This article was first published in January 2022 and was updated in November 2024.
In modern organizations, effective data management is critical. Two foundational concepts—System of Record (SOR) and Source of Truth (SOT)—help ensure data accuracy, consistency, and reliability across systems. This post explains their differences and why both are essential for your organization.
As technology evolves, it’s transforming how people do everything from communicating to shopping. Because so much of what we do happens because of the internet, it’s more important than ever that we can rely on and trust the data fed through various applications and systems. Likewise, most organizations rely on a system of record to serve as the backbone for their most essential business processes, enhancing data intelligence capabilities and ensuring data accuracy.
Understanding the Basics
A System of Record (SOR) and a Source of Truth (SOT) are foundational elements of a robust data management strategy. A System of Record serves as the authoritative data source for an organization’s information, ensuring that data remains consistent and reliable. On the other hand, a Source of Truth provides a comprehensive and high-level understanding of an organization’s data landscape. Grasping the basics of SOR and SOT is crucial for effective data management, enabling organizations to make well-informed business decisions based on accurate and reliable data.
What is a System of Record (SOR)?
A system of record (SOR) functions as a reference data source for a specific data element. It protects that information from other inconsistencies that can creep in when data gets handled and processed by other people in the company. For that reason, there must be strict checks and balances around who can access and make updates to the data in the system of record.
For example, a customer service rep may use a specific CRM to review information about a customer. Among the information displayed is the customer’s first and last name. That CRM functions as the system of record for reliable customer information. To keep the data consistent, the CSR should not have the ability to change the customer’s name and pass those changes directly to the database.
Instead, there should be specific controls limiting who can change customer information. Otherwise, you end up in a situation where multiple CSRs could inadvertently make updates that cause inconsistencies within the source system. A system of record should always have the most complete, accurate, and timely data because it’s relied on to feed other applications and systems.
Other sources around the organization might house similar details about that customer. However, your system of record should function as the master; the one referred to when there are questions about data entered through other applications.
What is a Source of Truth (SOT)?
A single source of truth refers to the need for everyone within an organization to make sure they’re making decisions using the same information. Companies should ensure that employees understand which source to use for reliable data to accomplish that. That’s especially important in today’s business environment when so many decisions rely on the validity of the information used.
By having a single source of truth, company leaders eliminate ambiguity for workers who might get confused. For example, the information a business collects from social media may differ from metrics collected from online questionnaires. In addition, having a unified data source to reference makes things less confusing because everyone’s relying on the same data to drive business decisions.
To construct a single source of truth, organizations need reliable, uncorrupted data from SORs, along with buy-in from company leaders. From there, you must work to ensure that only high-quality data makes its way into the single source of truth. You can do that by:
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Excluding random data, like that collected from the news
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Accounting for all information required by company department
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Filtering and combining all relevant data into a platform accessible by everyone in the company
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Ensuring that the information contained in the source system of truth is in line with compliance requirements
Why You Need Both a System of Record and a Source of Truth.
In today’s data-driven world, having a reliable System of Record (SOR) and a Source of Truth (SOT) is essential for maintaining data integrity and consistency across multiple systems. These components help organizations overcome data silos and fragmentation, ensuring that all stakeholders have access to accurate, up-to-date, and relevant data. This is critical for making informed business decisions and driving organizational success.
Ensuring Data Consistency Across Multiple Systems
A System of Record plays a pivotal role in ensuring data consistency across multiple systems. By serving as the single, authoritative source of truth for all data elements, a SOR ensures that all stakeholders are working with the same data. This reduces the risk of errors and inconsistencies, which can arise when different systems hold conflicting information. With a reliable SOR, organizations can ensure that their data is consistent across all platforms, which is vital for making informed business decisions.
Overcoming Data Silos and Fragmentation
Data silos and fragmentation can hinder an organization’s ability to make informed decisions. A Source of Truth helps to overcome these challenges by aggregating data from multiple systems into a single, unified view. This comprehensive perspective breaks down data silos, providing a complete and accurate picture of the organization’s data. By leveraging a SOT, organizations can ensure that their decisions are based on a holistic understanding of their data, free from the limitations of fragmented information.
How Do You Construct a System of Record with Master Data Management?
There are various factors to consider when creating a system of record.
1. Who needs the system of record?
The best way to get started is by diagraming the various processes and workflows relied upon by users. What is it that they’re looking for when completing a task? How does your software align with critical business processes? Typically, they shouldn’t be able to run without your platform.
2. What data does the system of record hold?
You should think about the kind of proprietary data housed within your SOR. For example, many companies use software like QuickBooks to function as their system of record for financial information. Therefore, any information coming from other sources must be checked against the data in that system to confirm validity.
3. Who’s going to use the platform consistently?
The next thing to consider is how many daily or weekly interactions your workers would have with the software. If your platform went down, how would it affect your regular workers? For example, your marketing team might rely on specific software to review analytics. However, if something happened, that wouldn’t affect the people working in operations or accounting.
Now think about what would happen if the time reporting system went down. Suddenly, no one in the company could accurately record their weekly hours worked. That has much broader impacts on the entire organization.
4. Does your software’s output drive business decisions?
What kind of information would your platform produce? Does it provide analytics or reports relied upon by business leaders? Make sure you’re not actually building a source of truth versus a system of record. The more individuals within your organization use information from your software to make decisions, the more likely it is to function like a system of record.
5. Are you translating human knowledge into system coding?
If your system requires a lot of human input, it is harder for someone else to step in and replicate what they do if something unexpected happens. Ideally, a system of record removes the need for human interaction as much as possible to execute essential company processes. That way, others can repeat the same functions without requiring special knowledge that only a few people have.
Systems of Record in Practice
Systems of Record are integral to managing critical data across various industries and organizations. They provide a single source of truth, ensuring that all stakeholders have access to accurate and up-to-date information. Common examples of Systems of Record include customer relationship management (CRM) systems, enterprise resource planning (ERP) systems, and master data management (MDM) systems.
Examples of Systems of Record
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Customer Relationship Management (CRM) Systems: CRM systems are designed to manage customer data and interactions, providing a single source of truth for customer-related information. This ensures that all departments, from sales to customer service, have access to the same accurate data, enhancing customer relationship management.
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Enterprise Resource Planning (ERP) Systems: ERP systems manage an organization’s internal and external resources, including financials, human resources, and supply chain management. By serving as a System of Record, ERP systems ensure that all relevant data is consistent and up-to-date, facilitating efficient resource management and informed decision-making.
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Master Data Management (MDM) Systems: MDM systems are used to manage an organization’s critical data, such as customer, product, and supplier information. By providing a single source of truth for these data elements, MDM systems help organizations maintain data integrity and accuracy, which is essential for effective data management and business operations.
These Systems of Record are crucial for ensuring that organizations have access to accurate and up-to-date data, enabling them to make informed business decisions and maintain a competitive edge.
Build the Ultimate System of Record for Customer Relationship Management
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