SAP's MDM Shows Potential, but Is Rated 'Caution'

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1 Products, A. White, D. Hope-Ross Research Note 16 September 2003 SAP's MDM Shows Potential, but Is Rated 'Caution' SAP's introduction of its Master Data Management solution shows it recognizes that maintaining distributed master data is key; however, the product's functionality limitations and enterprise focus will limit short-term success. Core Topic Application Integration and Middleware: Architectures and Patterns for Software Infrastructure Key Issue How will business and technology trends affect enterprise architecture for software infrastructure? Strategic Planning Assumption By 2H07, SAP customers using MDM, instead of manual methods, will realize 60 percent lower master data management costs for the integration of SAP data and non-sap applications (0.7 probability). SAP's recently introduced Master Data Management (MDM) product is designed to help enterprises harmonize their master data, which defines products, locations, customers and suppliers. MDM is designed as a central resource for harmonizing "islands" of master data across heterogeneous systems. This is needed to promote business process integration and enterprise/interenterprise visibility. MDM's three primary functions involve content consolidation, central master data management and master data harmonization. MDM is a component of SAP NetWeaver and leverages other NetWeaver components, such as Exchange Infrastructure. Gartner rates MDM as a "Caution," because of its incomplete functionality, including a lack of support for non-sap data sources; shortcomings in SAP's professional services in conjunction with the offering; and the immaturity of the solution. MDM will be on restricted release, beginning in 4Q03 and continuing through July Enterprises should not implement MDM without due diligence and a willingness to work closely with SAP as an early adopter. MDM will be most useful for consolidating SAP data across instances and in cases where data quality is good. MDM will experience challenges when attempting to harmonize data across applications, data models or enterprises. Product Strategy: SAP's strategy is to sell MDM to its enterprise resource planning (ERP) installed base to enable users to synchronize data within their enterprises and trading communities. Target data types include master or descriptive data, including customer records and product specifications, as well as operational data, such as customer orders. The objective is to improve data quality for Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 analysis purposes and make application integration easier, because data definitions can be consistently maintained. Although there is a need for this product in the market, SAP's entry does not ensure its success. MDM's success will be limited, because best-of-breed applications in each domain (including procurement) continue to define new metadata types and populate systems with operational data (such as supplier on-time delivery). Furthermore, customers will find that MDM is not uniformly mature across its proposed use cases. MDM is positioned as a generic infrastructure for the management of master data; however, there are three specific use cases: Note 1 Data Definitions Master Data: This is defined as core data needed to uniquely define objects used to communicate or transact commerce among interested parties, including customers and suppliers. Extended Data: This is designed as supplemental data appended or related to master data for the purposes of domain use (for example, a customer mailing address as part of the customer master) or commerce between interested parties (for example, item price is to item code as customer credit limit is to customer code). Transaction Data: This is a combination of master and extended data in a predefined format used as a record of instruction/output of an operational system examples include purchase orders, advanced shipping notices, customer orders, production orders and work in process routings. Metadata: This is defined as information about data, that is, a layer of information defining data types, such as "12345" and "12345 is a valid customer account." The customer account is metadata; is the data in that field. Content Consolidation: In this case, all data remains distributed. MDM enables an extraction or "copy" of the transactional data (see Note 1) and supports aggregation by providing centralized data mapping. For example, customer master remains in a customer relationship management (CRM) database, although customer order, which includes customer address (part of customer master), is aggregated by MDM. Users should note that this use case supports the mapping of master data, as opposed to the mapping of metadata (which defines the master data itself). This makes the content consolidation most useful for periodic or ad hoc data aggregation exercises. This use case will eventually prove useful in periodic SAP data consolidation exercises where the source data is clean and the mapping is straightforward. In cases in which data types are specialized (such as customer, item, supplier or engineering master data), users should also evaluate best-of-breed software and services. Central Master Data Management: In this use case, MDM provides authoring services for centralized master data and mapping to equivalent master data stored in distributed applications that continue to retain ownership of their individual master data. The centralized data (in MDM) and localized data (in distributed applications) are linked by such functionality as loading of data, matching of equivalent data and storage of mappings for later reuse. In this case, MDM would maintain mappings between item hierarchies used by multiple applications, instead of using mappings for individual records. This can make it easier for enterprises to do repetitive data consolidation. For example, changes to customer addresses in customer master (part of a CRM database) are copied back to the MDM database and made available to other systems as needed. 16 September

3 Users should adopt this use case on a selective basis to manage master data centrally. However, they should evaluate complementary methods in cases where data from non-sap systems is to be synchronized. Master Data Harmonization: In this use case, MDM provides authoring services for centralized master data, supplies mapping to equivalent data in distributed applications, and maintains centralized ownership of selected or all master data, including populating changes out to distributed applications. This differs from the previous use case in that ownership of the data now resides with MDM, and all changes to the master data emanate from MDM and are populated out to other databases and systems. MDM relies on the capabilities of content consolidation, but it assumes responsibility for maintaining the complete object (data) model in all enterprise systems. For example, changes to customer addresses in customer master are entered via MDM as the approving tool before being passed on to the CRM databases and applications. Master data harmonization includes a workflow and forms capability used for validation, duplicate checking and hierarchy modeling. This is the most-ambitious scope of an MDM use case. This use case will support the needs of data management for several data types. However, there may be challenges if these approaches are deployed in large-scale item data synchronization efforts that rely on external registries and peerto-peer models (such as UCCnet). It is at odds with this approach because MDM assumes that sources of master data are internal to the enterprise or can be changed by the enterprise using MDM. You should be cautious about using non-sap data via central data management and, instead, focus on this capability for managing distributed enterprise data in SAP applications. Strengths: SAP is ahead of other ERP II vendors in articulating and describing the challenges associated with master data management. MDM's strengths are as follows: Incremental Product Strategy: SAP has laid out a product road map to address the needs of users on an incremental basis, starting with the basic data consolidation within a SAP-only environment, expanding to non-sap data management and, finally, to multienterprise data. This road map reflects customer needs, enables SAP to incorporate information and learn from early adopters, and incorporates enhancements for the mass market. 16 September

4 Abstraction of Master Data From Business Processes: The complexities of master data management require applications that can support cleansing and business process maintenance. SAP's vision of using workflow and exception management as an underpinning is good. Furthermore, MDM's support for data management "across application silos" will help support xapps, another of SAP's efforts at intrasuite integration. Leveraging Core Strengths: MDM's architecture shows good reuse of SAP technology in which customers have already invested, such as data warehousing, catalog infrastructure and enterprise application integration (EAI). Metadata Support: MDM supports data aggregation techniques that are appropriate for different styles of problems. MDM can support aggregation at the record, master data or metadata level. Ultimately, MDM will lower application maintenance costs and improve data quality levels, as opposed to manual efforts (see Figure 1). By 2H07, SAP customers using MDM instead of manual methods will realize 60 percent lower master data management costs for the integration of SAP data and non-sap applications (0.7 probability). Figure 1 Maturity of SAP's Offering Compared to Gartner's Product Content and Data Management Stack Generic PC Data Management Solution SAP s MDM Solution Maturity Rating (High/Medium/Low) Catalog, CPFR Transaction Management Messaging Change Notification Telephone Directory Endorsement/ Conformance Cleansing Preparation Value-Added Apps/Services Update Synchronize Register Compliance Normalization Cleansing Pooling Aggregation mysap, R/3 Master Data Harmonization Central Master Data Management Proprietary Content Consolidation (Color denotes differing domain expertise) Low cannibalistic to Requisite Technologies Low in beta; unproven Low Low enterprise-centric; focus on structure, not transactions Low no compliance as yet; no industry support Low unproven search, few proof points Low master data only; limited reference to external metadata Source: Gartner Research (September 2003) 16 September

5 Challenges: SAP leads the other ERP II vendors in articulating and describing the issues being faced in master data management. However, MDM's challenges are as follows: MDM Lacks Technical Innovation: In its current configuration, MDM is little more than a recombination of well-known data management tools, including features of data warehousing, catalog technology and EAI. Although these are the likely origins for master data solutions, SAP has yet to bring unique innovations to market. MDM Makes Incorrect Assumptions About Other Applications: MDM assumes that other applications can support bidirectional message or file-based integration. Potential MDM customers should inventory their systems to see which target systems can support MDM use cases. You should assume that pre-built adaptors to integrate disparate enterprise applications will require consulting services. Metadata Support for PCDM: MDM lacks a "pre-packaged" vocabulary to define the meaning of product master data. Although MDM supports metadata authoring and provides mapping functionality, it does not yet provide out-of-the-box support for hierarchical item schemas, such as UNSPSC, ecl@ss and EAN UCCnet. Lack of Service Partnerships: SAP lacks partnerships for important services, such as the development of adaptors and data cleansing. Enterprises will need to take responsibility for retaining other vendors with the expertise needed to maximize the value of MDM. MDM Stops at Enterprise Boundaries: MDM's ability to support data synchronization drops significantly at the enterprise boundaries. MDM provides limited capabilities for synchronization with suppliers, customers or relevant industry registries (see "Product Content and Data Management Promises Savings"). Variability Business Process Support: MDM does not support data management processes with consistent depth across business disciplines. For example, in product life cycle management (PLM) and make/design business processes, there is a need for product definition data to be synchronized between departments and trading partners. In commercial or buy/sell relationships, the level of product data specification differs and is replaced with more relationship-centric data, such as price. Users may be forced to implement MDM as variants, such as 16 September

6 Consider This Product When: You need basic data mapping among clean data sources for analytics You need centralized coordination of master data among SAP applications You use multiple instances of SAP to handle all core business processes Consider Alternatives When: Enterprise data quality is poor, and strong search or data cleansing is necessary The enterprise is highly decentralized, or federated data management techniques are required There are multiple enterprise applications and architectures The enterprise is focused on attaining interenterprise data synchronization Acronym Key EAI CRM ERP MDM PLM SCM SRM enterprise application integration customer relationship management enterprise resource planning Master Data Management product life cycle management supply chain management supplier relationship management MDM for CRM, MDM for supplier relationship management (SRM; enterprise), MDM for supply chain management (SCM; extra-enterprise) and MDM for PLM. Hub-Spoke, Not Peer-to-Peer: MDM assumes that centralization is the most-efficient method to address distributed data management. Early efforts in the consumer goods industry suggest that a distributed or peer-to-peer model can be effective (see "How to Manage Product Data in a Multienterprise World"). "Mind Share" and Customer Pushback: Many R/3 and mysap customers have invested in large-scale solutions based on the assumption that data synchronization would be an outcome of implementation. Thus, some users may question SAP's attempts to charge for this capability. Bottom Line: SAP shows strong recognition and a reasonable product road map for Master Data Management; however, MDM is a new product and is not uniformly mature across its use cases. It remains largely untested and does not address the challenges of interenterprise master data. For these reasons, Gartner rates MDM as "Caution." Enterprises are encouraged to evaluate MDM alongside competing specialized solutions; however, those with good data quality and a need for synchronizing master data within SAP environments should seriously consider MDM. 16 September