Data Appreciation

The tide is changing, and data projects are on the rise. Regulation, the need for transparency and the fact data initiatives remain essential to reach business goals enterprise-wide have ensured data remains high on the agenda. During 2010, discussion about the importance of data initiatives has intensified, and reports and survey results have recently provided further evidence that the drivers for investment in data management activities are changing.

According to a report, Data Management Update 2010, released by Aite Group's senior analyst Fritz McCormick, data management projects are expected to continue to grow in the coming years, and spend is increasing. The research firm estimates spend on data management technology and operations, which reached approximately $1.2 billion this year, will grow to $1.43 billion globally in 2014.

The willingness to spend was also highlighted in a recent survey on data management strategies carried out by Thomson Reuters and research firm Lepus. It revealed firms are now more willing to invest in activities aimed at improving data quality and consistency, making cost reduction less of a priority. In fact, the survey results showed 77% of the 100 top-tier buy- and sell-side firms that took part in the survey have already increased spend on data quality and consistency, while only 4% are now spending less (Inside Reference Data, March 2010).

Boston-based McCormick says the data management space has evolved and taken a life of its own inside financial services, and this foundation has created an environment where it can flourish despite a difficult economic environment. "People have realized that, in the current environment, they have a real need to improve risk management, and whether they build or buy the application, they must ensure it is fed with the highest possible quality data they can get," he says.

Data experts suggest the attitude towards data has changed. New York-based Rick Enfield, product manager at Asset Control, says: "Three or four years ago, I would have considered data management to be an infrastructure project but the concept around these projects has been changing."

There is now interest in looking at data quality and transparency on a firm-wide basis. But while issues regarding transparency have placed the need for good data quality under the spotlight, this has not yet translated into longer-term projects. McCormick says that because firms are faced with smaller budgets than in the past and still need to deliver a better data management environment, it is all about what can be done in the near term.

But there is now a growing recognition improved data management can provide a competitive advantage, making projects less risky investments. London-based Mike Bennett, head of semantics and standards at the EDM Council, says he thinks the crisis has made people focus on the importance of data as a business asset.

Regulatory pressure and the need for increased transparency have had a role to play in this. "There are more projects now in the pipeline than there have been in the past three or four years," says Aite's McCormick.

While in the past data discussions revolved around much more holistic messages, the data management issue now comprises more individual applications and processes. It is now all about the end process and application. "It's not a focus on the particular data attributes being used but about getting all the functionality that I can out of a particular application or process, and so it takes these data projects to get that done," says McCormick.

Sorting out the data is typically seen as the fundamental first step when embarking on a new project. "Data management tends to be something that needs to be fixed first in an early phase on the way to achieving something else, and it is the something else that tends to be the business problem that ultimately gets the buy-in and funding," he adds.

However, this is not always the case. Internal research carried out by Cadis to distinguish the main reasons that led its clients to choose their software revealed 50% did so to carry out a specific data project as opposed to for another requirement. "More than 50% of our clients chose to work with Cadis due to a specific focus on data management and overall governance as opposed to a specific end purpose such as implementing a new global trading system or risk management system," says Stuart Plane, sales and marketing director, Cadis.

The Business Distance

Data has come a long way to be regarded as a business issue over the past year. But even after the increased focus on data within some financial institutions, the business and data management are still separated by a considerable distance. "The business side is starting to recognize data management isn't a technical, but a business problem, and people recognize they do need the underlying data to cope with regulation," says Enfield.

London-based Jean Williams, vice-president, software solutions at Asset Control, says: "It's our role to meet their objectives, as well as making them understand that when it comes to data the devil is in the detail."

Yet, achieving this can still be problematic, as the industry is experiencing the ramifications of long-running data projects, which perhaps had a high probability of failure from the beginning.

It is now recognized that data management projects need a strong foundation and cannot be regarded as non-business critical.

The Governance Role

To meet all the regulatory requirements and mitigate risk, initiatives aimed at improving data governance are increasingly seen as important for creating a strong foundation. Data experts agree that even the organizational structure can make a difference when it comes to putting forward a business case for strategic programs and can make the process of getting buy-in more straightforward.

Toronto-based Mark Cowan, managing director at First Spike, says: "One of the things firms have to do is understand where they are, as well as manage their expectations, ensuring they have the ability to govern what they are doing right now and provide them with a progression path."

To get started, Cowan suggests using a benchmarking data management maturity tool. This can help organizations understand where they are in the governance capability curve, he explains.

But despite access to tools and an increasing interest in getting the data right, some firms are still unsure about what a good governance structure entails. "Clients are not aware of the quality of the data and the idea of governance in the organization remains a vague notion," says Newland, explaining that it is the clarity that comes from having well-defined data governance, policies, procedures and people that is the obvious benefit.

Still, the reality now is that the importance of timing should not be underestimated. The anxiety following the financial crisis has dissipated fast, and the data world must ensure it makes the most of the current momentum and interest. The attitude towards data initiatives is changing and as long as good data quality is needed, it is bound to remain part of the agenda - with or without cost concerns.