Sunday, October 20, 2013

Business Value of Master Data Management

In recent posts Aaron Zornes (@azornes: MDM and Next-Generation Data Sources) and Henrik Liliendahl Sørensen (@hlsdk: Another Facet of MDM: Master Relationship Management) shared their vision about the future of Master Data Management as a discipline that does not only mitigate architectural flaws of the past, but will create business value for the years to come. They identified management of relationships as a next-generation focus, and Henrik even suggested the terms Master Entity Management and Master Relationship Management.

Indeed, this is another reminder that successful Master Data Management is based on Master Data Modeling which actually distinguishes Master Entities and Master Relationships. Moreover, here is the historic opportunity to underscore the business value of (Master) Data Modeling.

Party (as described in my comment post What domains are people managing with MDM?) refers to any natural person or legal entity that is relevant for a business. High-quality Party data are necessary ingredients, but to generate business value, an organization needs to win Parties as Customers, Suppliers, Employees etc., i.e. to create and record relationships between those Parties and the business.

In a traditional siloed approach, Parties and their relationships with the business organization are not differentiated. Parties in the role of Customer are kept in sales systems, Parties in the role of Supplier in procurement systems and Parties in the role Employee in systems related to Human Resources. This approach neglects a.o. that
  • A Party can e.g. be Customer and Supplier
  • A Party can be Customer in multiple sales systems that may coexist and be used depending on the product / service which was ordered
  • Even within the same organization, Marketing, Sales, Order Processing and Accounting will naturally have a different understanding of what a "Customer" is
  • Depending on the industry, even one purchase (order) / contract may have multiple "Customers", e.g. the roles of Contract Partner, Beneficiary and Payer may be represented by different parties.

Conclusion: The differentiation of Master Entities and Master Relationships is not only paramount for a structurally-sound approach that allows to generate a complete view of all relationships which a party has with a business organization. It is also a crucial prerequisite to extract and distill the value-critical components from the Master Entities and thus to reliably evaluate the actual benefits and costs as well as the opportunities and risks of a business connection based on the detailed benefit / cost / opportunity / risk that come with each single role that a Party occupies.

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