Today many companies are finding it more efficient to outsource all or part of their data management or data-integrity processes to customer data integration firms.
For the rest of the April 2004 issue of CRM magazine please click here
Life changes. And as it does, so does the data that captures its movements. Keeping up with these changes is a daunting task.
According to the U.S. Census Bureau, more than 43 million people--some 16 percent of the population--move to a new residence each year. On an average day:
Roughly 6,800 people marry; many of them change their names.
About half that number--3,400--divorce; many of them also change names.
11,184 babies are born.
6,742 people die.
In 2002 about 550,000 employer-businesses opened, according to the U.S. Small Business Administration. That same year 38,155 filed for bankruptcy.
So it's not surprising that about 2 percent of records in a customer file are obsolete within one month, according to The Data Warehousing Institute (TDWI). That does not count the number of records that contain incorrect or incomplete information.
Whatever the cause, over a relatively short period of time dirty data can render a customer database useless for making effective business decisions.
A $600 billion dilemma
In its study "Data Quality and the Bottom Line," TDWI set the price tag for dirty data at an astonishing $600 billion per year. A recent volley of federal legislation mandating data integrity in health and financial institutions; a growing chorus of marketing literature emphasizing the customer database as one company asset that few competitors can duplicate; and TDWI's report (and other industry studies) have led to a heightened corporate awareness of data integrity--particularly as it applies to CRM.
Some organizations attempting to corral and clean customer data turned to data warehousing. But as the costs of data warehousing and KM projects mounted, chief executives began to question the return on investment. "A lot of companies spent millions and millions on these initiatives, and they just flat didn't work," says Mike Wallis, product marketing leader for data quality at Acxiom, a customer data integration (CDI) firm.
Thus, many data warehousing initiatives have been relegated to the back burner in recent years, following a number of highly publicized--and expensive--project failures. As a result, the notion of outsourcing data-quality initiatives caught on.
In fact, today many companies are finding it more efficient to outsource all or part of their data management or data-integrity processes to firms like Acxiom. As a result, the number of CDI firms is growing. Companies specializing in CDI typically offer a platform or tool set that allows organizations to share data across disparate systems and databases, avoiding the massive expense of building out data warehouses.
Outsourcing heats up
Outsourcing database-marketing functions is not new. Eric Schmitt, a senior analyst at Forrester, notes that banking and travel services have outsourced functions like mailing-list maintenance for "the past 20 to 30 years." What is new is outsourcing the operation and maintenance of what Schmitt calls operational CRM and other transactional systems like call centers, Web sites, and point-of-sale operations that feed data to the core customer database.
One company that bridges the old and the new is Acxiom. Founded in 1969, it was one of the first to offer outsourced address-list cleansing and data management services. Today it provides a full range of CDI services, and is regarded as one of the top three service providers in the business. Another is Experian, which (although best known for its personal-credit data services) maintains and updates targeted marketing databases for clients, and the third, Harte-Hanks, specializes in database services for direct marketers.
And new players are getting into the game. According to Schmitt, large systems integrators have taken an increased interest in outsourcing knowledge services as they look for additional revenue streams and develop a greater appreciation of data-related business problems facing their clients. These include management consultancies like Accenture, which offers IT services with its traditional focus on business processes, and newcomers like Salesforce.com and RightNow Technologies, which offer an all-new business model, managing customer data as part of their hosted CRM offerings.
Companies that enjoy trusted relationships with an integration firm often prefer to outsource data services like data cleansing and management to that same integrator. Ultimately, Schmitt says, that partner will be working with the data as it is integrated with internal systems. Companies prefer that security and efficiency.
Efficiency was what spurred Rodale Inc. to embrace outsourcing. The publishing company sought to increase the accuracy and reduce the complexity of its database of readers, customers, and prospects who subscribe to one or more of its nine popular health and hobby magazines, including Prevention, Men's Health, and Runner's World; visit its 53 Web sites; or purchase any of its more than 500 books. In 2000, with a customer database that already contained more than 187 million names, the company set a goal of doubling that number of customers over five years.
Recognizing that the data suffered from duplication and incomplete customer records, Rodale turned
to Acxiom to help it cleanse and manage its database and integrate it with corporate marketing. During the course of the project Acxiom discovered more than 40 percent of the keyed data contained errors. It provided Rodale a CDI framework of data management software that uses Acxiom's InfoBase demographic data to resolve inconsistencies and cleanse the database of duplicates and fictitious customers.
According to Rodale's director of database marketing, Todd Leiser, the company mails more than
270 million promotions annually. Leiser estimates that the service has saved Rodale millions of dollars a year in direct mail costs alone. It also opened a new revenue stream by allowing the company to court advertisers with demographic information that allows them to target campaigns. "Advertisers," he says, "are hungry for this information."
Complexity spurred E.&J. Gallo Winery to embrace outsourcing. By some estimates as many as 6,000 retail stores open, close, or change hands each month. The challenge of adding, deleting, and updating hundreds of records monthly, compounded by Gallo having collected the data from its more than 400 distributors--each with its own data collection applications, inputs, and reporting schemes that had to be integrated into the master database--sent the vintner looking for outside assistance. Today, retail-site database provider Trade Dimensions and its integration partner, TDLinx, help Gallo maintain retail sales data from the more than 300,000 site outlets that market its products. Using Trade Dimensions' retail databases, TDLinx built an integrated system through which Gallo uploads its retail database to TDLinx each month. TDLinx cleanses and updates the records and returns the database electronically.
Not all or nothing at all
Integrators that specialize in database management offer a range of CDI services that go far beyond simple outsourcing of data maintenance. More than anything else, they are integrators that work closely with client companies to identify the data integrity processes that are needed and to provide the technology to support them.
A Forrester Research report recently noted that traditional technology integrators are beginning to get into the game. It cautioned that while they possess the technical skills needed to implement data management programs and are usually very familiar with their clients' businesses, many lack a depth of experience in dealing with critical business processes. "Few integrators have built and refined a detailed customer segmentation model over time, or managed the nuts and bolts of getting a 10 million--piece holiday catalog drop out the door," the report states.
William McKnight, president of McKnight Associates, a consulting firm that specializes in business intelligence and data warehousing solutions, believes failures occur because too often, the initiative focused solely on technology at the expense of the business process. Before companies outsource their data quality initiatives they need to thoroughly understand their data-related processes and requirements, "as opposed to outsourcing something that is ill-defined and will not ultimately meet your goal," McKnight says.
McKnight's advice? Start simple: Identify and implement the processes that will produce the cleanest data set for the projects that best enable company goals, for instance, customer segmentation to determine the past and future value of individuals in your customer database. This would allow an organization to direct its marketing efforts toward keeping and attracting the customers it wants, and away from those who deliver little or no value.
Service providers, McKnight says, should be able to clearly identify the opportunities that lie in outsourcing business intelligence and data initiatives to them. "That means bringing it back to ROI in some way, shape, or form."
A solutions partner--whether it's the consultant working to help you identify mission critical processes that are dependent on clean data, or the service bureau you are outsourcing the data cleansing process to--should be able to link all the activities in the process back to the value it delivers to the company. And that should happen "all the way down the line--connecting the dots, if you will," McKnight says.
Ken Chow, vice president of marketing and product management for Group 1 Software, whose technologies are designed to deliver and integrate clean data across the enterprise, advises organizations to devote "a considerable amount of thought" to results they want from their data and the business processes that will deliver them before they begin any implementation--outsourced or internal. "It's difficult to have a one-size-fits-all solution," he says.
Chow says that, typically, two things in organizations are true: "Usually you find someone in the organization who's absolutely certain they know the state of the data quality. Second, it's always worse than they think."
Carol Ellison is a technology journalist based in New York
DMDays '08: A database is more than just a list of names—it's where marketers go wrong and how to get back on course.
Survey reports that working together makes everyone stronger.