“Whatever we well understand we express clearly.” Nicolas Boileau
If you search for a definition for Master Data, you would probably find more than a hundred different definitions. Rather than start a complex discussion about the difference between “Master Data” and “Reference Data” or writing an article about whether a “Product Launch Project” is master data or transactional data, we will try to simplify some common concepts to help you identify what is actually important for your business.
“Master Data is your business critical data that is stored in disparate systems spread across your Enterprise.”
Does this help? Probably not that much. But the reason we like this definition, is that:
- Master Data is defined as data that is critical for your business
- It acknowledges that Master Data is in essence scattered in various applications within your Enterprise
Right. Can we give more details? Yes. Master Data is conceptualized in the core entities of the enterprise. These entities represent the slowly changing part of the business’ data and usually fall into four categories:
- Parties: represents all parties the enterprise conducts business with such as customers, prospects, individuals, suppliers, partners, etc.
- Places: represents the physical places and their segmentations such as geographies, locations, subsidiaries, sites, areas, zones, etc.
- Things: usually represents what the enterprise actually sells such as products, services, packages, items, financial services, etc.
- Financial and Organizational: represents all roll-up hierarchies used in many places for reporting and accounting purposes such as organization structures, sales territories, chart of accounts, cost centers, business units, profit centers, price lists, etc.
Transactional Data such as purchase orders, invoices or financial statements, is not usually considered master data since it actually registers a “fact” that happened at a certain point in time. Transactional Data is really what drives the business indicators of the enterprise and it relies entirely on Master Data. For example, consider the following sentence: “Harry Jones ordered two Z-Max-Power watches on March twenty first at fifty five dollars each.” You will notice that this sentence expresses a “fact” – i.e. that someone placed an order. You can also see that in this sentence, “Harry Jones” and “Z-Max-Power watch” are key elements without which the order wouldn’t exist or make sense.
This is precisely what master data is. In our example we’re referring to a “Customer” – Harry Jones – and a “Product” – Z-Max-Power watch at fifty five dollars. For any business to run efficiently, this master data has to be very well defined and understood. This means that “Harry Jones” must be recognized as a single, specific customer no matter which enterprise application is referring to him. This also applies to the “Z-Max-Power watch” along with its “fifty five dollar” price.