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How to Measure the ROI of Master Data Management (MDM)

January 11 2020
| 2 minute read

Communicating the value of MDM to executive leadership can be a challenge. Here are four simple steps to get started.

The return on investment (ROI) of master data management (MDM) is a topic that keeps captivating people – especially those considering investing in MDM. And with good reason. As with all major expenditures, people want to know what the outcome will be before they commit to it. It’s basic business logic.

Unfortunately, the answer isn’t always straightforward, since it isn’t necessarily easy to quantify the value of high-quality data and smoother data-driven business processes.

With this in mind, here are a few helpful steps to help you determine the ROI of a master data management implementation.

how to measure the roi of master data management

Four steps to 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 needs and where the solution is 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 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 implementations are many and spread widely across business units, it complicates the process of measuring ROI.

In order to monetize MDM and identify tangible metrics, talk to people likely to feel its effect directly; e.g., IT, finance, marketing, logistics/supply chain and product management, to mention a few.

Be sure to get to know their challenges and how they would be able to perform better if these problems were solved. Some of the answers will be data related; others may be more operational or process driven by nature. All of them will help you make your case.

Next, work closely with finance to do the math. What would it actually mean if these pains were to decrease or disappear? What would the impact be if the time it takes to onboard new products was cut from two months to two weeks? This will help you sell MDM to the business and give you tangible metrics to measure before, during and after implementation.

Step 3: Establish the total costs

Measuring the “R” in the ROI of anything requires you first and foremost establish the “I” – the investment. In this case, the total cost of your MDM solution, including licensing, hardware, implementation and user training. As well as operational costs related to data governance and maintenance, along with other variables such as change management.

You should also consider the cost of potential delays; i.e. what happens to the business if you do not begin using MDM according to the implementation schedule? Or if competitors bring new products to market before you because poor data processes are slowing you down. How  would that impact your market share?

Step 4: Be patient and persistent

As with most larger projects, MDM typically doesn’t become an instant success on day one. It can take a few quarters before effects are palpable. An important aspect of MDM is change management. A lot of people will need to start seeing 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 MDM generally helps create.

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, with experience and solutions geared to organizations in your industry who have faced similar challenges.

To learn more, download our executive brief, How to Estimate ROI on Your Master Data Management Initiative, below.

how to estimate roi on your master data management initiative

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Always having a love for technology and what it can do for global enterprises and individuals, Nils Pedersen continues successful program deliveries in Manufacturing, Distribution, Retail, and Automotive Aftermarket. As VP of Product Strategy at Stibo Systems, Nils Pedersen is passionated about making it easier for clients to manage enterprise intelligence on a global scale, improve sales, and quickly adjust to changes in business requirements.

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