Master Data Management: Cloud Vs on-premises

Cloud computing is not new to businesses anymore. The growth of cloud services, cloud data, and cloud usage continues unabated. More and more organizations are adopting cloud computing infrastructure these days to exploit the inherent benefit of cloud that doesn’t limit only to greater business agility but also expands to getting the best available technology of the time, and business efficiency along with some good economic value. Argumentatively cloud is more cleanly architected, free of baggage and legacy problems. However, cloud-MDM is something that did not gain enough momentum to be called a trend. According to Gartner, there are several inhibitors. Gartner claimed in its report “The impact of cloud-based Master Data Management Solutions” – “As a percentage of Gartner’s MDM inquiry calls with clients, interest in cloud-based MDM cluster around a maximum of approximately 6%. As the level of interests varies widely across client interactions, the rate of actual adoption is very likely to be far lower than 6%.”

We will explore these points in this article and analyze where are we on the cloud-MDM roadmap. If you are on your MDM journey and at the crossroads to decide whether cloud MDM is the one for your organization this article will help you find that out.

So, what are the differences between the two offerings namely cloud-based MDM and on-premises MDM? Cloud-MDM offers benefits of software as a service (SaaS) while not incurring a cost of the hardware and software associated with it and no maintenance to pay. The cost of provisioning hardware sometimes is prohibitive enough for the business to ditch the big capital expenditure (CapEx) in favor of other less critical investments. Subscription based licensing model of cloud helps organizations flatten their IT spending and adopt an operational expenditure (Opex) model. One of the many benefits of SaaS is increased operational agility in deploying the technology that enables the business to perform activities sooner to realize organizational goals. It also saves time and effort in infrastructure administration for the company if that is not what organization’s main strength is. Many organizations would like to focus on core business activities and services, it provides to its customers, rather than on services it consumes such as MDM, by letting expert professionals (cloud providers) manage it for them.

Architects and experts often argue about the security of the cloud and their reluctance to store the sensitive proprietary data outside company’s firewall. This argument could not be further from the truth. It is like arguing about keeping cash at home instead of in banks. Commonly understood fact that banks are more secure and have resources to make sure cash is safe with them is universal truth now. Although, there have been incidents happened in Bank but no one argues Banks are less safe than individual homes. Similarly, in today’s words company’s like Amazon, Microsoft have deployed the best resources to make security their priority more than what one company can afford to do. With the number of data hacks all-time high in 2016, incidents of on-premises attacks highly outnumbered the incidents of cloud attacks and these cloud attacks had nothing to do with cloud’s security vulnerabilities. All the recent data breaches that happened at Target, Home Depot in 2014 or Apple iCloud hack were human errors that cloud cannot protect one from. However, efforts should be made to select an established, certified, compliant cloud provider, who takes security very seriously and willing to go an extra mile to protect customer’s data.

Commissioning on-premises MDM would require companies to budget maximum projected capacity of the hardware. With cloud MDM, the organizations can elastically scale up and scale down processing, storage and software use licensing. Any new SaaS application required by the organization can be fired up very easily on the cloud compared to on-premises. Usually, enterprises need applications for their customer relationship management (CRM), Enterprise resource planning (ERP) and other back-office efforts. Most of the prominent applications such as Salesforce CRM and NetSuite ERP are already on the cloud. Cloud is where integration belongs. One may, however, argue that adoption of cloud MDM would result in a complex set of point-to-point integration of applications across their firewalls if they lack a mature data integration architecture. While this could be a concern but also a huge opportunity for the organization to think seriously about having a centralized integration point (governed data integration layer) for its cloud integrations if it wants to walk cloud first strategy. However, a piecemeal approach would be good for organizations that have large and complex operational system landscape to deal with, whether on-premises, on cloud or mix of both.

Cloud-based SaaS application delivers new functionality on regular basis e.g. Informatica MDM release new versions twice a year. The organization may decide when to upgrade and new features would be available overnight. This throws a great savings potential with no impact upgrade. However, backward compatibility may not be available or provided by the MDM vendor for previous production releases or may be available only for a limited number of old releases. In that case, the organization should be prepared to move quickly to upgrade other integrated technologies to catch up with the newest version of cloud MDM in time. Updated technology or newer infrastructure will be at organization’s disposal as soon as it is available on the cloud in a transparent way.

Organizations those operate in the global environment and have customers across the globe should keep local data regulations and security laws in mind while deciding the cloud MDM. Not all cloud providers offer cloud hosting outside the US. Some of them started thinking about it very recently with a backdrop of EU General Data Protection Regulation (GDPR) coming into effects from May 2018 but most of them are still in process of getting ready. In addition to that, the ruling from the Department of Justice in October 2015 that invalidates the US safe harbor agreement poses another problem for companies storing and transferring EU citizen’s data outside Europe. Hosting local customer’s Personally Identifiable Information (PII) data within the country boundary may be a requirement for your company. Analyzing PII data elements your organization would like to keep on Cloud MDM, to make sure your organization needs to follow country specific data residency requirements, would help to determine local cloud hosting requirements. If the answer is “Yes”, organizations should find a cloud provider that offers a locally hosted cloud-MDM in that country/Region. Some companies such as Amazon, have been more proactive than others, and have used EU-US privacy shield framework that allows US companies to live up to the requirements of the European Court of Justice.

A holistic assessment of the drivers and inhibitors are necessary to decide that cloud MDM is aligned with organization's long-term business and IT strategy. Most corporates, when in doubt, fall back on the on-premises option because it is tried and tested, and has been around for years, if not decades. Nothing wrong with it if your business sees high risks in adopting the cloud model. For further reading on how to develop an assessment score card based on sensitivity matrix and to develop “what if” scenarios, visit Gartner’s report – “Five factors for planning Cloud-Enables MDM”.