Blog post

How Master Data Management Demand May Change in 2016

By Andrew White | November 26, 2015 | 0 Comments

MDMMaster Data ManagementGDPMDM of Customer DataMDM of Product Data

I was reading my US copy of today’s Wall Street Journal and one of the front page articles caught me eye: Falling Corporate Profits Blur U.S. Growth Outlook.  My economic antenna immediately prickled at the title: falling profits at a time that the US Federal Research is looking to increase interest rates for the first time since 2006?  Surely that’s incompatible – we don’t want to make it more expensive to fund investment at the time that profits start to fall?  Interestingly I commented to a colleague of mine last week that I did not remember reading so many stories in the paper for this company or that company missing their numbers.  The article suggests that we are past the peak of the business cycle and by implication, we are no headed “down” toward the low point – that usually ends in a recession.

Economically this has been a strange period: near zero interest rates; low capital investment; high (corporate) cash hoarding; high employment; low wage growth/pressure.  The result has been meager growth yet stunning corporate profits.  So what this to do with MDM, you might ask?  Well, some years ago we notices an odd thing:  When US economic growth was growing, at or above 2%, spend on MDM of customer data solutions would grow much faster than MDM of product data.  When US economic growth slowed, and was under 2%, MDM of product data spend would outpace MDM of customer data.

The two segments are not hugely different in size – but their growth patterns are different.  MDM of product data tends to be growing consistently – sometimes 5% and sometimes low to middle double-digits (at its peak cycles).  MDM of customer data seems more volatile: It grows much more rapidly during the economic growth cycle, exceeding MDM of product data with high double-digit growth.  But during economic slow downs, MDM of customer demand continues to grow but at a much lower rate than its sister segment.  We concluded that in times of growth, organizations are focused on service level and revenue and account accretion.  In times of low growth or recession, those same organizations retrench and focus on internal efficiency, operational effectiveness, and supply leverage.  Thus the change in demand for MDM solutions.

This pattern has been observed twice so far (two long economic cycles) and we are seeing a third true to form now.  MDM of customer data has been growing much faster than MDM of product data for the last 3 years.  But in the last year, for 6 months of the last 12, we noticed some change in demand related to inquiries we take for the topics.  MDM of product data was hotter than MDM of customer data – and this might signal a shift taking shape in the economy.  The change in profits being reported now reinforce the idea that the economic cycle is changing.

So I would predict that by the end of 2016, and assuming corporate profits continue to fall and interest rates are higher than they are now, MDM of customer data will still grow handsomely but its rate of growth will be less than the increasing rate of growth in MDM of product data.  The Fed may mess up my forecast – If they keep interest rates unchanged in 2016 (The ECB actually operates with a negative interest rate and is talking of increasing that negative rate) then the year will be befuddled: trying to move into recession but other factors slowing that shift down.

Comments are closed