The Role of Cloud Data Warehouses as the New System of Record

1 Jan
6min read

What is a system of records?#

Let’s start with something funny, like a definition:

A system of record (SOR) is a database that serves as a business process's backbone. It is the primary source of truth for a specific set of data (as systems of record have fragmented and specialized).

The idea is to designate a reference to support business processes and decision-making. It helps align the company teams toward a common baseline, that is reliable and consistent on a particular topic (Product, Accounting, Sales).‍

Customer Relationship Management (aka CRM) is the most common system of record to store and manage data about your customers, including contact information, purchase history, and any other relevant information.‍

The behemoth Salesforce, leader in this category with his $142.22B net worth in October 2022, demonstrates the importance of a customer-focused SoR for companies. CRM is nowadays the go-to source for marketing, sales, and customer service.‍

But here's the kicker:‍

Today's CRMs were built 15 to 20 years ago (1999 for Salesforce, 2006 for Hubspot, to name only the most well-known), so they were not made to manage the complex data architecture that modern enterprises have.

In the last 5 years, the number of SaaS tools used by companies has been multiplied by 10. According to BetterCloud, an average SaaS company uses 80 different SaaS apps.‍

Consequently, the source of records is disparate across more tools than before (analytics data, product data, marketing data, financial data), and CRMs have become less and less the reference for business and customer data. Instead, they've become one tool among others.

One negative consequence is that it can lead to misalignment within the company, as each department relies on different systems of record. No need to remind that this topic remains among top priorities for most SaaS businesses. Companies where sales and marketing teams work together, see 36% higher customer retention and 38% higher sales win rates. Still, in 2023, misalignment is in the mind of every sales leader.‍

Here comes the value of the promise of a single source of trust.‍

Wait, what’s the difference between a system of record and a single source of truth?

Glad you asked.

We said earlier that SoR is the authoritative data source for a given data element or set of data. Today, a company has multiple SoR depending on the data they are looking. For instance, sales guys would be using Salesforce. Marketing folks would use Hubspot and the product team another tool like Mixpanel etc.‍

On the other hand, the source of truth refers to a reliable data source that gives a complete picture of the data object.

An extensive catalog of data accumulated from a wide range of sources within a company used as a way to unify & reconcile your disparate data and align your internal teams toward a single reference.

And which technology is the most suitable today to respond precisely to this definition?

The Cloud data warehouse.

What is the new source of trust?#

CRM systems are not well suited to handle the complexity and volume of data typically found in a data warehouse. While it’s a good system of records for sales data, representing other business entity definitions than people and companies and pushing it into other systems is a mess.

The traditional "One-size-fits-all" approach CRMs have been selling can't help answer each business-specific need. They are opinionated, you need to adopt their prism to do your business, they are inflexible, models can’t be easily recomputed as your organization grows, and their structure is locked up, data is managed and owned by the CRM and can’t be easily accessible for other providers/services.

Meanwhile, we’ve seen the adoption of cloud data warehouses as a strong signal that companies are shifting toward a data-driven structure.

Most established companies start using data for both operational and analytical purposes. The guys from Castordoc wrote an excellent notion on the Modern data stack landscape and the players relying on it as their core data infrastructure.

Finally, the rise of reverse ETL a few years ago is another shred of evidence that there is a paradigm shift. Their primary mission is to push back the consolidated, reconciled data from your CDW to your tech stack (or to custom audiences to do advertising) to make data operational.‍

It's not just an opinion anymore; the warehouse-first architecture is becoming the favored approach for data-driven organizations.

If we simplify the architecture of a CRM, it's typically a source of records coupled with a system of engagement.

At Cargo, we are convinced that the source of truth is now cloud data warehouses, and the missing piece to operationalize the data, is the engagement system: the application layer that sits on top of where your data lives.

For us reverse ETLs are patching CRM limitations. We think we could go even further: Instead of re-pushing the data into locked-up third-party systems with rigid infrastructure, we should start building on top of the warehouse. That's what we're doing for go-to-market.

This is the shift initiated by the launch of Unistore by Snowflake and by the emergence of data warehouse native apps.

Time to say hello to the next Generation of SaaS 👋👋

👉 Interested to learn more? Join the movement here

MaxMaxJan 1, 2024

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