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Master data management market heats up -- software buyers beware

Forrester expects master data management spending to increase dramatically by 2010, but recommends three steps to take before investing in master data management software.

Before taking part in the predicted master data management (MDM) spending spree, there are a few things buyers should know, according to a recent report by Forrester Research Inc.

First, there's no single, "complete" MDM technology product on the market yet, according to Rob Karel, study author and principal analyst with the Cambridge, Mass.-based analyst firm. No single vendor technology package exists today that can effectively manage all data domains, including customer, supplier and product, he said.

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"[Vendors] creating cross-data-domain, holistic MDM solutions are really not there yet," Karel said. "There are very disparate technologies that they're trying to wrap together and package, but they're still working on it. It's a couple years away."

That may be contrary to what potential buyers hear though, and the confusion around MDM software vendor claims may get worse before it gets better, due to rapid market growth. Forrester sized the worldwide MDM market at $1.1 billion in 2006 and forecasts that market will grow to $6.7 billion by 2010. However, of 2006 revenues, only about one-third went to software licenses, and that figure includes customer data integration (CDI) and product information management (PIM) systems.

The lion's share of early adopters' MDM dollars went to service providers, such as systems integrators, software vendors' professional service groups and, increasingly, management consultants helping with strategy and architecture. The complexity involved in MDM implementations means that services will continue to outsell software by about a two-to-one ratio for the "foreseeable future," Karel said.

"[MDM] is not an application, it's a capability and it has a lot of moving parts," Karel said. "If [organizations] implement technology first, it's usually going to be expensive, but under-delivering expectations."

Master data management planning and prerequisites

While the MDM software market matures, there's plenty that organizations can do to prepare and plan, Karel said. In the short term, companies can develop MDM best practices around one data domain, such as customer or product. And there are other steps to take to lay the groundwork for long-term MDM success, Karel said.

  • Develop data stewards now. The difference between MDM success and failure depends greatly on an organization's ability to determine its own definition of what constitutes a quality, trustworthy piece of data, Karel said. Data stewards act as liaisons between business and IT, facilitating discussions about data and determining MDM requirements. Whether hired from the outside or developed internally, it's a critical role, Karel said. But avoid this common mistake when creating data steward positions:

    "Most organizations try to either make an IT person a steward, where the business doesn't necessarily recognize their value, or [they choose] a business person that really doesn't understand technology," Karel said. "This evolving role has to be someone who is competent in both business and technology."

  • Align other initiatives with MDM. Early adopters have learned that MDM helps make other data-driven programs successful, Karel said, by ensuring information quality, integrity and consistency. Companies often associate MDM with data warehousing, business intelligence, direct marketing and supply chain improvement projects. MDM is also complementary to regulatory compliance efforts and integration required by mergers and acquisitions, and it can play a role in service-oriented architectures including information-as-a-service, Karel noted.

  • Implement metadata management. "The definitions, business rules, quality metrics, data relationships, policies and stewardship roles that enable a master data capability are all captured and maintained through effective use of metadata," Karel wrote in the report. Earlier data initiatives often failed to recognize this, he said later. For example, some early BI systems focused too much on the delivery of data to dashboards and scorecards, but didn't consider the underlying data integrity -- thus making the BI information untrustworthy. Companies should combine, or at least synchronize, MDM and metadata projects, he said.

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