Seven Ways to Reduce IT Costs Using Master Data Management

By eWEEK Staff  |  Posted 2012-05-11

Seven Ways to Reduce IT Costs Using Master Data Management

Thanks to the current recession, IT managers are facing a dilemma: Despite budget cuts, enterprises do not expect reductions in service levels provided by IT shops to their customers.

OK, so how do you maintain or improve service levels, yet continue to run the business efficiently? IT decision-makers are seeking out help in this area: investments that can accelerate cost reductions and at the same time streamline business processes.

Master Data Management (MDM) software and services are designed specifically for this purpose. MDM aims to help an enterprise align its master data assets -- documents, Internet and intranet sites, e-mail, spreadsheets, charts and graphs, audio, video -- across multiple systems and departments. It also provides 24/7 maintainance.

An MDM platform offers a consolidated view of a company's data assets and a consistent way of aggregating and distributing the data, which has proven to accelerate processes, projects and products through their various channels.

The main roadblock MDM has faced has been the up-front capital expense; an MDM deployment can reach up to and more than $1 million, which is out of reach for most companies that aren't among the Fortune Global 1000.

However, this is changing due to market competition. Up until recently, the MDM market has been dominated by IBM, SAP and Oracle. The top-selling software and service packages have been IBM WebSphere Customer Center, Oracle-Siebel Customer Data Hub and Universal Customer Master and SAP's NetWeaver MDM.

Other companies are now making a move in this space, thus bringing availability of these products to a much wider market. Teradata, which spun off from NCR in 2007, also has products on the market,  along with DataFlux, i2, Initiate Systems, Kalido, Purisma and Siperian.

This article offers "Seven Ways to Reduce IT Costs with Master Data Management." The author of this information is Ravi Shankar, Senior Director of Product Marketing at Siperian, a provider of a "flexible" master data management platform.

The following is excerpted from an original article by Mr. Shankar. Read on.

Lower Interface Costs an Important Factor

The following was provided by Ravi Shankar, Senior Director of Product Marketing at Siperian, maker of a "flexible" master data management platform.

MDM Cost Reduction Benefit  No. 1:  Lowers 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.

MDM Cost Reduction Benefit No. 2:  Eliminates 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.

Frequently, however, 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! 

MDM Cost Reduction Benefit No. 3:  Cuts 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.

Outsourced Cleansing Costs Are Reduced

MDM Cost Reduction Benefit No. 4:  Reduces 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 its direct marketing lists, whereas under the pressure to meet regulatory compliance deadlines, the legal department may outsource the manual cleanup of their compliance data. 

However, 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 substantial 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. 

MDM Cost Reduction Benefit No. 5: Reduces 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 multinational organization operating in more than 100 countries held its employee records in 70 different human-resource 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.

MDM Cost Reduction Benefit No. 6:  Reduces 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. 

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.

MDM Cost Reduction Benefit No. 7:  Reduces 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.

Editor's note: The bulk of this article was provided by Ravi Shankar, Senior Director of Product Marketing at Siperian, maker of a "flexible" master data management platform. It was edited for presentation on by Senior Writer Chris Preimesberger.

Rocket Fuel