Data management is essential for any modern business, but it comes with challenges. Organizations may become overwhelmed by the volume of data collected or struggle to integrate it in a meaningful and impactful way. Ensuring compliance with data privacy laws adds another layer of complexity. A system of record (SOR) can help make data management more efficient.
In this guide:
What is a system of record?
A system of record is an authoritative system for specific data elements within an organization. For example, an HR system serves as the source of record for employee data, while your CRM system may be the equivalent for customer data.
Whatever its use case, an SOR ensures data accuracy, consistency, and integrity by serving as the primary repository for critical information. It helps to support compliance, decision-making, and interoperability across systems.
Systems of record is a broad term, as it covers a range of functions. If you’re unsure whether your solution fits the definition of an SOR, consider the following:
- Does your solution store proprietary business data?
- Is your solution used by employees on a daily or weekly basis?
- Is your solution essential to the business process?
- Do you require your solution to make key business decisions?
There are several components of a system of record. These components include the golden record, master data management (MDM), and the source of truth.
The golden record.
Underpinning any business or organization’s data is the golden record. This consolidates all the data an organization holds on each data entity – employees, customers, products – to provide a single source of truth. Created by the master data management (MDM) platform, this resource combines data stored across various systems, including SORs, into a single dataset. The golden record is understood to be an organization’s most accurate, consistent dataset for each entity.
Master Data Management (MDM).
The master data management (MDM) platform is what creates the golden record discussed above. To achieve this, it consolidates data from multiple sources and cleanses it of duplicates and conflicts. This means it can establish a single source of truth across an organization’s key data entities.
Source of truth.
A source of truth refers to the authoritative source for a particular data element within an organization. While systems of record focus on storing and managing business-critical data, such as customer records or financial transactions, sources of truth are more concerned with data architecture and governance.
Sources of truth emphasize the technical infrastructure that ensures data consistency across systems. This includes how data flows through APIs, data lakes, and integration layers, as well as how it's synchronized between platforms.
A source of truth also involves data governance—the policies and practices that define how data is managed, accessed, and controlled across the organization. In short, while a system of record is concerned with where data resides, a source of truth is concerned with which version of the data should be trusted and how that trust is maintained.
Key characteristics of a system of record.
Systems of record have the following characteristics:
- Data integrity
- Data validity
- Data centralization
Data integrity - Data integrity refers to the accuracy and consistency of a dataset. This might include unaltered files, complete datasets, or similar items. Essentially, the data in a system of record remains unchanged until it is removed from the system. This way, data will remain consistent for each user.
Data validity - Like data integrity, validity is a cornerstone of trustworthy data. SORs prioritize high-quality data that is fit for purpose. For users, this means that the data is reliable and can be trusted for informing business decisions. Validity can be enforced internally through data management and regular assessments.
Data centralization - Holding your data in one location is essential for SORs. It makes it easier to create and maintain a golden record that approved users can access and use. When everyone sources their information from the same dataset, rather than multiple datasets, people are less likely to use conflicting or inaccurate information. Massive and complex datasets are sometimes referred to as big data.
Benefits of using a system of record.
Using a system of record comes with a host of benefits, many of which translate into more informed business decisions and improved outcomes.
- Access and Transparency – SORs are designed to be accessible to staff regardless of their team or location. As this data is treated as the definitive source, it means teams working with the same information should always reach the same conclusions.
- Scaling – As SORs are typically automated and hosted in the cloud, increasing their scope can be relatively simple. So, as your company grows and you collect more data, you won’t need to worry about expansion issues.
- Security – The more systems you use, the more you must monitor. Relying on centralized systems of record allows you to focus your security efforts on a single source, which can both save time and reduce security risks.
- Cost Reduction - Whether it’s reducing the time staff spend searching through databases or lowering the cost of hosting data, SORs can result in savings across the business.
Types of systems of record.
If you’re considering a system of record for your business, there are multiple types to choose from. Depending on your needs, you may find that some options are better suited to you than others. Explore the most common SOR options:
- Databases
- Enterprise-level applications
- Customer relationship management systems
- Accounting systems
Databases.
Databases are systems that hold information. Whether it’s records of sales, customer details, or employee salary information, databases not only house the information but also allow you to retrieve it. Common databases include relational databases, NoSQL databases, data warehouses, and data lakes.
Enterprise-level applications.
Enterprise applications (EA) are types of software designed to help organizations run effectively. This can include both private businesses and governments. An EA will typically run, or at least influence, all aspects of a company’s operations. Some enterprise applications include enterprise resource planning (ERP), cloud data warehouses, and master data management (MDM).
Customer relationship management (CRM) systems.
Designed to help you manage your customers, their experience, and how you communicate with them, CRM systems are commonplace in B2C businesses. With the ability to track sales progress, spot customer trends, and identify pain points, CRMs can provide valuable insights into your business. Some examples include Salesforce or Oracle.
Accounting systems.
Focused on the financial information in your business, accounting systems are built to track and manage your money. Sound finances are integral to a business’s success so that an effective accounting system can play a significant role in your organization’s future. Some examples include General Ledger, Accounts Receivable, and Accounts Payable.
Complementary components to utilize within a system of record.
Systems of record are designed to fit well with other data management systems. Often, these allow users to access, analyze, or otherwise manage the data captured by SORs. Explore complementary systems in more detail below.
Data warehouses.
While SORs are designed to capture and process data in real time, data warehouses are designed for analytical processing. Typically, when data is extracted from a SOR, a data warehouse presents the information in a format that is accessible for reports and decision-making.
Systems of engagement.
Systems of engagement use data from SORs to improve a user’s experience. Systems of engagement are typically used in customer relationship management software, but can be used by any platform or solution that focuses on user interaction. Data for systems of record is used in real time to provide accurate insights and inform interactions.
Systems of reference.
While systems of record capture data and serve as an authoritative source of information, systems of reference differ slightly in that they contain accurate and complete data, which is often used for reference purposes. That is to say, the data in a system of reference is designed to be used by a business or organization as it is considered the most accurate and complete.
To manage potential conflicts between systems of reference or record, master data management is used to reconcile any disputes that may arise between the two sources. This helps to provide consistent and reliable data.
Cloud computing.
Cloud computing has revolutionized modern computer infrastructure, benefiting numerous services. For systems of record, the story is much the same. Cloud computing enables scaling without infrastructure investments, but it also allows data to be accessed from anywhere, provided there is an internet connection.
Similarly, with cloud computing, it has never been easier to update systems of record, whether that involves security measures, industry updates, or general maintenance.
Implementing a system of record.
If you’re planning to create a system of record or are implementing one in your organization, you have several options available to you.
- Begin by defining the scope of your SOR, as well as its purpose. Think about why you need a System of Record and what you need it to do. Best practice includes determining the data the SOR will manage and what other data sources will feed into it.
- Next, select the appropriate tools for your system. You’ll need to factor in the complexity, type of SOR, and any specific requirements. In line with best practice, evaluate whether platforms can be scaled should you see growth in data volume, and also whether they can integrate with other systems.
- From the start, you’ll need to implement a consistently accessible structure within your system records. Your system must be easy to understand, allowing users to maximize its benefits and effectively utilize the data it provides.
- Key to this is ensuring that relevant employees receive training on how to use the new SOR platform. Some best practices include creating and delivering a training plan that covers all areas of the SOR. It’s also worth creating training documents and using a combination of teaching and hands-on training.
- Once your system of record is operational, you’ll need to review the system regularly to ensure it’s working correctly. It’s also likely you’ll need to update your software to keep up with changing needs and any potential bugs. It may be a good idea to set up a monitoring system for the software, allowing your IT team to identify and address issues promptly.
- You’ll also need to consider where you’ll store your data. The data will likely contain sensitive information, so it must be stored in a secure location that's both reliable and accessible. Regardless of where it’s stored, you must remain compliant with regulations such as state-level data protection laws. VPNs, firewalls, and network segmentation can help to secure your network.
Legal and Regulatory Considerations.
Depending on the country you’re based in, data privacy regulations will impact what you can do with your system of record. As SORs typically contain sensitive information, few countries will allow you to collate this data as you please, and there can be serious consequences for breaking these laws. Regulations might affect things such as:
- Data minimization – You must specify the minimum personal data that you’ll collect and process. Any amount exceeding the minimum may be considered a violation.
- Purpose limitation and consent – Your reason for collecting data must be clearly stated in your SOR, and it can’t be used for any other purpose. Consent should be given freely, and it should be clear how data is being collected and used.
- Data security – Your data must be securely protected, and you may be required to adhere to specific data security and compliance guidelines. Security covers the technical, physical, and organizational aspects. You should also have a procedure outlined in the event of a data breach.
In the United States, there is no national law governing how businesses collect and use the personal data of citizens. However, there are state-level equivalents. In California, for example, residents are protected by the California Consumer Privacy Act (CCPA). Other states with their own data privacy laws include Colorado, Utah, and Connecticut.
To help ensure you and your employees are compliant with regulations, you can do the following:
- Conduct a Data Privacy Impact Assessment (DPIA) to evaluate your current security standards and identify any existing vulnerabilities. If you’re working with third-party vendors or processors, you can use Data Processing Agreements to define obligations and responsibilities.
- Build privacy into your systems of record by integrating data protection principles from the outset. This can benefit from clear outlines on the specific technical and organizational steps you’ll take to protect the data you collate.
- Provide workforce training on the details of data security and ensure that everyone is aware of the relevant government procedures.
How Workfront can help manage systems of record.
Systems of record are designed to help businesses capture and manage their data efficiently. For many companies and organizations, SORs enable them to make informed business decisions, assess their performance, and gain valuable insights. If you’re looking to expand your business, modernize internal processes, or gather insights through systems of record, Workfront can help.
Watch the Workfront overview video to learn more.
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