Take Master Data Management To The Next Level With Blockchain Technology

Some experts contend that data is the new oil.

While there is heated debate about this assertion, one thing that nobody can deny is that data is an extremely important resource for modern businesses.

However, businesses can‘t extract real value from data unless they have robust Master Data Management (MDM) practices and solutions.

MDM has already long since proved its importance, however, it‘s hard to implement MDM due to several key challenges.

As a consequence, businesses are increasingly looking for technology solutions to improve their existing MDM solutions and practices. Blockchain is emerging as an important solution for these problems.

Are you a business leader who is wondering how to take master data management to the next level with blockchain technology? Look no further since this is exactly what I explain how to do here.

Contents

MDM: A brief introduction
Why does MDM matter?
The global market for MDM
What should a robust MDM solution offer?
Key MDM players and offerings in the market
MDM implementation challenges
Why should blockchain matter vis-à-vis MDM?
How blockchain can help to implement MDM?
Planning to take your master data management to the next level with blockchain?

MDM: A brief introduction

Master data management (MDM) is a method that helps businesses to manage their important data well, by enabling them to link this data to a common reference point. When an organization implements MDM well, it sees a noticeable improvement in data quality.

An effective MDM implementation also enables various stakeholders in an organization to share data seamlessly. This overall improvement in data quality and ease of sharing result in improved data processing in their IT systems. You can read more about MDM in “master data management (MDM)”.

Why does MDM matter?

Businesses typically use the term “Master data” to refer to the following data elements:

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  • Reference data, i.e., permissible values in other data;
  • Customer data;
  • Product data;
  • Employee information;
  • Transactions;
  • Tickets for tracking problems or customer interactions;
  • Analytical data.

You can read more about this in “7 examples of master data”.

The importance of MDM is best understood by reviewing what happens when an organization doesn‘t have effective MDM solutions and practices. The lack of MDM results in the following:

  • Crucial data belonging to the organization remain in different systems like ERP, CRM, etc., and no effective sharing is possible.
  • Different departments and IT systems view crucial data differently, therefore, it‘s practically impossible to gain organization-wide insights from this data.
  • Businesses can‘t find answers to important questions like “Who are most profitable customers?”, and “Which products deliver the best profit to us?”.
  • Sub-optimal data quality results in a lack of confidence in the IT systems.

You can read more about the importance of MDM in “Master data management – what, why, how, & who”.

The global market for MDM

Estimates for the global MDM market vary, however, they all project a significant growth, as the following reports show:

 

What should a robust MDM solution offer?

When shopping for a robust MDM solution, you should look for the following capabilities:

  • The solution should enable master data matching and linking.
  • Data consolidation is a key feature in any good MDM solution.
  • A robust MDM solution should enable the mass processing of data.
  • Such a solution should make the data easily sharable.
  • Data security is important, therefore, a good MDM solution should secure data.
  • Data enrichment is another key capability of a robust MDM solution.

You can read about these capabilities in “Top 17 master data management software”.

Key MDM players and offerings in the market

The following players dominate the global MDM market:

  • SAP;
  • Oracle;
  • IBM;
  • Informatica;
  • Stibo Systems;
  • TIBCO Software;
  • Riversand Technologies;
  • Orchestra Networks;
  • EnterWorks;
  • Microsoft;
  • KPMG;
  • Teradata Corporation;
  • Software AG.

This is not an exhaustive list of prominent MDM providers, and you can find more MDM players in this Reuters report.

Popular MDM offerings in the market are as follows:

  • Informatica MDM;
  • Orchestra Networks EBX;
  • SAP Master Data Governance;
  • IBM MDM Solutions;
  • Reltio Cloud;
  • TIBCO MDM;
  • Riversand MDM;
  • Stibo Systems Master Data Management;
  • Profisee;

You can read more about these offerings in “Top 10 master data management solutions”.

MDM implementation challenges

MDM can add significant value to your business, however, you will likely face various challenges while implementing it. These challenges are as follows:

  • Your business has various kinds of data, e.g., demographic, transactional, interaction, etc. The first step is to scope out your MDM implementation after analyzing these different kinds of data, and that can be hard!
  • Many businesses have data in silos since they have operated in silos since long.
  • Data quality issues slow down MDM implementation.
  • Most enterprises use various software packages for different functions like CRM, ERP, BI, etc. Key data elements reside in these packages, and arriving at a uniform view of master data can be hard.
  • Businesses are seeing an explosion of unstructured data, e.g., emails, documents, etc.
  • Mergers and acquisitions are common in the business world, and these pose challenges for MDM implementation since two different businesses often store master data differently.

You can read more about these challenges in “MDM primer: the challenges, systems and success factors involved in delivering the ultimate customer experience”.

Why should blockchain matter vis-à-vis MDM?

Why would you consider blockchain as a solution to MDM implementation challenges? Before I answer this question, let‘s quickly understand what blockchain is. This promising technology has the following features:

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  • It‘s a decentralized, peer-to-peer (P2P) network, and anyone can join a public blockchain network whereas private blockchains allow only trusted parties to join.
  • Computers on this network are called ’nodes‘, and each node has the complete transaction history. Since each node is a complete ledger, blockchain is often referred to as the “Distributed Ledger Technology” (DLT). A cybercriminal can‘t shut this network down by taking over one computer.
  • Blockchain networks use digital signatures, data encryption, cryptographic hash functions, and consensus algorithms to protect the integrity of data.
  • Data and transactions are transparent, and the audit-trail is immutable.
  • Starting with Ethereum, the blockchain technology offers smart contracts. These are transparent, tamper-proof pieces of code that execute autonomously, and their execution is irreversible.

Given these characteristics, blockchain can improve security, transparency, and efficiency, as I have explained in “How to build your own blockchain using Node.js”. In the context of MDM, the security and transparency offered by blockchain can help.

How blockchain can help to implement MDM?

There are various ways in which blockchain improve MDM, e.g.:

1. Decentralization of blockchain can improve data management

I have written about how organizations collect, store, and process crucial data in a multitude of systems like CRM, ERP, etc. This often poses challenges to MDM implementation since we typically view MDM from a centralized paradigm.

However, it‘s an inescapable reality in large enterprises that data collection and the storing of it will happen at multiple touchpoints. Given that, MDM should also adopt decentralization since that mirrors the enterprise reality.

Blockchain with its decentralization can accelerate this shift where individual business functions will act as nodes. When they collect data, the blockchain protocol can ensure that master data is available on all nodes. You can read more about blockchain-powered decentralized MDM in “Blockchain – new dimensions to master data management”.

2. Blockchain can help in reconciling data in an MDM solution

A robust MDM solution must enable enterprises to reconcile master data effectively. It‘s hard to achieve though, due to the following reasons:

  • The MDM solution needs automated controls for multi-point reconciliation.
  • You must deploy these tools across multiple sources of data, and these automated tools would then feed your MDM system.
  • These tools will need to produce dynamic data reconciliation reports, subsequently, the subject matter experts and the MDM architects in your team need to review these reports.
  • Reconciliation exercises including the required adjustments follow.

You can read about this in “Master data management (MDM): easier said than done”.

Blockchain with its distributed ledger and consensus algorithms can help significantly with data reconciliation. As I have explained above, you need to design the blockchain MDM solution such that your diverse source systems are nodes on the decentralized network.

Subsequently, the consensus algorithms in the blockchain protocol take over. Consensus algorithms work towards maintaining data integrity, and by their very design, they maintain the same data across all nodes on the blockchain network. This saves a significant amount of time and effort, as you can read in “Master data belongs on the blockchain”.

3. Blockchain can improve your confidence in your master data

As a business leader in your enterprise, a key concern for you is whether your master data has been corrupted. This is one area where a blockchain-powered MDM solution can help significantly, due to the following reasons:

  • Users in a blockchain network must transact using their digital signatures, and these are very hard to compromise.
  • Data encryption, cryptographic hash functions, and consensus algorithms make it hard for hackers to tamper with the data.
  • You will likely use an enterprise blockchain framework like Hyperledger Fabric to power your MDM solution, and such blockchain networks allow only trusted parties to join.
  • Enterprise blockchain frameworks like Fabric also provide advanced security solutions, and an example is its Hardware Security Model (HSM) to secure the digital signatures. You can read more about this in “Pros and cons of Hyperledger Fabric for blockchain networks”.

No technology is fully immune to hacking, however, blockchain does a great job of dissuading cybercriminals by raising the costs of attacks significantly. You can read “Can blockchain technology be hacked?” to learn how blockchain provides a high degree of security against cyber-attackers.

4. Improved transparency in an MDM system, thanks to blockchain!

The transparency of data collection, enrichment, etc. is a key requirement of any robust MDM solution. However, silos and multiple movements of data from one system to another in an enterprise make it hard to maintain an audit trail.

A blockchain-powered MDM solution, with its distributed ledger and immutability of transactions, can provide audit-trails for every MDM operation. According to experts, this is a key advantage since it improves the confidence of the stakeholders in the system.

5. Blockchain can improve the efficiency of an MDM solution and reduce costs

The distributed ledger of blockchain can make it easier to share master data among stakeholders. Since blockchain is a decentralized network, the sever management costs reduce, and this is another advantage of using blockchain.

Important considerations for using blockchain to power an MDM solution

Before you implement a blockchain-powered MDM solution, you need to consider several important factors, e.g.:

1. Blockchain bloat

Blockchain requires every node to store the entire transaction history, therefore, as the network grows so does the volume of data in every node. While this built-in redundancy guard against hackers taking the network down by attacking one node, over time it also results in “blockchain bloat”.

As I write this, experts are working on several solutions to address this, e.g., sharding, ephemeral blockchains, and zero-knowledge proofs. You can read about them in “Can blockchain bloat ever be solved?”.

2. Planning a blockchain project

Planning a blockchain project requires significant expertise since you need to plan for several aspects. These could include which blockchain framework to use, which development tools to use, etc., and you can read about them in “What to plan for when undertaking blockchain software development?”.

3. Choosing the right blockchain network host

You would likely use an enterprise blockchain framework, therefore, you will need to choose a blockchain network host. There are several Blockchain-as-a-Service (BaaS) platforms, e.g., Blockchain on AWS, SAP Cloud Platform BaaS, Microsoft Azure BaaS, and IBM Blockchain Platform. Our guide “Best blockchain network hosts 2019 – Ethereum – Amazon etc.” can help you to choose one.

Planning to take your master data management to the next level with blockchain?

While blockchain can add significant value to your MDM solution, implementing a blockchain-powered MDM can be hard. MDM is a specialized technology, moreover, blockchain skills are niche. I recommend that you engage a reputed software development company for such a project. Our guide “How to find the best software development company?” can help you to find one.

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Aran Davies

Blockchain Expert | Developer | Writer | Photographer
I love all things blockchain and related to app development. What time I have when I am not busy writing for the DevTeam.Space blog of over 350 articles, I spend sitting around wondering what the future will look like 50 years from now.
Aran Davies