Thursday, December 15, 2005

MDM Business Benefits

There were some interesting results in a survey of 150 big-company respondents conducted by Ventana Research as to where customers saw the main benefits of master data management (MDM). The most important areas were:
  • better accuracy of reporting and business intelligence 59%
  • improvement of operational efficiency 27%
  • cost reduction of existing IT investments 8%

It is encouraging that respondents place such a heavy emphasis on business issues compared to IT, since quite apart from this sounding quite right (MDM can improve customer delivery errors, billing problems etc) they will have a much better chance of justifying an MDM project if the benefit case is related to business improvement than the old chestnut of reduced IT costs (which so rarely appear in reality - surely IT departments would have shrunk to nothing by now if all the projects promising "reduced IT costs"over the years had actually delivered their promised benefits). A nice example of how to justify an MDM project can be found in a separate article today, in this example specifically about better customer information.

The survey also reflects my experience of the evolution of MDM initiatives, which tend to start in a "discovery"phase where a company takes stock of all its master data and begins to fix inconsistency, which initially impact analytic and reporting applications. Later, after this phase, companies begin to address the automation of the workflow around updating master data, and finally reach the stage of connecting this workflow up to middleware which will physically update the operational systems from a master data repository. This last phase is where many of the operational efficiency benefits will kick in, and these may be very substantial indeed.

Based on the rapidly increasing level of interest in MDM, in 2006 I expect to see a lot of the current exploratory conversations turning into more concrete projects, each of which will need a good business case. At present MDM projects tend to be done by pioneering companies, so it will be very interesting to see if the various projections prove accurate and MDM starts to become more mainstream.

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