Is a Customer Data Platform the best solution for you?
26 October 2023
Customer Data Platforms (CDPs) offer a comprehensive solution for collecting, organizing, and acting on data related to every customer interaction. But as much as off-the-shelf CDPs promise a click-and-play solution, they cannot magically crack every intricate data engineering challenge.
Whether you should buy an off-the-shelf CDP or look at your own data stack and build what’s missing depends on your organization’s unique context, needs, and capabilities. A sound decision, however, also requires a good understanding of how a Customer Data Platform compares to a traditional Data Warehouse (DWH).
A Customer Data Platform vs. a traditional Data Warehouse
When comparing a CDP with a traditional DWH, there are several similarities and differences to consider.
Data storage & processing
Let’s start by looking at some similarities. Both a CDP and a DWH ingest and transform data from upstream applications. Due to their specialty, the traditional DWH might have the upper hand here as a Customer Data Platform often offers minimal capabilities to ingest data from sources that are not officially supported. Another similarity is that both setups frequently offer Reverse ETL capabilities, where the processed data is pumped back into the operational applications.
That being said, CDPs and DWHs do have different focus. While a Data Warehouse is a general-purpose data storage and processing system, a Customer Data Platform is specifically tailored to process customer data. Technically, a CDP can be seen as an application layer over a DWH with a marketing suite stacked on top.
Stream processing is another primary capability that CDPs provide out of the box. Although undoubtedly possible in traditional DWH setups, it is not yet a standard capability. However, this technology is getting increasingly implemented in typical DWH setups.
Unlike traditional Data Warehouses, where data governance must be planned, implemented, and maintained, Customer Data Platforms often have built-in mechanisms to manage data quality, data usage and protection, privacy standards, and streamline compliance tasks such as GDPR requests. This makes managing data governance tasks more approachable to business teams without technical expertise.
The differences between a CDP and a DWH regarding ownership should not be overlooked. Traditional Data Warehouses are managed by IT and data engineering teams, whereas CDPs are designed to be more marketer-centric and cater to different user personas. This implies that little or no buy-in or capacity is required from the IT and data engineering teams.
While this represents a significant advantage for organizations looking to quickly deploy advanced marketing capabilities, this might be a considerable risk in other organizations. Without adequate IT buy-in and expertise, there is a risk that Customer Data Platforms fall short on the details, leading to a cascade of downstream issues that you wanted to solve in the first place.
The elements to consider when deciding between a Customer Data Platform and your own data stack
The decision to buy an off-the-shelf CDP or look at your own data stack and build what’s missing is not straightforward. The right choice depends on your organization’s unique context, needs, and capabilities. For example, is your organization prepared to build its in-house solutions, or does it lean more toward buying?
Let's look closely at several other factors that come into play.
The capability of your data organization
Suppose you have a mature team at your disposal that is skilled at data engineering, data analytics, and data governance. In that case, you may be better off extending your current stack to include CDP functionalities. Of course, this also depends on how easy it is to adapt your Data Warehouse. But if those preconditions are met, you can deliver a level of flexibility and customization that you can never achieve with any off-the-shelf Customer Data Platform.
The need for customization
If your needs are very specific or highly sophisticated, an in-house solution is better positioned to provide the flexibility you need. While a capable Customer Data Platform offers some scalability, it may not provide the granularity and level of customization you are looking for to address your specific requirements. In the end, having peace of mind that your solution will scale to your needs is so much easier when you have complete control of the architecture.
The risk of vendor lock-in
Don't overlook the risk of vendor lock-in that potentially comes with every off-the-shelf software solution. You might run into surprises in the future when your vendor changes pricing and features or outright discontinues the product you’ve purchased. We have encountered cases where expensive export licenses and a surprising amount of work were needed to export data from proprietary systems. The initial cost of a Customer Data Platform might seem lower than the investments you have estimated to bring your Data Warehouse on par, but you will most likely save resources in the long term.
Total cost of ownership & long-term implications
We believe the most critical point to consider is whether you want to have yet another proprietary solution in place. This can significantly impact the TCO over time, especially when your organization tends to adopt side-by-side solutions for new technologies. It is yet another application that needs to be maintained, updated, and secured, which will put additional strain on your resources.
Also, consider the long-term implications in this case. Once a system becomes deeply integrated into your daily operations, you will find it increasingly difficult to get rid of it as strong business dependencies tend to develop over time. After all, you never want to be locked into an expensive and complex solution that may not be able to keep up with your evolving needs.
As said before, the decision to buy an off-the-shelf CDP or look at your own data stack and build what’s missing is not a straightforward one. One thing is sure: the best choice will depend on a deep understanding of your organization - which we are experts at here at Datashift. Let’s get in touch to see how we can help you out.