More than half of senior managers don’t regard management of their master data as a significant priority, according to a recent Aberdeen Group report.

It makes sense, then, that “lack of clearly defined ROI for data management” is the chief obstacle to implementing MDM initiatives. That’s because causality is one step removed—if customer data is cleaned up, and the business sees a subsequent increase in customer satisfaction, it’s hard to draw a direct cause and effect, according to Aberdeen research associate Nathaniel Rowe.

And because of this “nebulous” ROI, as SAP Mentor and ASUG volunteer Jamie Oswald terms it, it’s often very hard for customers to get funding for the project on its own. Instead it’s piggybacked with ERP rollouts or upgrades.

“It’s not important enough on its own, but you can usually find room for it under some much bigger umbrella,” Oswald says in an email response. “The downside, of course, is this is the first thing to get cut (or more commonly, half-done) when the project is pushing the limits of its budget and timeline because it isn’t ‘mission-critical.’”

But there are clear and quantifiable benefits to having clean data, Rowe contends in his report: From Design to Delivery: Enhancing the Product Lifecycle with Master Data.

Rowe looks at 634 different organizations—256 that had a formal MDM program, and 378 that did not, and compared some ROI metrics for product data.

Here’s a sampling of his findings:

• Organizations without MDM initiatives reported that their employees spent five times longer searching for data (6.2 hours per week versus 1.3) than those that had MDM programs.
• When it came to inventory management, those organizations with MDM programs had more complete and on-time deliveries (3 percent), better inventory accuracy (4 percent) and better improvements in inventory turns achieved by an ERP implementation (7 percent).
• In turn, customer satisfaction in these organizations was 17 percent better than those that didn’t have MDM programs.

Rowe also argues that MDM programs can ultimately help reduce an organization’s IT costs. Those with MDM programs paid, on average, 7 percent less in storage costs and 5 percent less in data management costs than those without MDM programs.

Plus, those with MDM programs had better year-over-year increases in the sales pipeline attributable to marketing campaigns and product sales.  And overall, operating margins during the last two fiscal years were four percent better than those without MDM programs.

Of course, these benefits are not derived simply from successful MDM software implementation but from good organizational policies, discipline, and training related to data creation and management, Rowe points out.

“There is a very much a human element,” he says. “You need to have support from the top down and the bottom up.”

Set the policies, clearly define and document them, and roll them into employee training, Rowe says.

Ultimately, data should be owned by the line of business side of the house—the people who deal with the data day in and day out. But beware: Part of the problem with data that leads to data duplication in the first place is that too many people have item creation powers. Time must be taken up front to determine who needs to access the data and who should have management and oversight over that data, Rowe says. This reluctance to give up control over data is a key challenge.

It helps to have an official person (Aberdeen has seen some organizations put the CIO in this role) in charge of an MDM initiative, specifically documenting and defining roles—someone who can be the mediator between IT and business and understands the needs, demands and frustrations from both sides of the house.

Finally, MDM programs shouldn’t be just one and done projects, Rowe points out.  If policies aren’t set and people don’t get the necessary training to ensure good data discipline across the organization, scrubbing the data until its squeaky clean one time won’t matter.

Making MDM part of the organization’s culture is a key to success. What if MDM programs were just ways to identify a company that has a culture conducive to embracing what IT should be doing, Oswald asks, i.e. automating processes and minimizing variability. This is instead of what IT is doing, i.e. chasing their tails so people can put stuff into 30 Excel spreadsheets to be loaded into a database “because that’s how we’ve always done it.”

“Maybe being willing to spend on MDM means you are already destined to be great at IT,” Oswald says, “which means, of course, your entire business will run more efficiently.”

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2 Comments for The ROI of MDM: Does Clean Data Make Money?

Mark Montgomery

Found this to be quite good both in terms of article and underlying research — certainly rings true in my experience. We have groundbreaking emergent technology w/patent issue date in a couple of weeks that should help considerably with the task of MDM. Have been attempting to partner with SAP for some time– excellent strategic partner match based on every piece of evidence we can find, with literally thousands of their customers showing interest, including several of their oldest, largest, and large new installs, but only hearing silence so far– curious industry.

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David Bann

This is a really informative article with excellent backing and research. Often MDM goes hand in hand with business process management in order to enforce the culture of data cleanliness. A tool like SAP Process Orchestration (which includes SAP BPM, SAP BRM and SAP PI) is well suited – this approach enables the automation of “clean data” processes to avoid redundancy, it speeds up the product development life-cycle, it gives insight as to where the process bottlenecks are and much more. I suppose this topic should have an article of its own though

Thanks for the article – really enjoyed it!

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