs to manage vendor, customer, material and product master data. Starting with only one of these master data types will not effectively improve the systemic supply chain, and would severely constrain the usefulness of an MDM solution for supply chain performance management.

2) Confining MDM to a registry approach may impede solving hard business problems. An MDM solution implemented to improve credit risk management and capital requirements for compliance with Basel II regulations will need to reconcile conflicting counterparty master data and legal hierarchies and store them centrally for immediate access. In this case, a registry approach would only identify counterparties as duplicates without determining a system of record or the correct definition for the counterparty. As a result, credit risk managers would be unable to determine which counterparty definition is current and accurate. In addition, a registry approach cannot determine the legal hierarchies required to calculate the aggregated risk exposure. Consequently, the credit risk managers would need to go through a process to determine the correct entry and combine information from different systems to arrive at that a single definition and legal hierarchy representation. From that point forward, the information would act as the single best source of information for all credit risk calculations. A small footprint using the registry approach would not effectively solve this difficult business problem.