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Varying technology and business approaches provide options.

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Summary
Demand is increasing for consistent information to use to improve business and operational performance. Interest among Global 2000 companies is growing rapidly in the area of master data management (MDM). A significant number of these companies have initiated MDM programs and are implementing MDM systems. Broadly speaking, Ventana Research is seeing two implementation approaches. Operational MDM (O-MDM) is focused on the distribution, synchronization or exchange of master data to ensure consistency in transactional operations. Analytic MDM (A-MDM) is concerned with the management of the master data items and associated hierarchies required for aggregation and analysis.

This distinction is worth making, but it is becoming clear that most global businesses will need both approaches. Ventana Research believes it is only a question of timing - of when rather than whether they will realize this. However, most CIOs do not want to purchase and maintain a variety of MDM products from several vendors. They want solutions that will cover all their MDM needs, both O-MDM and A-MDM. This reluctance will present a major challenge for all MDM vendors in the coming year. Ventana Research recommends that users challenge prospective MDM vendors to explain how they intend to address this challenge. We urge organizations to consider a broad and long-term view of their MDM needs when selecting an MDM vendor.

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The increasing demand generally for consistent information to support business performance and more specifically for MDM programs and systems has led vendors to latch onto the term MDM to describe their products and so avail themselves of this new market opportunity. This has led to confusion in the market and obscured what exactly MDM means.

Although MDM implementation projects vary widely in scale and scope, they fall into two main types: synchronizing basic master data (such as product or customer codes and names) across organizations' transactional applications or reconciling data drawn from a variety of sources to deliver integrated, consistent business intelligence across the entire business. Ventana Research calls these two approaches as Operational MDM (O-MDM) and Analytic MDM (A-MDM), respectively. Let's look at the practical differences.

Operational MDM is focused on the distribution or exchange of master data to ensure consistency in transactional operations by synchronizing master data between two or more individual systems (or from some form of data hub back to local systems). The focus here is specifically on transferring what are often basic master data items - such as a customer name and code - between transaction processing systems. An example would be ensuring that customer data required both by an instance of SAP R/3 and by Siebel CRM is maintained in sync. When a new customer is defined in Siebel CRM, for example, the data is automatically mapped and transferred to the R/3 ERP system.

Typical examples of this type of MDM are customer data integration (CDI) systems, such as those from Oracle, Purisma and Siperian, and product information management (PIM) systems, available from IBM (with its DWL technology), i2, Oracle, SAP, Tibco and UDEX. (Ventana Research defines CDI as the practice of and technology for integrating customer data across the enterprise's applications, systems and databases. We define PIM as the practice and associated technology for managing product information across the enterprise and ensuring its proper integration, storage and use toward common objectives.)

Analytical MDM is associated with the areas of business intelligence and management reporting and encompasses the requirement to reconcile, rationalize and organize master data at some form of hub to support efficient, consistent reporting for compliance and business performance management. Analytic MDM involves the management of master data items and associated hierarchies that are required for aggregation and analysis within the data warehouse and in business intelligence reporting tools. Examples of vendors focusing on this area are Hyperion, IBM and Kalido. It is not surprising that Operational MDM as typified by PIM and CDI has attracted attention. It is primarily in these areas that, driven to maintain different suppliers' products in sync, companies first recognized the need to reconcile different definitions and formats for master data items such as customers and products.

For many companies facing globalization, a primary requirement is to have consistent, integrated reporting across their global business at all levels. This need has been met by the Analytic MDM vendors. Indeed recent A-MDM vendor customer feedback indicates that while companies see implementing Operational MDM as a long-term goal, most had no immediate plans to tackle it. Instead, many cited the need to improve significantly the speed, reliability and efficiency of business reporting - especially at the corporate or global level - as their main reason for choosing to implement master data management at this time.

Increasingly clear, however, is the need for both approaches in most global businesses. This perception is reinforced by the growing pressures of regulatory compliance, which requires the ability to audit from the transactional level through the data warehouse reporting landscape to the management reporting level.

Assessment
Most CIOs are clear that they do not want to purchase and maintain a variety of MDM products from a range of vendors for CDI, PIM, Analytic MDM and so on, nor do they want to have to integrate different solutions from several vendors. While they may wish initially to focus on CDI, for example, they want solutions that will cover all their MDM needs - both Operational MDM and Analytic MDM. This will present a major challenge for all who identify themselves as MDM vendors in the coming year. Users should challenge prospective MDM vendors to explain how they intend to address this challenge. Ventana Research recommends that organizations consider a broad and long-term view of their MDM needs when selecting an MDM vendor.

About Ventana Research
Ventana Research is the leading Performance Management research and advisory services firm. By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. These business improvements are delivered through a top-down approach that connects people, process, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of over two million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research Performance Management workshops, assessments and advisory services can impact your bottom line, visit www.ventanaresearch.com.
2006 Ventana Research

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