Improving Operational Efficiency with Master Data Management
Marketing initiatives used to drive MDM projects; now the focus is on operational efficiency and compliance
As enterprises employ MDM to reduce costs and support compliance, the very nature of their MDM projects is changing
- By James E. Powell
- March 10, 2009
IT is being pushed to do more with less. In these tough economic times, enterprises are looking for ways to economize. Where can you get quick improvements to your operations? Michael Destein, director of solutions marketing and Peter Ku, director of product marketing, are from Informatica, a vendor offering a data integration platform, and in our discussion they share several MDM ideas that can make your organization more efficient.
We discuss where you can get the ”big hits” of efficiency, how IT and business users both play a part in making an organization more efficient, the traps organizations fall into in their MDM projects, and best practices to help you avoid such problems.
Enterprise Strategies: How have enterprises changed their focus when it comes to projects?
Michael Destein (MD): It’s well known that the world’s economies are in a shambles. Because of this we have seen our clients shift their focus from gaining market share and customer acquisition to what I would call a “survivor” mentality. Do what is necessary to keep the business alive -- growth and market share are secondary right now.
However, this doesn’t mean they are just sitting on their hands. On the contrary, the smart people are looking for ways to do more with less. Both in IT and across business functions. For example, one of our customers (ACH Foods) found that they could reduce the time it takes to integrate a legacy system from acquired companies from nine months to four months, saving them millions of dollars per consolidated system. This is a competitive advantage that in a downturn could prove to be a strategic differentiator as markets consolidate.
How is that reflected in the kinds of projects that enterprises are now focusing on?
Peter Ku (PK): While the business drivers have changed, we have seen the types of projects stay consistent. MDM projects which used to be driven by marketing initiatives are now driven by operational efficiency and compliance. Data migration projects that were driven by expansion and new system deployments are now driven by consolidation of several systems into one. There are many examples like this, but all of them have a common thread -- increase the efficiency of the organization as a whole while reducing total short term costs.
Is this the responsibility of business users or IT?
PK: It is the responsibility of both business and IT, and it has to be a collaborative effort in most cases. Let’s take a common example of improving customer profitability: doing more with fewer active customers. An initiative like that might include:
- Providing the call center with a quick lookup feature to find the customer’s accounts
- Synchronizing multiple systems with the customers change of address
- Accurately consolidating multiple accounts for an individual customer
Has this shift to reducing costs changed the technical requirements of projects?
PK: It hasn’t changed the long-term architectures, but it has changed the way that organizations sequence in the capabilities they need. We are seeing that clients require that projects are divided into shorter and smaller phases. This does have the resulting technical requirement of being able to scale down the projects to include just the capabilities needed while providing an architecture that provides a long-term vision and strategy.
How can an enterprise leverage its existing investments to improve operational efficiency?
MD: Over the past ten years, organizations have built out their infrastructure for moving data to data warehouses. That same infrastructure can be used for operational integration and master data management. Many of Informatica’s customers have expanded their use of our data integration and data quality products into these new areas.
One example of this is Electronic Arts (EA). Using Informatica, EA implemented an operational data store (ODS) tied into two other key related systems, an enterprise data warehouse (EDW) and a global financial reporting (GFR) database. This integrated environment provides a daily, 360-degree view of key business areas such as sales, revenue recognition, and demand planning. With this, EA has achieved benefits including multi-million dollars savings in project costs and a 25 percent reduction in calendar-time-to-benefit for rollout of systems to new business areas.
By building on work done for one project (such as data warehousing), organizations are able to reuse components, reduce learning curves of vendor software, and simplify their enterprise data integration architecture.
What are the biggest areas where enterprises can be more efficient?
MD: Most organizations have automated individual departments and functions already, so they don’t jump out as big opportunities for improving operational efficiency. However, in addressing the departmental efficiency issues, they have often created inter-departmental, cross-line-of-business, and cross-geography inefficiencies.
Sharing data across these organizational boundaries presents some great opportunities to cut business process and IT costs. From a business standpoint, having the most up-to-date and complete customer data can reduce processing costs, mismatched sales incentives, and customer service calls.
To accomplish these tasks, IT organizations must find ways to deliver a common set of information to multiple systems. This has many pitfalls. For example, despite having done a thorough analysis of source and target systems, many teams find themselves in a cycle of “code, load, and explode” when they migrate data into a master data hub. Organizations can become more efficient by using purpose-built data integration tools that allow them to document the metadata of systems and develop the mappings graphically. This enables them to quickly adjust to the unanticipated nuances of different systems without having to go back to square one and re-write their code.
What other best practices do you recommend?
PK: Broadly speaking, we recommend that organizations develop an enterprise integration competency center (ICC). We find that organizations that do this actually reduce their overall expenditures on data integration and data quality software and operational costs.
In specific project areas, we recommend the following:
- In MDM, we find that organizations that tackle data profiling as their very first step are more successful with their implementation
- For data migration projects, having a strategy and methodology developed up front avoids the perennial “code, load, and explode” syndrome
- For all projects, apply data quality functions anywhere and everywhere you move data between systems; consider it a “water filter” ensuring that the receiving system can trust the data
Overall, having a single data integration platform that applies to any of your data integration projects will allow you to leverage prior work and skills you develop within the organization.
Where will operational efficiency come from in the future?
MD: I will make three predications:
1. Once the economy starts to rebound, IT organizations will be very lean. Because of this, the business groups will trend even further towards software as a service (SaaS). When this happens, IT organizations will need to integrate with these systems for both data governance as well as operational integration. Having a data integration platform that can span on-premises data and data in the cloud will be key to both business and IT operational efficiency.
2. Master data hubs will continue to be funded and deliver on the promises of SOA, CRM, and supply chain management. Having a centralized location to aggregate, govern, and distribute data that is used in multiple business processes will cut duplicate and often conflicting efforts out of the business process and IT infrastructure.
3. Data governance will move from a goal to a reality. Organizations will define policies and procedures for creating, updating, deleting, and sharing data. These procedures, when coupled with data warehouses and master data hubs, will reduce manual data corrections, mistakes in reporting and analysis, and simplify compliance processes.
How does Informatica help in making an enterprise more efficient?
PK: Informatica provides a data integration platform that enables our customers to address a variety of projects including enterprise data warehousing, data governance, master data management, data migration, operational integration and others. We believe the Informatica platform is comprehensive (providing data you can trust, when you need it, where you need it); unified (a single platform provides all data integration capabilities); open (designed to work with what you already have now or will have), and economical (providing a lower total cost of ownership).
We’ve been the pioneers in the Integration Competency Center philosophy and are helping our clients weave integration into their enterprise architecture. This approach yields immediate benefits and lays the foundation for future growth, operational efficiency, and data governance. We offer a proven methodology and full range of educational services so clients can develop the skills to be self sufficient.