The return on investment (ROI) of master data management (MDM) is a topic that keeps captivating people – in particular, those considering investing big in MDM. And with good reason. Because as is the case with all investments, people want to know: What’s the outcome? What will we get from the money we spend? It’s business logic. But nonetheless, the answer isn’t always straightforward as it isn’t necessarily easy to quantify the value of high quality data and smooth data processes.
With this in mind, here are a few helpful steps that can help you determine the ROI of a master data management implementation.
Step 1: Define the scope
To measure anything, you need to know what to measure. Which source of pain do you expect MDM to address? What divisions, domains, locations, systems, processes etc. will the solution affect? Knowing the exact scope of your MDM initiative and where it’s likely to have an impact is essential to define expected benefits and returns as well as see and measure improvement once it goes into effect.
Step 2: Identify tangible benefits and do the math
MDM is considered foundational for successful digital transformations and the ROI of MDM supporting such initiatives may be several orders of magnitude. However, it can be challenging to quantify these types of returns. And while it’s great that the benefits of a larger MDM implementation are often many and spread widely across business units, it complicates the process of measuring ROI. You need to monetize MDM.
To do that and thereby identify tangible metrics, talk to people who are likely to feel its effect directly; for example, IT, finance, marketing, logistics/supply chain and product management, to mention a few.
Before investing in MDM, be sure to get to know their challenges and how they would be able to perform better if these problems were to be solved. Some of the answers will be data related; others may be more operational or process driven by nature.
Next, work closely with finance to do the math: What would it actually mean if these pains were to decrease or disappear? For instance, what would the financial impact be if the time it takes to onboard new products changed from two months to two weeks? This will both help you sell MDM to the business and give you tangible metrics to measure before, during and after the implementation.
Step 3: Establish the total costs
Measuring the “R” in the ROI of anything requires you to first and foremost establish the “I” – the investment. In this case, the total cost of your MDM solution. You need to consider both licensing, hardware, implementation and user training as well as operational costs related to data governance and maintenance. And what about other variables such as change management?
You should also consider the cost of potential delays; i.e. what would happen to your business if you do not begin using MDM according to your implementation schedule? Or if competitors bring new products to market faster than you because poor data processes are slowing you down. What would the financial impact of that be if it affects your market share?
Step 4: Be patient and persistent
Unfortunately, most MDM projects don’t become an instant success from day one. Typically, it can take a few quarters after implementation before the effect is palpable. Part of MDM is the change management aspect. A lot of people will need to start seeing the positive returns and understand the gains to fully commit to it. Ultimately, those who show patience and persistence will succeed and be rewarded with the positive business outcomes that are a result of solid MDM efforts.
Of course, every company’s investment and return on MDM will be unique, given every company is unique. The important thing is to work with partners that understand this, and with experience and solutions geared to organizations in your industry who have faced similar challenges.
To learn more tips and tricks on how to estimate and manage ROI of MDM, get our fact sheet: