By Ravi Shankar, Senior Director of Product Marketing, Siperian Inc.
Information Technology managers are facing a dilemma given the current economic
climate. Despite budget cuts, companies do not expect reductions in the service
levels provided by IT to the business. Under such circumstances, how do you
maintain or improve service levels and continue to run the business efficiently?
Smart IT decision-makers are seeking out technology investments that can help
to accelerate cost reductions and at the same time streamline business processes.
Master data management (MDM) is exactly this kind of investment. MDM ensures
that critical enterprise data is validated as correct, consistent and complete
when it is circulated for consumption by internal or external business processes,
applications or users. A recent Gartner report on 2009 Enterprise Software Spending
mentions that "the business cases for many application and infrastructure
initiatives are now aligning to cost reduction and risk management," and
that MDM is key to transforming business processes to streamline them further
in current market conditions.
But not all MDM technologies can provide these cost benefits. Only an integrated,
model-driven, and flexible MDM platform with easy configurability can provide
rapid time-to-value and lower total cost of ownership. Consider the following
seven ways a flexible MDM platform can lower costs:
Seven ways to reduce IT costs
1.) Reduce interface costs One definite way to reduce IT costs is to reduce the number of point-to-point
integrations across applications. Business processes such as order-to-cash that
cut across several heterogeneous applications, including order management and
accounts receivable, require complex point-to-point integration between the
individual applications. Multiply that by the number of business processes handled
by all business applications and what you have is a highly complex web of integrations
across the enterprise.
These point-to-point integrations are expensive to develop and maintain, but
MDM can simplify them by centralizing common information (master data), and
making this reliable information available at the different points within business
processes. Reducing interface costs has been proven in repeated implementations.
A global investment banking company that embraced MDM to eliminate trade failures
caused by counterparty inconsistencies was able to save millions of dollars
by eliminating interface maintenance and support. But it's important to select
an MDM platform that supports a non-invasive approach to integration. Business
applications that provide data to the MDM platform should not have to be modified
to store the identifier of the reconciled master record created by the MDM platform.
This will enable rapid integration and time-to-value.
2.) Reduce redundant third party data costs
Eliminating duplicate data acquisition from external data providers can account
for significant cost savings. For many companies, integrating third party data
from institutions such as Dunn & Bradstreet, Acxiom, IMS or Reuters is a
key requirement for their business operations. But frequently, different departments
within the same company will source data for their own uses, unaware that another
division within the company already procures the exact same data from the same
source. The cost of these duplicate data acquisitions has a multiplier effect.
With MDM, the third party data is integrated directly into the MDM system and
then distributed out to all downstream applications. This reduces the duplicate
data acquisitions to just one. The same global investment banking company mentioned
above was able to also save millions of dollars by eliminating redundant third
party data costs. When selecting an MDM platform, ensure that it provides out-of-box
integration with the most common third-party data providers or, if not, provides
a facility to rapidly integrate the third-party data in real-time or in batch
3.) Reduce data cleanup costs
Cleansing data centrally in an MDM system can account for significant cost savings.
Most companies have invested in data quality tools to clean up data within an
application for a specific business purpose such as direct marketing. Later,
as data quality requirements grow for other business purposes, companies continue
to cleanse the data within other respective business applications. This causes
two problems. First, the costs for multiple uses can compound and significantly
impact the IT budget. Second, since the cleansing is done individually by application,
duplications across applications are not taken care of.
By integrating the data from these disparate applications into a central MDM
system, it becomes possible to cleanse all data across the enterprise in a single
system. This approach helps not only to resolve conflicts across source applications,
but also makes it possible to create and store the history and lineage of any
changes to the data. Thus, by centrally cleansing the data, companies can save
on license and support fees for additional instances of data quality tools.
It's important to add that in order to realize these benefits you need to ensure
that the MDM platform is able to leverage your existing investment through reuse
of the existing data quality tool.
4.) Reduce outsourced cleansing costs
An MDM system can provide significant cost savings by eliminating expensive
outsourced manual cleansing. Some companies outsource the deduplication of their
data to an outside data cleansing services provider. This is usually done for
either marketing or compliance reasons. A marketing department may outsource
the deduplication of their direct marketing lists, whereas under the pressure
to meet regulatory compliance deadlines, the legal department may outsource
the manual cleanup of their compliance data. But in both these cases, the cleansed
data is never stored in a central place for future access, and it requires repetitive
cleansing. Over a period of time, these costs can mount to millions of dollars
across the organization. Further, the history of how the data has changed over
a period of time is not stored, a prime requirement for compliance audit.
An MDM system eliminates the need for outsourced manual cleansing by automatically
cleansing, enriching and deduplicating data on an ongoing basis, centrally storing
it for future use, tracking the changes to the data, and then making the cleansed,
enriched data available to marketing and compliance applications. Keep in mind
that the most effective MDM platforms are those that also store the history
of all data changes and the lineage of all merges as it modifies the data through
cleanse, enrich and dedupe processes. It should also support the ability to
readily view the history and lineage at any point-in-time for audit purposes.
5.) Reduce license, support and hardware costs of redundant systems By centralizing data for the enterprise, MDM makes it possible to reduce
the amount of, or even eliminate, redundant data stores and systems. Instances
that hold duplicate data can be retired, resulting in significant cost savings.
Consider this scenario: a multi-national organization operating in over 100
countries held their employee records in 70 different HR application instances.
With this scattershot approach, company HR executives had no way to tell the
exact count of employees -- it would take over two weeks to tally the employee
count, by which time a number of employees would have joined, quit or been terminated.
By centralizing the employee information in an MDM system and retiring the redundant
HR instances, this company can now not only gain the accurate employee count
at any point in time, but also save on costs of maintaining the additional instances,
thereby realizing costs saving in a variety of ways:
Reduced license and support fees by retiring redundant instances
Eliminated costs for tools required to perform customization
Lowered costs associated with the maintenance of expensive hardware to run
6.) Reduce custom solution development and maintenance costs
By replacing old custom masters, companies can save on costs spent developing
and maintaining them. Some companies have developed their own proprietary custom
masters such as a Customer Information File (CIF) or Operational Data Store
(ODS) by stitching together various tools. These masters were originally developed
to solve a specific business problem, but over time they have become inflexible
to meet the growing demands of the department, and are much less capable of
addressing other business needs in different parts of the organization. Besides,
creating and maintaining these systems is resource intensive -- armies of programmers
are required to code, test and customize them. By replacing these antiquated
custom masters with a configurable off-the-shelf MDM platform, organizations
can not only save significant development and maintenance costs associated with
band-aiding the custom solution, but also help refocus IT to support business
operations with timely data.
Pharmaceutical companies and banks used to rely on custom masters until it
became costly to maintain and extend, after which they replaced them with off-the-shelf
MDM platforms. Pharmaceutical companies have always faced the challenge of having
to integrate several external data sources, and in some cases as many as 50
sources such as IMS, AMA, and DEA, with their internal data. These firms had
to deal with data inconsistency between internal and external systems and rampant
duplication. Banks, on the other hand, deal with millions of customers spread
across several applications, and in some cases hundreds of applications, requiring
a single operational data store to gather all the customer data to support a
key business process such as new account opening. In both these cases, the custom
masters became cost-prohibitive to maintain and extend as the business requirements
grew. Companies in these industries were vanguards in switching over to off-the-shelf
MDM platforms to cut costs immediately and to save on future development costs.
But, be sure that the MDM platform you choose can be easily configured, as opposed
to requiring coding. With a flexible configuration, you can rapidly take over
the current master and also extend your MDM implementation to address future
business needs in other parts of the organization.
7.) Reduce the cost of information delivery
IT can reduce costs by delivering the right information at the right time. Compliance
and management reporting are two of the major functions supported by IT. Errors
in the reports delivered to regulatory agencies can results in fines, and errors
in reports delivered to management can result in misinformed and poor strategic
decisions. When auditors or management doubt the authenticity of the data in
the reports, it will often result in calls to IT to help prove the veracity
of the data. This can undermine management trust in IT department performance.
It can also result in critical IT resources having to be diverted to mine the
data for historical changes, which can be an expensive operation. MDM can help
eliminate this situation by a) managing a single version of the truth along
with a history of all changes, and b) delivering this information to any reporting,
business intelligence or data warehouse. Hence the compliance and management
reports created from these systems always have the most authentic information.
Should the veracity of the information need to be verified, it can be easily
achieved with an MDM system since it stores all the changes to the data. Hence
the MDM system helps reduce IT costs by delivering reliable information. Since
most reporting is performed using a business intelligence or data warehousing
system, ensure the MDM vendor has experience performing such integration and
can provide customer references showing that it has done so.
Investing in a flexible MDM platform is a smarter option
For the reasons stated above, investing in an MDM platform is a smarter way
to cut IT costs now during an economic downturn, instead of simply maintaining
the status quo and facing hard decisions brought about by budget cuts. For some
companies, a single reason might be large enough to warrant an investment in
an MDM platform. But for others facing a litany of performance issues stemming
from poor data quality, a number of these reasons would apply and an MDM investment
is usually more than justified.
However, decision-makers should be aware that not all MDM systems provide lower
total cost of ownership and rapid return-on-investment, both of which are necessary
criteria to secure the funding for an MDM system. MDM systems that offer a loosely
integrated set of core capabilities, model only one data domain such as customer,
offer only a simple architecture such as registry, and integrate with only operational
or analytical systems can actually increase IT costs by requiring extensive
coding and customization. Hence, it is important to select a configurable MDM
platform that comes with an integrated set of core MDM capabilities out-of-the-box,
is able to model any type of master data, and supports a flexible architecture
for integration with both operational and analytical systems. Such a system
can be quickly implemented yielding rapid return-on-investment, and will keep
maintenance costs down, resulting in lower total cost of ownership -- something
we strive for given the current economic climate.
About the Author
Ravi Shankar is Senior Director of Product Marketing at Siperian, Inc., an innovative provider of the most flexible master data management platform. For more information, contact the author at firstname.lastname@example.org or visit www.siperian.com.