Digital Transformation / March 9, 2022 / by Emily Dobutović

Data Silos: How Can They Negatively Impact Your Business?

Data Silos: How Can They Negatively Impact Your Business?

Before we dive into the discussion of why data silos are bad for your organization, first we need to define what data silos are.

In short, a data silo is a repository of fixed data that remains under the control of one of the departments and is usually isolated from the rest of your organization. 

To explain data silos in a simple manner, we can even compare them to farm silos that keep grain stored away, safe from any of the external elements. 

One of the main goals of digital transformation is to break data silos down and ensure data flows effortlessly across all layers of your organization. But first, let’s see why data silos are actually bad for your business. 

Before we dive in, we’d like to offer you a helping hand. If you’re looking for a reliable digital transformation company that can help you go fully digital and embrace new tools, processes, and technologies, let’s talk! We’d like to share some ideas! 

In any case, let’s start! 

Data silos create problems in interdepartmental communication

First, why do data silos have a negative impact on your organization? The answer is quite simple. 

With data silos in place, communication between departments becomes much more complicated. Not all your departments will have the same data at their disposal and that is the main cause for all the problems that arise from data silos. 

Oftentimes, several departments will have outdated data, while some may not even have that specific data at their disposal. 

So, the question arises – how to solve this issue and eliminate these troublesome data silos? 

To answer that question, we’ll first go deeper into the topic of data silos. By the end of this article, you’ll know almost everything you need to know to start solving these issues as soon as possible.

What are data silos? 

We defined data silos at the beginning of this article, but let’s do it again, just so we can expand on that idea.

By definition, a data silo is a repository of fixed data that’s under the control of one of the departments in your organization. That means that other departments don’t have access to data in that data silos. And simply – this makes interdepartmental communication a troublesome matter. 

What are data silos - why are they bad for your company

Usually, the issue of data silos is present mainly in larger corporations, as tons of data flow through their departments on a daily basis. And take into consideration that every department has its own different goals, priorities, and responsibilities. 

Also, if your departments are competing with each other instead of cooperating, you’ll find yourself fighting an uphill battle against data silos. 

Data silos are the enemy of effective business operations – and one of your main organization-wide goals should be to eliminate every one of them. They are a barrier to proper collaboration and operational efficiency. 

But how do data silos appear in the first place? 

Data silos are the result of 3 different factors: 

  • Cultural – if your employees are competing with each other, they will most likely keep the data from each other
  • Structural – in larger organizations, hierarchy is one of the causes of data silos, as there are numerous layers of management and staff in place
  • Technological – If one department can’t access an application used by other departments, they end up being deprived of data 

Finally, data silos worldwide are being put in the spotlight. They are severely criticized because they are the real enemies of productivity and data quality. Business leaders have recognized the damage they’re causing, and in the last few years, a lot has happened in the field of data management.

Before we share with you an effective method for eliminating data silos, let’s talk about just how harmful data silos are and how much do they cost. 

Why do data silos have a negative impact on your business? 

Essentially, data silos cause a waste of resources, both human and financial. And this can play out in two different directions:

  1. All your departments store the same data
  2. Your departments are storing complementary, but separate, data

Each of these possibilities can cause numerous problems. Let’s name a few of them. 

Important to say here is, storage costs money. 

data silos - different teams are storing the same data

And now you may wonder – why pay extra to store the same amount of data in several different places? We can agree that it’s simply not the best practice. 

Allowing your departments to store and access the same data is a much better and more efficient approach. So, if you’re trying to cut costs, this is one of your first options. 

Sometimes, data stored in multiple silos will likely differ. Determining which data silo is more up-to-date become riskier. For instance, there is a risk of overwriting the current data with outdated data – and we don’t want to do that. 

When you already have an established culture of separating data in silos, you’ll find it challenging to change the mindset of employees. Also, undoing some of the data silos could cause some trouble because your systems are already arranged and enriched with different layers of permissions.

Let’s expand on this for a moment. Permissions are often set up by a group, and when the data is stored for a specific group – it will be difficult to change all the needed permissions. 

Also, you could find your data even stored in different systems. For example, the Security Operations department may be storing their data in an Oracle database, while your Sales and Marketing department stores their information in Salesforce. 

Now, eliminating these data silos becomes somewhat harder. 

But to every problem, there is a solution. And many companies have recognized data warehouses and data management systems as their primary solutions for data silos. 

We can define a data warehouse as a repository for all data collected by all your operational systems. They are usually fully optimized for access and provide managers with a holistic view of their organization’s data.

Systems such as product information management, digital asset management, and master data management are some of the best possible solutions to your data silos. 

Just a note: Our CEO, Krunoslav Ris, wrote a great piece on evolving systems of digital transformation. Give it a read!

Removing data silos successfully may not be a zero-cost investment, but it’s a necessary one to ensure a high level of data quality, accuracy, and completeness.

And now, when we’ve gone through some of the reasons why data silos are considered the enemy of modern business – let’s talk about the financial aspect of data silos. 

How much do data silos cost your organization? 

It’s not particularly easy to say how much do data silos cost and present you with solid numbers. But there’s a way to accurately calculate the expenses. 

You’ll need to take into account the value of your employee’s time, the value of your organization’s time and the amount of time wasted because of data silos.

For example – how much is your organization going to lose per hour if one of your employees can’t work due to the data needed not being accessible? And how much is that going to cost your organization, as it’s a fact that your projects and goals will be pushed back because of this issue? 

Try answering these questions and soon you’ll find out that data silos are totally needless and expensive. 

How to eliminate data silos in 3 steps? 

Here, we’ll talk more about eliminating data silos and present you with a 3-step solution. These steps can additionally be broken down into several more, but for the sake of simplicity – let’s keep the number 3 for a while.

Let this image down below serve as a reminder for this 3-step data silos elimination process.

How to eliminate data silos in 3 steps

1) Find a new data management platform

We can agree that having numerous Excel spreadsheets with random software for storing your data is not the best approach. Instead, you should consider placing all of your data into a single platform. 

That way, your data will be easily accessible to everyone. There are many data management platforms you could choose from. Our team at Lumen Spei will help you recommend and implement the most appropriate platform for your entire organization.

Our main priority is to enable you effortless data management and ensure top-level data quality. 

2) Create a cooperative company culture

It’s crucial that your entire organization embraces the new company culture, focused on collaboration, rather than on competition. This may result in the creation of a new department, such as the Diversity & Inclusion department, or in developing new processes in your HR department. 

A company culture that is characterized by employee collaboration is a prerequisite for removing communication barriers between your departments. That way, data will flow effortlessly through all layers of your organization. 

3) Invest time to go through outdated data

You most probably have a few years’ worths of outdated data and it may seem challenging to go through all that data to sort it out. But – it’s inevitable. You need to ensure that all your data is accurate and up-to-date. 

To make this happen, you’ll most likely want to have a dedicated team that will continuously go through your data and eliminate any data inconsistencies. 

Do you need help with eliminating data silos? 

Trying to eliminate data silos and improve your data management on your own is a challenging task. On the other hand, continuing to work while knowing that data silos are endangering your company’s growth may not result in the best way possible. 

We encourage you to learn more about digital transformation and its role in business growth to maximize your business results. It’s a long and evolving process, so be sure that you’re as familiar with it as you can be. And this is exactly where Lumen Spei can help your company really hit the mark.

We’ll help you design and implement new tools, processes, and workflows to ensure your company can handle all of your data through a new platform. Whatever kind of data-related issue you’re experiencing, we’ll deliver you the results. 

You’d like to know more about how exactly can we help you? Reach out to us and let’s share some ideas! 

Emily Dobutović

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