What is master data management? Ensuring a single source of truth

Master data management definition

Master data management (MDM) is a set of disciplines, processes, and technologies used to manage an organization’s master data. Master data is data about business entities or objects (customers, suppliers, employees, products, cost centers, etc.) around which business is conducted. It is used to provide context to transactional data and is typically scattered around the business in various spreadsheets, applications, and even physical media.

Gartner defines MDM as “a technology-enabled discipline in which business and IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency, and accountability of the enterprise’s official, shared master data assets.”

MDM principles

MDM seeks to create a single version of truth across all copies of master data to ensure data values are aligned. In doing so, MDM provides an “enterprise-wide infrastructure to standardize, integrate, and establish an authoritative source for data from disparate sources of information that have similar and/or duplicate attributes to support business operations and decisions,” according to professional services firm Earley Information Science.

Once established, MDM ensures the consistency and quality of a company’s data assets, including product data, asset data, and customer data, by making this data available to end users and other applications. Organizations pursue MDM for a variety of reasons; among the most popular are to create internal/operational efficiencies (69%), to improve business process outcomes (59%), and to improve business process agility (54%), according to Gartner’s Jan. 2021 MDM Magic Quadrant.

Master data vs. reference data

Reference data can be considered a subset of master data. Both master data and reference data provide context for business transactions, but master data is concerned with business entities, whereas reference data is about classification and categorization. Reference data rarely changes. Examples include postal codes, transaction codes, financial hierarchies, state or country codes, customer segments, and so on.

According to enterprise data company TIBCO, “Where master data represents key parts of the business, including customer data and data related to business activities and transactions, reference data represents a set of permissible data to be used from the master data for classification.”

Copyright © 2021 IDG Communications, Inc.

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