Why Are Data Silos Problematic?

One of the most critical challenges that organizations encounter today is data silos. While this issue is frequent, it is not always easy to detect.

This is because it is an organizational issue caused by an organization’s counter-productive infrastructure.

Data silos create several subsequent problems that work against a company’s growth.

Organizations need to restructure and connect their processes to deal with them properly, which is complicated and time-consuming.

So, why are data silos problematic?

Let’s delve deeper into why and how they are created.

Table of Contents

What Are Data Silos?

A data silo is a repository of information held separately by one department in an organization and not shared with the rest of the departments.

Usually, the department that contains the raw data is the one that initially produced or collected the company data. Of course, The term “silos” is derived from the structures that farmers use to store bulk materials.

Moreover, there can be more than one data silo within an organization. Multiple departments use different databases and tools to collect, examine, and store the raw data from other departments. Often, various departments have pieces of data that, if combined, can be even more useful.

However, due to the lack of transparency and collaboration, the data are isolated and are kept in separate locations. The more data silos, the more dysfunctional a company is.

For example, in an institution, the departments of Finance, Human Resources (HR), and Communications / Marketing often hold similar information about the organization’s employees.

HR would have an employee’s personal information (home address, cell phone number, birth date, full name, work contact information, work contract, position, vacation time, etc.).

Finance would have the same employee’s bank info, salary information, etc. Communications would have internal communications content that would interest the specific employee based on their job description and the department they belong to.

This disconnection diminishes the data quality. The organization’s workflow is disrupted if the data cannot be easily located and understood.

Departments cannot succeed in many tasks if they have insufficient data. Therefore, the entire organization will be impacted negatively.

How Do Data Silos Occur?

A data silo can occur for various reasons. Often, it is created naturally within an organization due to outdated infrastructure plans.

The digitization trend made many companies reevaluate their processes since data has become a valuable commodity.

Therefore, their previous business structures that aided the creation of data silos had to be done away with.

Of course, there are a lot of factors that reinforce the creation of data silos. Technology is one factor that plays an integral part in the cause of data silos.

When a department uses a specific technological tool to assess data and other departments do not have access to that same tool, then a data silo is created as information cannot be shared within the rest of the organization.

Sometimes, different departments use different types of systems to store data, and these systems may not be compatible with each other. Therefore, information cannot be shared in this case either.

Legacy systems do not tend to share information easily. Their application can differ from other contemporary systems and generally does not support collaboration with other teams.

Companies must employ proper technological tools that allow quick data transfers between departments.

Furthermore, every team needs to be properly trained in using the tool, as insufficient access and knowledge in the system’s use can have the same result as no access at all.

Besides technology, another factor for data silos can also be the actual organizational structure. In the past, individuality for each department was actually encouraged by businesses.

Each department had its own goals, procedures, and systems and did not usually overlap with the others.

Because data did not have the same value today, organizations did not push for collaboration.

Moreover, a company expansion can complicate current processes, separating departments more than before. The more a company grows, the harder it gets to perform data management.

How Do Data Silos Affect Organizations?

If an organization keeps its data segregated, it risks affecting its accuracy.

Data quality can diminish over time due to data silos, which leads to outdated or inaccurate information.

Without the sharing of data, the information does not get correctly updated. This threatens the data integrity, provides a limited view of the business and makes operations ineffective.

Data analysis also becomes less productive since the information analyzed is not sufficient to provide accurate results.

Data silos also duplicate tasks. When similar information is reproduced and stored in multiple places, all the tasks associated with its collection, evaluation, organization and storage are multiplied.

This has many adverse effects on a business as it wastes resources and employee time and increases expenses.

An organization will have to acquire additional storage space to store the same information and spend funds on multiple systems for each department instead of one that can support all or most departments.

Silos also seriously slow down the organization’s operations. Slow delivery of services and products due to slow operations can also negatively impact customer satisfaction and, in turn, affect the organization’s profit.

Finally, silos also discourage collaboration. Work tasks can become more manageable and get completed faster if employees collaborate with each other.

However, data silos prevent collaboration from taking place, making employees do various tedious duplicate tasks that can affect their motivation.

How to Do Away With Data Silos

There are a lot of solutions that will help you break down all the data silos in your organization.

The number one thing you need to consider is to reevaluate the organizational structure and change management system.

If you want your organization to strive in the digital age, you have to modify the company culture to embrace collaboration.

These changes are the most difficult to implement since they need to be performed from the top down to the lower levels of the hierarchy. However, the benefits will be immediate.

Data integration is also very effective for tearing down all data silos. Centralizing all your data in one place, where every properly trained employee from any department can access, update, and add to the already existing information, is the most effective way to do away with any data silos. A great tool to use to centralize your data is cloud technology.

Cloud software tools help transform a disparate business into a well-organized collective, streamlining workflows and producing greatly improved results.

Several techniques perform data integration, such as scripting, ETL tools, and Integration Platforms as a Service (iPaaS).

Conclusion

Even though they are created naturally within an organization, there are many reasons why data silos are problematic.

Considering this current era of digitization, data management and centralization are very important for the effective operation of many businesses.

Therefore, data silos negate an organization’s growth and only make the success of companies harder.

This is why modern businesses should try to break down all the data silos within their various departments if they want to strive in the digital era.