Thought leadership
June 2, 2023

Six key use cases for data contracts

What is a data contract, and who uses it in the real world? This post explores six use cases across several industries where data contracts can help.

Liz Elfman

Data contracts have become instrumental to ensuring efficient and secure data movement.

Essentially, a data contract is a formal agreement between two parties outlining how data is exchanged, processed, and maintained. The contract is usually between the users of a system and the data teams extracting data from that same system.

The term was originally coined by Andrew Jones of GoCardless. It establishes guidelines about what kind of data is involved, how it will be accessed, used, and protected, and the responsibilities of each party touching the data. Moreover, data contracts provide an essential layer of transparency in an environment where data mismanagement can lead to grave consequences.

What does a data contract look like in the real world? Here are six key use cases where data contracts would play a major role.

1. Data in e-commerce

E-commerce platforms deal with large volumes of data daily: transaction details, customer information, product listings, and vendor information, for example. Using data contracts, these platforms can manage the data exchange across different areas within the platform, like the customer interface, payment gateways, or supply chain systems. Data contracts can also help provide insight into which teams are responsible for data reliability, technical trouble shooting, and marketing campaign analysis.

2. Privacy in healthcare

In the healthcare space, patient data is highly sensitive and requires rigorous safeguards. Data contracts in healthcare, often between hospitals, clinicians, patients, and third-party service providers, can ensure that every piece of data is handled with the utmost care, while respecting patient privacy. Moreover, these contracts define who can access the data, how it can be used, and how long it's retained.

3. Managing IoT devices

The Internet of Things (IoT) is a network of interconnected devices that exchange data. The complexity of this network necessitates data contracts to govern interactions. For instance, a smart home system might involve multiple IoT devices like thermostats, security cameras, and lighting systems, that each produce types of data. A data contract between device manufacturers can regulate how these devices communicate and share data, ensuring interoperability and security.

4. Interoperability in microservices architecture

Microservices architecture breaks an application into smaller, independent components, each with a specific role. These services need to communicate effectively. Across teams that interact with microservices, data contracts can define what data is shared, how it's shared, and when. Ultimately, data contracts can contribute to a framework that enables microservices to work while remaining loosely coupled and maintainable.

5. Enhancing reliability in business analytics

Business analytics rely on high-quality data to generate insights. But data comes from various sources, each with their own structures and standards. Some data is from qualitative feedback, and other data is from quantitative campaign calculations. Data contracts can set clear guidelines on the format, structure, and quality of data that's being contributed and analyzed.

6. Regulating AI and ML models

In AI and machine learning models, the quality and structure of input data significantly influences the results. Data contracts in this context can regulate the flow of data into these models, setting standards for data format, quality, and privacy. Moreover, they can outline the requirements for data handling, storage, and retention for legal and compliance purposes.

Final thoughts

Data contracts are a powerful tool for managing the complex web of data interactions that exist today. They're useful across most industries; after all, what working environment isn't improved with secure, reliable data exchange?

As data continues to grow in value and complexity, data contracts will probably become even more critical to the future of data management.

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