Master Data Management (MDM) has become a crucial aspect of modern business operations, ensuring the accuracy and consistency of vital data across different IT systems. In this article, we will explore the concept of MDM, its importance in today’s business landscape, key components, architectural styles, benefits, challenges, and best practices.

What is Master Data Management (MDM)?

MDM is a comprehensive process that creates a uniform set of data on customers, products, suppliers, and other business entities to maintain accurate and consistent information across various IT systems. As a core discipline in the overall data management process, MDM helps improve an organization’s data quality, streamline data sharing between different business systems, and facilitate data processing in IT environments containing diverse platforms and applications. Moreover, effective MDM can make the data used in business intelligence and analytics applications more trustworthy.

Origin of MDM

Master Data Management evolved from previously separate methodologies focused on consolidating data for specific entities, primarily customer data integration (CDI) and product information management (PIM). MDM brought them together into a single category with a broader focus, although CDI and PIM remain active subcategories.

What is Master Data?

Master data, often referred to as the golden record of information in a data domain, corresponds to the entity subject to the data being mastered. Data domains vary from one industry to another. For example, manufacturers typically focus on customers, products, suppliers, and materials, while banks concentrate on customers, accounts, and financial products. In healthcare organizations, patients, equipment, and supplies are among the applicable data domains. For insurers, domains include members, products, claims, and providers in the case of medical insurers.

Some data domains, such as employees, locations, and assets, apply across various industries as part of MDM initiatives. Another example is reference data, which consists of codes for countries and states, currencies, order status entries, and other generic values.

Master data does not include transactions processed in various data domains. Instead, it functions as a master file of dates, names, addresses, customer IDs, item numbers, product specifications, and other attributes used in transaction processing systems and analytics applications. As a result, well-managed master data is often described as a single source of truth, or alternatively, a single version of the truth concerning an organization’s data and external data sources ingested into corporate systems to augment internal datasets.

MDM Architecture

MDM can be implemented in two forms: analytical MDM, which aims to provide consistent master data to data warehouses and other analytics systems, and operational MDM, which focuses on the master data in core business systems. Both forms offer a systematic approach to managing master data, typically enabled by deploying a centralized MDM hub where the master data is stored and maintained.

There are, however, different ways to architect MDM systems, depending on how organizations want to structure their MDM programs and the connections between the MDM hub and source systems. The primary MDM architectural styles include the following:

Registry Architecture

This style creates a unified index of master data for analytical uses without changing any data in individual source systems. Regarded as the most lightweight MDM architecture, it uses data cleansing and matching tools to identify duplicate data entries in different systems and cross-reference them in the registry.

Consolidation Approach

In this style, sets of master data are extracted from various source systems and consolidated in the MDM hub, creating a centralized repository of consistent master data primarily used in BI, analytics, and enterprise reporting. However, operational systems continue to use their own master data for transaction processing.

Coexistence Style

Similarly, this style creates a consolidated set of master data in the MDM hub. In this case, though, changes to the master data in individual source systems are updated in the hub and can then be propagated to other systems so they all use the same data, offering a balance between system-level management and centralized governance of master data.

Transaction Architecture

Also known as a centralized architecture, this approach moves all management and updating of master data to the MDM hub, which publishes data changes to each source system. It is the most intrusive style of MDM from an organizational standpoint due to the shift to full centralization, but it provides the highest level of enterprise control.

In addition to a master data storage repository and software to automate interactions with source systems, an MDM framework typically includes change management, workflow, and collaboration tools. Data virtualization software can also be used to augment MDM hubs, creating unified views of data from different systems virtually, without requiring any physical data movement.

Benefits of Master Data Management

MDM offers several primary business benefits, including:

Increased Data Consistency

A uniform set of master data on customers and other entities can help reduce operational errors, optimize business processes, and boost the accuracy of BI and analytics applications, potentially leading to improved strategic planning and decision-making.

Improved Regulatory Compliance

MDM initiatives can aid efforts to comply with regulatory mandates such as the Sarbanes-Oxley Act, the Health Insurance Portability and Accountability Act (HIPAA), and new data privacy and protection laws like the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act. MDM can help companies identify all the personal data they collect about people.

More Effective Data Governance

MDM also dovetails with data governance programs, which establish standards, policies, and procedures on data usage in organizations. MDM can help improve data quality metrics used to demonstrate the business value of data governance efforts. Additionally, MDM systems can be configured to give federated views of master data to data stewards responsible for overseeing datasets and ensuring that end users adhere to data governance policies.

>>> Read more: What’s the Difference Between Master Data Management and Data Governance? 

MDM Best Practices

Managing MDM programs effectively involves several best practices, including:

Involving Business Stakeholders

MDM is as much an organizational process as it is a technical one. Involving business executives and users in MDM programs, especially when master data is managed centrally and updated in operational systems by an MDM hub, is essential. Data and business process owners should have a say in decisions about how master data is structured and policies for implementing changes to it in systems.

Documenting Potential Business Benefits

Connecting MDM’s expected benefits on data assets to corporate strategies and business goals is generally necessary to secure management buy-in for a program, which is needed to obtain funding and overcome potential internal resistance.

Building End-User Training and Education

Business units and analytics teams should receive training on the MDM process and its purposes before a program starts.

Planning for the Long Term

MDM must be addressed as an ongoing initiative rather than a one-time project, as frequent updates to master data records are commonly needed. Some organizations have created MDM centers of excellence to establish and manage their programs, helping to avoid roadblocks in incorporating common sets of master data into business systems.

Challenges of Master Data Management

Despite its benefits, MDM can be a difficult undertaking. Some common challenges include:

Complexity

The potential benefits of MDM increase as the number and diversity of systems and applications in an organization expand. MDM is more likely to be valuable to large enterprises than small and medium-sized businesses. However, the complexity of enterprise MDM programs has limited their adoption even in large companies.

Disagreements on Enterprise Data Standards

One of the most significant hurdles is getting different business units and departments to agree on common master data standards. MDM efforts can lose momentum and become bogged down if users argue about data formatting in their separate systems.

Project Scoping Issues

The scope of planned work can get out of control, or the implementation plan may not properly stage the required steps, leading to unwieldy MDM implementations.

Incorporating Acquired Companies

When companies merge, MDM can help streamline data integration, reduce incompatibilities, and optimize operational efficiency in the newly combined organization. However, the challenge of reaching consensus on master data among business units can be even greater after a merger or acquisition.

Dealing with Big Data

The growing use of big data systems in organizations can complicate the MDM process by adding new forms of unstructured and semi-structured data stored in various platforms, including Hadoop clusters, data lake systems, and newer data lake house environments.

Key Steps in the MDM Process

MDM initiatives typically involve long projects with various phases and tasks, including the following key steps:

  1. Identify all relevant data sources for a particular domain and the business owners of each data source.
  2. Work with various business stakeholders to agree on common formats for the master data across all systems.
  3. Create a master data model that formalizes the structure of the master data records and maps them to the various source systems.
  4. Decide on the type of MDM architecture to deploy based on business needs and planned applications, in collaboration with the stakeholders.
  5. Deploy any new systems or software tools needed to support the MDM process.
  6. Cleanse, consolidate, and standardize data to fit the master data model, using data quality management and data transformation techniques.
  7. Match duplicate data records from multiple systems and merge them into single entries as part of the final master data list.
  8. Modify source systems as needed so they can access and use the master data during data processing operations.

Key Roles and Participants in an MDM Initiative

MDM programs should involve a wide range of people in an organization due to their complexity and broad impact on business operations. Some key positions and participants in the MDM process include:

  • MDM manager
  • Master data specialist
  • Data stewards
  • Other data management professionals
  • Executive sponsor
  • Business stakeholders

By understanding and implementing Master Data Management effectively, businesses can improve data consistency, regulatory compliance, and data governance, leading to better decision-making and overall success in the modern business environment. SimpleMDG is an effective master data governance solution that can help businesses achieve these goals efficiently and effectively.