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Master Data Management Challenges and Benefits

We explore what’s driving interest in MDM, how to get started with MDM, and what ROI you can expect

Rob Karel, a principal analyst with Forrester Research, is a leading expert in how companies manage data and integrate information across the enterprise. His current research focuses on issues including master data management, data quality management, metadata management, data governance, and data integration technologies, including ETL and EII.

TDWI: Everyone seems to have his or her own definition of master data management. Can you give us yours?

Rob Karel: Forrester defines MDM as a business capability enabling an organization to identify trusted master data by defining or deriving the most trusted and unique "version" of important enterprise data (e.g., vendor, customer, product, ass location), and then leverage master data to improve business processes and decisions.

MDM incorporates this master version of the data within functional business processes (sales, marketing, finance, and support, as examples) that will provide direct benefit to employees, customers, partners, or other relevant stakeholders within an organization.

Master data alone provides little value. It's the anticipation of how the data will be consumed by other applications or systems within the context of a business process that provides the most value.

Why is the whole concept of master data management gaining so much traction right now?

MDM is trendy now, but I would still consider the implementation of it very immature. There are many technology alternatives on the market to solve a wide variety of master data challenges, but end users are still struggling a great deal to effectively scope and define their MDM strategies.

In the current economic environment, MDM is playing an important role in reducing compliance risk due to a lack of data transparency and trust, especially in the financial industries and others that have been hit hard. However, organizations are also looking for MDM to improve efficiencies and analytical insights so they can make better decisions, faster.

What is one of the biggest challenges you see among Forrester clients who are working on MDM initiatives?

The biggest contributor to failed MDM initiatives is a lack of effective data governance. MDM technologies are only going to be as good as the definitions of quality determined by your specific business. MDM is not an "if we build it, they will come" type of technology investment that IT can push on the business. The business must take ownership of the definitions and measures of quality, and work in tandem with IT to develop the appropriate solution. As I mentioned, MDM is a business capability, not a technology solution, and it's a business capability that cannot succeed without the business playing an active role.

Where should a company start with MDM?

Organizations shouldn't try to build their business case for MDM top-down, attempting to capture the potential value across the entire enterprise. Instead, they should consider a bottom-up approach that defines quantitative and qualitative ROI for only those few select functional organizations that can best articulate and measure the business impact that poor quality data has on their processes. Building a business case with those willing to defend it can get their trusted data effort started -- and begin the momentum that will eventually deliver the cross-enterprise vision for MDM.

How quickly can they expect to see results?

I recently published research titled "The ROI of Master Data Management" (Editor's note: see ) which used Forrester's Total Economic Impact methodology to answer that question. I analyzed a typical customer data-centric operational MDM initiative. It was focused on targeted benefits of reduced call center costs, minimized direct mail waste, and reduced privacy compliance risk.

The results demonstrated that significant benefits could be delivered year one, but the upfront software and service costs required to implement and integrate MDM were so high that an ROI was not returned until year three. The message here is that organizations must either adopt a long-term vision for MDM, or reduce scope in the short term and deliver MDM in multiple phases to ensure incremental ROI can be delivered.

Can you preview what you'll cover as a speaker at TDWI's MDM Insights conference in March?

My presentation is titled "MDM in 2009: Your Business Case Is the Key to Delivering Master Data." It will focus on the challenges MDM evangelists face in securing senior sponsorship and funding for MDM initiatives. I'll provide recommendations on how to build a compelling and quantitative business case to gain the necessary momentum to address this complex problem.

About the Author

Linda L. Briggs writes about technology in corporate, education, and government markets. She is based in San Diego.

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