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What Are Data Silos and Why Are They Problematic?

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In our data-driven world, 33% of finance teams are struggling with inaccessible or siloed data.  Companies cannot back well-informed business decisions without accurate reporting from FP&A teams. 

Siloed data makes it difficult for finance teams to gather all the information needed for creating accurate reports. Inaccurate reports are just one-way data silos negatively impact business

In this blog, we're going to cover why exactly data silos are problematic for your organization and how to identify them and find a solution to avoid them. But first, let's discuss what a data silo is.

Key Takeaways: 

  • Data silos occur when business information gets stuck somewhere within a network, which is less useful. They create barriers to data collection and reporting.
  • Data silos cause a decrease in efficacy in the collection, storage and management of business information by creating incomplete data sets.
  • It also leads to inaccurate and inconsistent data, causes duplicate information systems and increases your organization's IT infrastructure costs. 
  • It cultivates a siloed mentality between departments making it difficult for various teams to share data or communicate effectively.
  • Most companies experience data silos, and the key to avoiding them is identifying them so that you and your teams can determine a resolution.

What Are Data Silos? 

Data silos are when useful company data gets trapped within an organization's information network. This data becomes less valuable than it could be otherwise. While these barriers to information may seem innocuous, siloed data makes sharing and collaboration across departments challenging.


Since this data is unavailable to the entire organization, teams, departments and even individual team members get only part of the information. It creates issues for the organization and its customers. 

Data silos occur when different departments collect data in their internal systems, leaving information out of a central repository where other departments and team members can access it.

Why Are Data Silos Problematic?  

Data silos are a problem because they hinder business operations and decrease the efficacy of collected data. They restrict executives from useful information for vital business decision-making

Siloed information prevents sales reps, call center agents, support professionals and operational teams from accessing pertinent data about products, customers, supplies and more. The following are specific ways data silos are harmful to a company:

Creates Incomplete Data Sets     

Finance professionals spend roughly 25% of their time on data analysis. Data silos create incomplete data sets, meaning budgeting and forecasting reports do not paint a clear and complete picture. They can impact business internally and can be detrimental to the customer experience. 

For example, if a customer contacts support for help with a malfunctioning product and the support agent can't see data from other customer interactions such as sales or billing, support could be missing vital information to assist the customer. 

Let's say a customer often speaks to the billing department to pay their bill because they are not comfortable with technology." If support knows that about the customer before taking the service call, they can make a better plan to work with them to resolve their current issue.

Incomplete data sets slow down the resolution process, make it difficult to serve customers and create challenges for department heads to gather information, such asFP&A professionals who need to develop monthly, quarterly or annual reports. 

Leads to Inaccurate and Inconsistent Data    

Incomplete data sets often lead to inaccurate and inconsistent data. Inconsistency occurs between departments creating further data inaccuracies. 

For example, if marketing teams format customer information differently than other departments, data errors by other departments (such as sales) are more challenging to identify and fix. Updates to the data in other systems do not get made in a siloed customer service data update.

These information inconsistencies create data integrity and quality issues that impact end users in analytics and operations applications.

Infographic comparing data silos to data lakes 
                                                                                                   Source: RkimBall  

Causes Duplicate Data Platforms       

Data silos occur because there are multiple data systems within your organization. CMSs, CRMs, ERPs and other data platforms create siloed information unless they are integrated. Still, even well-integrated systems can create siloed data. 

Siloed data adds to IT costs by increasing the cloud space needed and the number of on-prem servers your organization must maintain. 

Often, separate departments deploy and manage their systems instead of the company's data management team, increasing inadequate use of IT resources and unnecessary spending. 

Doesn't Support Collaboration    

When data gets isolated in silos, it reduces the opportunities for information sharing and collaboration between departments and throughout the organization. It is more difficult for teams to work together effectively when individuals do not have access or visibility into siloed data.

Cultivates Siloed Mentalities Between Departments  

Siloed data contributes to inter-departmental silos. Departments that safeguard their data closely and are unwilling to share it with other divisions create silos. It almost becomes part of their mentality. 

They often oppose data governance programs aimed at breaking down data silos and ensuring data consistency and accuracy across all organizational systems.

Data Security and Regulatory Issues

When individuals store information on Excel spreadsheets or an online business tool such as Google Drive, they often do so on mobile devices in files that are not shared. Not only does this create data silos, but it also creates data security and regulatory issues.

It increases risks to an organization's data security and privacy without suitable controls. Siloed data also complicates measures to comply with data protection and privacy laws.

How To Identify Data Silos 

Data silos are all too common but can be difficult to identify, especially in larger companies with various business units operating autonomously. While data silos may not be evident, here are a few signs that point to them:

  • Teams can't access or find relevant data.
  • Various departments report inconsistent information.
  • Executives complain about a lack of information for making well-informed business decisions.
  • End users discover data sets are out of date or incomplete.
  • Unforeseen IT costs unexpectedly emerge.

Breaking Down Data Silos With Vena 

Eliminating data silos enables organizations to collect, store, manage and use data more effectively. It also frequently lowers data management and technology costs. Vena removes silos and connects data assets in one Complete Planning platform to support your business operations better. 

Excel at Breaking Down Data Silos

Vena offers an Excel-native central database for all your organization's financial data. We bring data from your existing systems to improve your data's integrity.

Try Vena Today

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