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15 Centralized Database Advantages and Disadvantages

In a centralized database model, a core unit acts in a way that serves the entire company. This description is often used to describe an analytics model which has been completely centralized, though it may also refer to shared information database which is accessible to everyone.

Companies that are large and have a single-business organization have a need for information, analytics, and applications to be able to cross various boundaries. This enhances the communication within the organization, providing more effective leadership from the C-Suite as specific needs are accurately related to the specific individuals tasked with a response.

Choosing a centralized system is about funding a way for a unique business strategy to have the most potential impact. According to reporting from Deloitte, 42% of companies have established a centralized approach.

Because every business is different, here are the advantages and disadvantages of a centralized database to consider.

List of the Advantages of a Centralized Database

1. It allows for working on cross-functional projects.

A centralized database speeds up the communication which occurs within an organization. Instead of having layers of administrative red tape in place to handle cross-functional projects between teams, the core design allows for those teams to come together whenever it is necessary. That makes it possible to absorb analytical data faster, complete specific tasks with more quality, and make more progress toward the vision, mission, or goals which have been established.

2. It is easier to share ideas across analysts.

Many businesses are setup in a way that creates silos for individuals and teams. By implementing a strategy which centralizes information and analytics, those silos begin to disappear. Instead of having multiple people working on the same projects or datasets independently, the organization can coordinate their work to have them collaborating more often. When everyone can share their ideas with the rest of the organization, the diversity created allows for a better growth potential.

3. Analysts can be assigned to specific problems or projects centrally.

There is a higher level of accountability found within a centralized database. That is because there is much more transparency about the policies and procedures being implemented. Each person can be assigned to a specific problem that the organization must address. Those with the correct authorities can monitor the progress of that person in solving the identified issue. Instead of routing through numerous sections, teams, or departments, all of the communication for each problem or project is routed centrally, which reduces confusion.

4. Higher levels of security can be obtained.

When there is long-term funding granted to a centralized database, then there is a higher level of data security which develops for the organization. That is because the information which is obtained by the company serves the entire company. Everyone involved with the information retention is bound by certain protocols or limits with their access, which limits the amount of data leakage which may occur. The end result is that the valuable data stays internal more often than going external.

5. Higher levels of dependability are present within the system.

There are fewer breakdowns of internal reporting systems when a centralized database is present. Instead of having multiple channels open, which may come to different conclusions on their own, there is one central channel which includes everyone. Each person can access the data they require, offer their opinion, and listen to the company-wide chatter as specific conclusions are created. Dependability happens because people get onto the same page faster.

6. It reduces conflict.

When there is a centralized database responsible for the collection and storage of data, then conflicts within the organization are reduced. That occurs because there are fewer people involved in the decision-making processes which involve the data. When there are top managers or assigned individuals responsible for this information, the lower-level managers and lower tier employees are insulated from the burdens of using the data inappropriately, which leads to a happier working environment.

7. Organizations can act with greater speed.

When there is a core database responsible for managing information, decisions on actions or strategies occur with greater speed because there are fewer layers of data which must be navigated. Leaders of the business are able to operate more efficiently because the communication processes are built naturally into the system. That makes it easier for everyone to evaluate the pros and cons of any decision they may face.

8. It helps an organization stay close to a focused vision.

The centralized database can be configured to keep tabs on an entire organization with regards to its one purpose or vision. Inconsistencies are eliminated from the workflows because the data being collected is intended for specific purposes which are clearly communicated to everyone involved.

List of the Disadvantages of a Centralized Database

1. It can become unresponsive to the needs of the business.

There are heavy workload requirements which become necessary when using a centralized database. Individuals and teams find that the time constraints placed on them may be unreasonable for the expectations asked. In time, if these constraints are not addressed as they should be, a centralized database creates unresponsive teams that are focused on specific tasks instead of collaboration. The teams can essentially rebel against the system to create their own silos for self-protection.

2. There are lower levels of location-based adaptability.

Using a centralized database means you are trading movement efficiencies for less flexibility at the local level. If there are changes which occur locally that affect the business, this data must be sent to the centralized database. There is no option to control he data locally. That means response times to local customers or the community may not be as efficient as they could be, as there may not be any information in place to deal with a necessary response.

3. It can have a negative impact on local morale.

When there is a centralized database being used, the responsibilities of local managers are often reduced. That occurs because the structure of the company may forbid local managers from hiring their own employees. It may force them to use data from the centralized system which they feel has a negative impact at the local level. Instead of being able to make decisions immediately, they are forced to wait for data to come from the centralized database. For those who wish to experience higher levels of responsibility with their management role, the centralized process can be highly demoralizing.

4. Succession planning can be limited with a centralized database.

Because the information is managed by a centralized database, there is little need to work on the development of new or upcoming managers. The only form of succession planning that is necessary with this setup involves bringing in an individual to replace a core analyst at some point. Should top-level managers experience a family issue, health event, or some other issue which interferes with their job, there may be no one with the necessary experience to take over the position, which reduces the effectiveness of the centralized database.

5. It reduces the amount of legitimate feedback received.

A centralized database may provide transparency. It may lead to greater levels of communication. Those are not always positive benefits. When anyone can offer an opinion or feedback on information they have received, they often feel a responsibility to send a response. Many employees may have general knowledge about certain policies or procedures, but not have access to the full picture. They waste time creating feedback which isn’t needed, which wastes time for everyone who reads that feedback. Over time, this can lead to lower levels of productivity and higher levels of frustration.

6. It may increase costs.

When a centralized system is in place, there is a reliance on the accuracy of the data being collected. Even one small miscalculation could have a grave impact on the centralized database. That may result in higher fees for rushed deliveries, incorrect orders that are labeled as being correct, and unnecessary changes to potential inventory controlled by the organization. The costs of fixing a mistake from a decentralized system tend to be lower than fixing the mistakes generated by centralized systems.

7. There is a risk of loss.

When there is a centralized database, everything is stored within that database. What happens to that information if the database should be lost for some reason? Because there are no other database locations, an organization loses access immediately. That could create a long-term outage which may affect the overall viability of the company. Even with cloud backup systems in place and other protections available, there is always a risk of complete loss present when using a centralized database.

These centralized database advantages and disadvantages must be considered at the local level. For some organizations, the centralized structure makes sense because it brings people and teams together with a common bond to work toward a specific mission. For others, the system may create too many data points, bogging down overall productivity.

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