Why Master Data Complicates IT Project Execution?

Data Hoarding: A Challenge for Every Company

Nearly every company struggles with data hoarding. Businesses collect vast amounts of data, often without real necessity. According to IDC, as much as 90% of collected data remains unused, leading to chaos and unnecessary costs. The most commonly overstored data includes system logs, customer data, IoT information, and backups—many of which have no practical application. Worse still, many companies are unaware of who is responsible for the data and how it is utilized.

The Need for Data Governance

To avoid disorder, companies must consciously manage their data. Data Governance helps define what data is collected, why, and who is responsible for it. Proper governance reduces costs, improves data quality, and minimizes the risk of regulatory violations such as GDPR.

How to Migrate to a Different System?

First and foremost, understanding the project’s objectives and assumptions is crucial. These define possible data migration scenarios:

• Moving from one system type to another,
• Upgrading to a newer system version,
• Creating a unified system after merging companies,
• Integrating a newly acquired company into an active system.

These changes can involve a single company or multiple entities. In the case of multiple companies, the project can be executed as a pilot followed by rollouts or in a single-phase “big bang” approach.

Nothing Emerges from a Vacuum

Companies merge, get acquired, or emerge from carve-outs and investments. Instead of reinventing the wheel, organizations should leverage existing system models. A practical approach involves copying system elements from a previously established operational model and populating them with new company data.

From a project execution perspective, the “copy, don’t change” approach is both simple and cost-effective. However, several factors must be considered:

• Can system settings be copied for a company operating in a different country? This requires verifying if the operational model and financial reporting obligations align.

For instance, VAT settlement methods vary by country. The same transactions in Poland might be subject to split payment (where part of the payment goes into a special account), while in most EU countries, reverse charge applies (where the buyer is responsible for paying VAT). Different tax obligations mean different operational models, which in turn dictate the master data required for system functionality.

Is That All?

Beyond taxation, EU countries also differ in their chart of accounts and VAT rates. While VAT rates are a minor parameter adjustment, VAT settlement mechanisms and accounting structures significantly impact business processes—each requiring different data inputs.

Let’s put aside international complexity for a moment. Even copying system settings for companies in the same country but operating in different industries poses challenges. For example, a food manufacturing company acquiring a packaging supplier faces operational differences:

• Food manufacturers prioritize stable ingredients and consistency, rarely modifying recipes.
• Packaging companies operate more like printing houses, focusing on design project management and versioning.

Would copying a system cover all operational needs in such a case? Unlikely. It could lead to functionality gaps.

What About Data?

Master data structures also differ between industries. In FMCG, a Bill of Materials (BoM) is simply a list of ingredients with quantities. In packaging production, a new product version is more akin to a bookbinding project rather than an ingredient list.

Simpler Scenarios? Still Risky.

Even in a straightforward scenario—copying a system for an acquired company in the same country and industry—risks remain. For example, reviewing open obligations, contracts, and rebate agreements is essential.

Consider rebates:

• Are they volume-based per product category?
• Or based on total revenue?

Such differences can complicate migration, even if system adaptation seems straightforward.

Amputation or Surgical Precision?

Copying an existing IT system saves time, money, and human effort—everything companies value. However, it comes with risks. Before proceeding, businesses must assess:

• Which changes are legally required?
• Which could harm operational efficiency?
• Which could compromise contractual obligations?

Copying is easier, but first, identifying necessary modifications is crucial. Analyzing how a system should function in the future helps define the required data and formats.

If companies understand their processes and define the essential data, they can migrate only what is needed. Think of it like moving to a new house—you don’t take unnecessary items. The cost of relocating and managing clutter is tangible in personal moves (time, space, and effort). In data migration, the inefficiency is less visible but equally impactful.

Though environmental concerns like carbon footprint have taken a back seat, data storage efficiency will soon return as a business priority. According to IDC, corporate data volume grows by over 25% annually, and by 2025, data centers will consume approximately 3% of global energy demand. Managing only the necessary data is not just cost-effective—it’s an urgent necessity.

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