Insights

Powering Private Equity and Alternative Investment Firms

In today’s digital experiential economy, as organizations continue to expand and add new business units with new clients and new applications, data can often get messy and inconsistent. While data is often considered as valuable as gold, it must be cleaned, sorted, and made accurate and consistent to be usable across different departments. This is where master data management (MDM) comes into play.

Industries today are seeking clean, consistent data to make critical business decisions, and the private equity (PE) and alternative investments sector is no exception.

The Rise of MDM: Why It’s Crucial for Businesses
In plain language, MDM is a process that creates a uniform set of data on customers, products, suppliers, and other business entities from different IT systems eliminating data discrepancies and inconsistencies caused by humans. As said earlier, MDM primarily improves data quality, streamlines, and facilitates data sharing between departments becoming the single source of truth. The data may come from both internal and external sources.

Data discrepancies & human errors – A sales executive from the sales department may feed a customer name ‘Eric Smite.’ While the Product department may enter it as ‘Eric Smith’ or the finance department may enter it as ‘E. Smith’ – different departments may enter the same name in multiple ways, lacking uniformity. By implementing a proper master data program through MDM, organizations aim to gain deep insights into their operations at a granular level, enhancing both operational and business efficiency.

Facts Speak:
A survey by Gartner reveals that an organization’s poor data quality results in an average loss of $15 million per year. We can say, MDM emerged out of necessity for businesses looking to improve the consistency and quality of data related to their key domains- products, suppliers, customers, assets, location, etc.

The global MDM market size in 2022 was approximately $16.7 billion in revenue, and is set to touch $34.5 billion by 2027, at a CAGR of 15.7%. The wide-spread adoption is attributed to increase in the use of data quality tools for data management and rising need for compliance.

Here, MDM programs provide a single view by consolidating data from multiple sources into a standard format by eliminating data duplication and multiple errors. This standard format is called ‘master data’ or the ‘golden record’ of information or ‘the single source of truth,’ which can be compiled for each data domain in an organization – customers, products, suppliers, or materials (for manufacturing). The applicable data domain for BFSI may include – customers, accounts, products, members, products & claims.

For capital markets, alternative investment, and private equity (PE) firms, data domains include limited partners, portfolio companies, investors, wealth management, hedge funds, retirement services, and funds. For real estate firms, data domains encompass potential buyers/sellers, real estate investors, products, agents, property investment, exchange, finance, mortgage, insurance, and settlement.

Navigating the Data Deluge: Key Data Types to Master

• Master data: Mostly comprised of enterprise information, it has uniform, thoroughly cleansed, quality distributable data made available for all departments and domains for use. It contains key business object info on customers, products, suppliers, assets, employees, etc. These are commonly found in all domains.
• Transactional data: It complements the master data. Mostly temporal and instantaneous in nature it includes info related to – dates, bills, invoices, customer IDs, item numbers, product specifications, other transactional info related to sales, deliveries, claims.
• Reference data: It constitutes the varying VAT rates, currency codes, currency exchange rates, country identifiers, postcodes, zip codes, order status entries.

Supercharging Business Performance with MDM

• Increased data consistency: A uniform master data set on customers, products, and suppliers enhances both operations and analytics. It eliminates errors, optimizes processes, and boosts customer engagement. Customer reps access complete customer data, sales teams see all potential leads, and supply chain companies track and ensure accurate deliveries. This saves significant time and provides high-quality, accurate data.
• BI and Advanced Analytics: A proper MDM program can boost the accuracy of BI and analytics applications, further powering strategic planning efforts and better decision-making.
• Compliances: Aids in our efforts to comply with standard regulatory compliances like GDPR, CCPA, and HIPAA, while establishing accountability for the data they collect on people.
• Data governance: As a business function of MDM, it lays policies, standards, and procedures and oversees data stewardship at the ground level for better and responsible data usage within the organization while ensuring end users adhere to the data policy. Data governance implementation can bring true democratization for various stakeholders and business units in a company.

The Challenges

MDM: The Game-Changer for Private Equity and Alternative Investments
Most private equity and alternative investment firms, apart from using their years of dealing and experience, are now turning towards MDM and data analytics solutions to gain a better competitive advantage. PE firms today are increasingly relying on clean, uniform, consistent, and trustworthy data to make better decisions and to get better returns across their investment lifecycle. By doing so, PE firms can have a better view of their portfolio company’s performance, track their set KPIs and follow trends better and create value and edge to stay afloat and maintain business continuity and growth trajectory.

As a PE firm, if you are considering an acquisition, implementing a value creation plan, developing, and monitoring an exit plan, or looking to invest in various asset classes, track, manage, and diversify your portfolio investments, etc., having a strong, scalable MDM program in place can boost your private equity performance. Further, it can amp up a firm’s data-powered decision-making ability. It is worth noting that most of the data is either company-generated or alternative (third-party) data.

ThoughtFocus’ MDM & Data Governance Solutions Deriving Business Value for Global Businesses
ThoughtFocus serves private equity and alternative investment firms in scaling and automation, with technology solutions including AI, ML, data science, and advanced analytics. Our solutions provide you with a detailed view into your business operations, investment life cycle, competition, and customer journeys, which are ‘highly crucial’ for your business continuity and sustenance especially in a competitive market. Here, real-time insights add value to private equity and alternative investment decision-makers to invest better and with due diligence.

If you are looking to continue your business innovation streak in private equity and alternative investments, gain better insights into your investments (at every stage) in the investment lifecycle, and secure better business value, revenue, and ROI- our MDM and Data Governance solutions can help!

Powered by our accelerators for an easy fast customer onboarding experience, latest technology, and a deep domain expertise in supporting the capital markets – private equity, real estate, alternative investments, and hedge fund firms for over two decades, we know ‘what it takes’ to help drive your business innovation –transcend and keeping you ahead in this digital experiential economy.