Industry analysts and solution providers have long believed that the cost and relative complexity of master data management (MDM) makes it almost solely a large-enterprise initiative beyond the reach of small and medium-size companies. The comment “You’re not big enough to have a master-data-management problem!” is common. The reality, however, is that MDM has become an increasingly burning issue for small and midsize companies. These companies need a solution that’s purpose built for this market segment and that delivers ease, affordability and quick time to value.
Disconnected business applications and departmental silos have always been a problem for companies, largely because companies naturally evolve differently, such as by growing organically or through mergers and acquisitions. The business landscape is also changing; competition is increasing to get products to market on time and across multiple channels while navigating complex supply chains and regulatory requirements. This situation leads to a proliferation of business applications that must be introduced into the IT ecosystem to support new-product introduction, omni-channel commerce, customer-relationship management, supply-chain management, regulatory compliance and other critical business processes. Organizations ultimately can’t avoid introducing departmental or business-application silos. They do, however, need a strategy to cope with this proliferation quickly, reliably and cost effectively to scale and be agile in their business. This is where effective master data management and data governance can deliver business value.
The Cost Challenge
A major challenge of master data management has always been the cost that’s organizational and IT related. The organizational cost is because of the need to build alignment across multiple business divisions, with each one trying to optimize its own siloed processes, but ultimately at a considerable cost to the broader organization. This reality forces organizations to bring MDM projects at the executive level for cross-division alignment, sponsorship and funding, in turn potentially creating a significant challenge. Even when organizations get executive-level buy-in, a common hurdle has traditionally been high IT costs associated with master data management. These costs include software licenses, professional services, support and maintenance, and internal IT resources. It raises the question, should master data management always come at cost before it can deliver value?
The simple answer to that question is no. But it does require organizations to rethink how they can take advantage of an effective MDM strategy without breaking the bank. A crucial step is to phase out an MDM implementation over time with defined milestones and success criteria. This strategy has two advantages for businesses. The first is that the budget and funding can come from a specific business division that has the greater need to tackle their MDM issues. It can be in relation to supply chain, sales and marketing, or compliance. The second advantage is the way that organizations can quickly prove tangible ROI for a specific business problem to justify any further MDM investment. Telling a success story to other business divisions is much easier than citing external stories that are harder to validate.
Where MDM Cost Is Headed
MDM software and implementation costs are nowhere close to what they were 5 or 10 years ago. One factor is that as the MDM category matures, commoditization and democratization has driven down the selling price. Another is that SaaS and hosted deployments have turned MDM software into an operating expense as opposed to a capital expense, and they’ve eliminated the need for organizations to pay for infrastructure, support and maintenance while giving them the flexibility to pay in smaller instalments. The last factor, which is by no means understated, is that new and growing players in the MDM market offer robust MDM capabilities not just for a single domain but for multiple domains in a single application at a lower cost than before.
Technology and markets are constantly shifting, which means costs will change as the market does. Reevaluating and even abandoning preconceptions when they no longer apply to the organization is a smart strategy. The market today strongly indicates that organizations should reassess how their master-data-management strategies can help transform their businesses at a low cost.
Optimize and Influence
There’s much to be said about optimization when it comes to multidomain master data management. Historically, the challenge to most organizations has been that the cost of multidomain MDM grows exponentially as they try to tackle business challenges dealing with different types of master data. For example, many companies go through an entirely different process for researching, qualifying, evaluating and selecting a software vendor for customer MDM shortly after they’ve implemented a product MDM solution. This situation usually means the solution for product MDM can’t scale to support customer MDM requirements. These companies therefore spend large amounts of money on the buying cycle of a completely different technology and incur extra support and training costs.
For this reason, organizations—specifically, those that are cost sensitive—must insist on a multidomain MDM solution that can consolidate, enrich, validate and syndicate any type of master data without having to buy a new product or learn a new technology. It’s time for MDM providers to offer solutions that manage any type of master data at a marginal cost to the customer.
As organizations look to find the MDM solution that’s right for them, time to value is another way of saving dollars up front and in the long term. Solutions should have the ability to be installed, configured, integrated and upgraded at a low cost with minimal to no support from vendors or their implementation partners—truly the democratization of MDM. Some MDM vendors are already heading in this direction, and customers should be looking for one that delivers on this promise to make a lasting, positive impact on their business processes at a lower cost than ever before.