The True Cost of Data Silos & How to Eliminate Them

Sirojiddin Dushaev Lead Data Engineer & Cloud Solutions Architect

Bogdan Steblyanko Chief Executive Officer

Today, the data of a business is much more than just numbers sitting in a spreadsheet – it’s a treasure trove of insights waiting to be discovered. When used correctly, your data can help make smarter decisions, optimize operations, and drive growth. That’s why the majority of companies realize that investing in data is a priority. But what do you do if your data has poor quality or is not being tracked correctly? 

The price tag of messy data can be hefty – estimates show that data issues cost organizations USD 12.9 million every year. And it’s not just about the immediate financial hit: poor data can significantly impede long-term growth by further complicating the workplace ecosystem and decision-making.

What most often leads to these results? You guessed it – data silos. In three out of four companies, these silos hinder internal collaboration and make it difficult to share essential insights across departments. And with the growing focus on data, the issue of data silos is worsening: industry studies show more than 40 percent of companies are dealing with an increasing amount of isolated data.  

So, how can you prevent your business falling into the data trap? In this article, we’ll explore everything from the causes to methods for overcoming data silos. 

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Article Highlights:

• Manual data entry and spreadsheets stored on separate devices increase the risk of data silos by introducing errors and inefficient data sharing;
• 71% of respondents believe that internal departmental competition leads to a “data hoarding” mentality;
• Cloud solutions and data lakes are scalable options for centralized data storage, providing all departments with real-time access to accurate information;
• CHI Software improved a client’s ROI by 10–20% by converting recommendation services from Scala to Python, implementing Kafka for real-time streaming.

Understanding the Root Causes of Data Silos

On the way to answering the question of how to overcome data silos, every business needs to understand why the issue arises in the first place. Let’s analyze the key factors.

Here are the main reasons why data silo challenges appear in a business.

1. Lack of Integrated Systems

When different departments use different software or tools that don’t interact with each other, it will almost certainly lead to data silos in businesses. For example, a sales department may use a CRM system, while a marketing department relies on email automation software – if these systems lack integration, they will store data separately, and this way of working will make it much more difficult for teams to access complete information.

2. Unplanned Growth

As a company grows, management may implement new tools and processes. If these tools are not properly integrated with existing systems, they can create disconnected workflows and isolated data pools. Remember that scaling should be planned with data management in mind. 

3. Departmental Barriers

Two out of three respondents say that corporate culture contributes to data silos. Departments may be reluctant to share information due to a lack of trust or unclear communication channels. 

Furthermore, 71% of respondents believe the problem lies within the departments themselves, as employees fear competition and do not want to share their knowledge. This situation can create a “data hoarding” mentality where teams only share information when necessary.

4. Legacy Systems

Some legacy data architectures often lack support for modern integrations. Businesses of all sizes, from startups to enterprises, may struggle to connect outdated systems with new tools, ultimately leading to data silos.

5. Poor Data Governance 

Having a company-wide policy for storing, accessing, or sharing data is also essential. If there are no such rules, teams are likely to start creating their own methods, which may lead to inconsistencies.

6. Manual Processes 

Relying on manual data entry or spreadsheets stored on separate devices can result in data silos; manual processes increase the risk of errors and hinder effective data sharing.

7. Collaboration with Third-Party Organizations

If there is no clear integration strategy, third-party organizations can silo data. For example, providers and partners may use their own systems, which will make sharing data much more difficult.

You might not always notice it right away, but data silos have a huge impact on your business. Let’s dive into how they can hurt your company.

Do you recognize your workflows in one or more of these reasons? Let's figure out how to handle them!

The True Cost of Data Silos: How They Damage Your Business

Some people do not realize how data silos can affect business because, at first glance, the issue may seem harmless. After all, when each department has its own database, the process looks organized, right? But here’s the thing: when data is locked up in one place and is inaccessible to other teams, it quietly eats away at your business’s potential.

From missed opportunities to wasted resources, data silos come at a price, and it’s higher than you might think. Let’s divide the consequences into two categories: tangible costs (direct and measurable losses) and intangible costs (less visible but no less damaging consequences).

This is how data silos can affect businesses.

Tangible Costs of Data Silos

What better way to directly demonstrate the damage than with financial consequences?

Higher Operational Costs

Data silos often mean duplication of effort. If two departments work with similar data but don’t share insights, they may unknowingly duplicate tasks or research. This doubling workload leads to additional costs for tools and services, repetitive manual work that could actually be automated, and increased IT costs for managing multiple systems.

Lost Revenue Opportunities

When sales, marketing, and customer service departments don’t have access to shared data, your company is missing out on many sales opportunities. For example, if the marketing department lacks information about the sales team’s interactions with customers, it cannot tailor offers to customer requirements and target marketing campaigns. 

Customer Acquisition

As a result of such ineffective communication between departments, the customer experience deteriorates, and customer churn increases. As a result, your business will have to spend significantly more money on marketing, sales, and ineffective customer retention strategies. Remember: it costs five to seven times more to attract a new customer than to retain an existing one.

Incorrect Budget Planning

How can your company make effective budget allocation strategies if it bases its decisions on incomplete data? Imagine that your finance department does not have a clear picture of the ROI of your marketing efforts. In this case, the only way to plan the budget is to do it blindly, which directly affects your company’s performance. 

Security Breaches 

If your systems are disconnected and lack uniform security measures, this can leave open weaknesses that hackers can exploit. A single data breach can cost companies millions in damages, as well as legal fees and a loss of customer confidence.

Intangible Data Silos Costs

These types of costs are harder to measure, but they have a significant impact on long-term growth. In addition to the inefficient solutions and poor customer experience mentioned above, there are several more risks of data silos.

Reduced Productivity 

Employees spend more time searching for data than doing meaningful work when data is hard to access. When projects slow down due to inconsistent or fragmented data, your employees may burn out because of it. 

Limited Innovation and Flexibility

Data silos slow down your ability to innovate and quickly get information about customer feedback and market trends. As a company, you lose a chance to react to market demands in time and fall behind competitors who can innovate faster and adapt more easily.

Spotting the Signs: How to Identify Data Silos 

Now you probably want to learn how to identify and how to avoid data silos. Well, data silos are not always obvious. But if you know what signs to look for, you can detect problems before they cost you time, money, and lost opportunities. Let’s analyze them together.

These are the first signs you have to deal with the business impact of data silos.

Poor Communication Between Teams

If you notice that your departments are chasing the same information, it’s a wake-up call. For example, the sales team asking the marketing team for customer information, and the customer support team waiting for information from the sales team is a clear sign that your data is stuck in silos.

Inconsistencies or Duplication of Data in Different Systems

When you pull reports from different tools, do you get conflicting results? For example, if sales reports show revenue numbers that are different from financial reports, or customer data doesn’t match across platforms, then your business is probably facing the risks of data silos.

Difficulty of Accessing Data

If accessing data feels like a treasure hunt – jumping between spreadsheets, platforms, or software – data silos are likely to blame.

Reporting Problems and Inaccurate Data

If reports in your company are taking longer than expected to prepare, and the reports themselves are incomplete or lack a single source of truth, you can be sure it’s the impact of data silos. 

Slow Reaction to Market Changes

If your business is taking too long to respond to new opportunities, it may be due to data silos, because your agility suffers when insights from different departments are not shared quickly enough.

Lack of a Unified Customer View

The main sign of data silos is that your business cannot create a 360-degree view of the customer. What is the problem? Customer data is stored in isolated sales, support, and marketing systems, and it’s impossible to have full transparency.

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Breaking Down Data Silos: Top Practical Tips 

As a big data development company, CHI Software understands how important an uninterrupted flow of data is for making informed business decisions. Therefore, we will provide practical tips to eliminate data silos and unlock the full potential of your business information.

These tips will help you significantly reduce the risks of data silos.

Centralize Data Storage

A centralized data warehouse ensures that all departments have access to accurate and up-to-date information. Cloud solutions or data lakes are scalable storage options that can grow with your business. But what exactly are these solutions, and how do you implement them?

For example, CHI Software used Postgres for general data storage for one of the largest advertising platforms due to its reliability and fault tolerance. For specific data processing tasks requiring faster performance, CHI Software’s developers supplemented it with ClickHouse, which is excellent for real-time analytics, and MongoDB for processing unstructured data such as customer profiles and marketing content. This combination gave all departments instant access to accurate data.

CHI Software’s team has vast experience in data management solutions, including those helping eliminate data silos.

Standardize Data Formats and Processes

Data standardization ensures service interoperability, simplifies orchestration, and reduces manual work. But to start standardizing, you need to define standard formats and processes, adopt industry standards such as JSON or XML for data exchange, and ensure that all departments follow these guidelines.

Integrate All Components Properly

When components are not integrated properly, data becomes fragmented, leading to inconsistent reporting, duplication of effort, and operational inefficiencies. If you don’t want to see these results in your team’s work, we recommend that you look forward to a data engineering service. With the help of qualified specialists, you will get:

• Special pipelines that securely transfer data between systems without bottleneck;
• Compatibility of all tools (CRM systems, marketing platforms, and analytical tools);
• Implementation of real-time data streaming and immediate access to fresh information.

Believe us, it brings good results: CHI Software’s efforts led to a remarkable 10 to 20% boost in our client’s return on investment (ROI). How is that possible? As part of an ongoing project, CHI Software’s data engineers have converted recommendation services from Scala to Python, providing better integration with other components. Developers also implemented Kafka for real-time data streaming and HTTP requests for seamless interaction between services. 

Unite Business Managers

Business unit managers understand both strategic goals and operational realities. Involve them early in any data-related projects, making sure that: 

• Each business unit understands how data sharing impacts its goals;
• Managers are data leaders who can do the maximum to prevent data silos within their departments;
• You hold regular cross-departmental meetings to share data insights and align strategies; 

You can also provide specialized training for department heads on data literacy and integration tools. You give them tech knowledge, and they lead their teams using shared data strategies. 

Break down data silos and build high-performance data pipelines with our help! Hire CHI Software for data engineering tasks

Foster a Data-Driven Culture

A data-driven culture encourages employees to make decisions based on insights rather than assumptions. We have several tips for you to create this culture:

• Share tools and techniques for accessing and analyzing data and hold regular trainings;
• Inspire teams with real-life examples where data-driven decisions have led to successful outcomes; 
• Encourage departments to set measurable goals based on data. For example, a customer service department may want to reduce response times based on previous performance data;
• Recognize teams and individuals who successfully use data to drive results. Rewards will reinforce positive behavior and motivate others to follow suit;
• Facilitate meetings and projects that bring together different departments to discuss data-driven insights.

Conclusion

The business impact of data silos is enormous: they drain resources, stifle growth, and limit your company’s potential. 

To overcome even one of data silo challenges, a titanic effort must be made: centralizing data storage, standardizing processes, integrating systems, expanding the knowledge and capabilities of business managers, and working on company culture. 

But remember the reason to start this journey: data is only powerful when it is connected. With the right approach, your business can transform data from isolated numbers into a unified force that drives innovation, growth, and long-term success.

Ready to unlock the full potential of your data? Contact us today and let CHI Software help you build a data-driven future.

About the author

Sirojiddin Dushaev Lead Data Engineer & Cloud Solutions Architect

Sirojiddin is a seasoned Data Engineer and Cloud Specialist who’s worked across different industries and all major cloud platforms. Always keeping up with the latest IT trends, he’s passionate about building efficient and scalable data solutions. With a solid background in pre-sales and project leadership, he knows how to make data work for business.

Bogdan Steblyanko Chief Executive Officer

Bogdan started at CHI Software as a Project Manager and quickly advanced to CEO in 2021. With experience in key roles, he's driven major improvements and led the company through challenges, including opening three development centers and entering the Asian market in 2022.