White PapersEvery company seems to have some business and/or IT manager who may be quick to shrug off Master Data Management (MDM) as a feel-good initiative lacking quantifiable benefits at best, or as a fad at worst. When faced with internal MDM sceptics, it’s really just a matter of validating the business benefits to convert them into champions.
The best approach to take is to provide tangible metrics or business scenarios that make it difficult for even the most skeptical to doubt the significant business value of MDM. In fact, almost all business functions can benefit from the collective insight an MDM solution can provide either in terms of operational efficiencies or better customer-facing business processes. Despite these benefits, companies still need to take the time to build consensus among both business and IT decision makers before attempting to embark on, or secure funding for a MDM initiative.
How to Sell Skeptics on the Value of Master Data Management Untitled Document How to Sell Skeptics on the Value of Master Data Management very company seems to have some business and/or IT manager who may be quick to shrug off Master Data Management (MDM) as a feel-good initiative lacking quantifiable benefits at best, or as a fad at worst. When faced with internal MDM skeptics, it s really just a matter of validating the business benefits to convert them into champions. The best approach to take is to provide tangible metrics or business scenarios that make it difficult for even the most skeptical to doubt the significant business value of MDM. In fact, almost all business functions can benefit from the collective insight an MDM solution can provide either in terms of operational efficiencies or better customer-facing business processes. Despite these benefits, companies still need to take the time to build consensus among both business and IT decision makers before attempting to embark on, or secure funding for a MDM initiative. EToday business managers are more aware of the positive impact that reliable data, including customer data among others, can have on critical business functions such as Customer Service. They also tend to have a clear understanding of the value this data can have on customer-facing functions such as Marketing and Sales. Also, with federal compliance regulations taking center stage particularly in the Financial Services and Pharmaceutical sectors having a single view of clients and healthcare providers has become a major requirement in meeting regulations. Yet, despite the acceptance among the various lines of business users, an organization still needs to present a viable business case if it hopes to convince both IT and Executive management of the over-arching benefits of MDM. One of the major challenges is in placing accurate values on such abstract pursuits as improved customer service, brand, and regulatory compliance. Another unavoidable challenge is that many CIO s are understandably risk-averse and may be reluctant to embark on any technology investment that is unable to quantify a return on investment (ROI) largely because many have found top line revenue growth from Customer Relationship Management (CRM) and Business Intelligence (BI) investments to be difficult or impossible to quantify. In order to convince skeptics and enable MDM champions, companies should apply the following three principles to build a winning business case: 1. Quantify cost savings before tackling revenue impact. 2. Use logic and arithmetic to derive revenue impact. 3. Link MDM to a bigger initiative. #1: Quantify Cost Savings before Tackling Revenue Impact Many companies who look to drive top line revenue growth from a MDM initiative tend to rely on forecasted revenue impact exclusively for project approval. Unfortunately, this approach rarely provides the level of detail required to sell the initiative. Consequently, a successful MDM business case must be built based on a foundation of quantifiable cost savings. For instance, many companies look for cost savings within their IT department which is a great place to start. After all, a MDM implementation is designed to replace the cumbersome point-to-point solution interfaces which many companies have in place in their current data integration environment. Improved and more consistent data also reduces the developer and data analyst costs often required for the analysis and redesign of management reports. Further, MDM allows for the standardization of common data cleansing and extract-transfer-load (ETL) software and third party data providers, thereby reducing software maintenance fees and data licensing costs. So, before attempting to sell the MDM solution using unreliable and forecasted revenue impact, it is recommended that business users work together with IT managers to explore areas that can have a profound impact on the bottom line and find hard numbers to quantify the cost savings. 2 Untitled Document How to Sell Skeptics on the Value of Master Data Management 3 An additional area ripe for cost savings is Sales Operations; a group challenged by lead assignment, commission payments, and administration of channel/distribution programs. Organizations should tap into Sales Operations management and identify the amount of time spent on these efforts and the group s use of permanent and temporary employees to address related data. MDM can have a tremendous productivity impact on lead assignment and commission payment processes as well. With MDM, account data can be formatted for use with complex named account assignment rules and synchronization across CRM and ERP systems. Other areas to consider include the marketing of third- party services and systems, order management efficiency, and customer service time spent per call. For example, customer service had become time consuming for a manufacturer of doctor prescribed medical devices. Customer service representatives had to search across multiple systems in order to identify the caller and resolve his or her issue. More importantly, privacy legislation required the manufacturer to become increasingly reliant on accurate and unified patient data in order to adhere to patient marketing opt-out regulations and to better manage product recall processes. Previously, the product recall process experienced problems with duplicate patient files, wrong addresses, and mail return rates as high as 20% including items returned from now deceased individuals. While these issues certainly got the attention of senior management, a successful MDM business case needed to be built based on a foundation of quantifiable cost savings to convince decision makers. In order to identify hard numbers to support the business case for MDM, the company embarked on a ROI assessment and interviewed IT and business unit managers over a one week period. The assessment identified 5.3 million in cost efficiencies to comply with a recent product recall. In addition, annual cost savings of 600,000 were identified in marketing database management and marketing campaign execution. The manufacturer identified another 1.2 million in IT cost avoidance for planned integration initiatives, and 1.5 million over 5 years in productivity improvements for data administration and customer support. These hard numbers gave the project the nod to move forward despite having been on the back burner for two years. #2: Use Logic and Arithmetic to Derive Revenue Impact Another common approach to presenting a MDM business case is to simply put forward conservative, but believable, revenue numbers without supporting evidence. Presenting a 1 percent revenue increase is typical; a small percentage resulting in very large top line growth for Global 500 companies. A more reliable method is to extrapolate revenue growth from key business areas such as Marketing and Sales. For example, let s look at a typical marketing campaign. If Marketing reports an average response rate of 2.9 percent for campaigns and 30 percent of the customer data used for these campaigns is duplicate, invalid, or dated, the effective average response rate is closer to 2 percent. By replacing this inaccurate data with reliable customer data, campaign response rates could improve by as much as 50 percent. Further, by extrapolating the improvement in campaign response rates using the metrics of deal closure rate and deal size , you can derive the revenue impact. For example, one organization calculated an increase in average campaign response rates from 2 percent to 2.9 percent had a value of 10 million in revenue based on current response rates and average deal size. In the Wealth Management sector for example, it would be worth communicating the possible revenue impact that could be realized if Financial Analysts were able to spend more time on selling and advising clients rather than on data administration. For instance, one global institutional bank estimated that branch personnel spent up to 70 percent of their time gathering data before meeting with clients to cross-sell and up-sell. By assuming a reduction in the amount of time spent to assemble data and using the current closure rate, the bank Untitled Document How to Sell Skeptics on the Value of Master Data Management 4 determined that an MDM solution would drive over 100 million in top line revenue opportunities. Another case example is a global investment bank with assets exceeding 600 billion which was grappling with the results of an unfavorable customer satisfaction survey. The banks client s were particularly dissatisfied with the unusually high straight through processing trade failure rate. The failed trades were found to mostly be a result of inconsistencies in managing 250,000 counterparties and 2.5 million trading accounts across 250 trading systems. Trade failures were costing the bank millions of dollars in operational costs to resolve the failed trades, not to mention the opportunity cost of capital which would otherwise be freed up to earn interest. In addition to the risk and exposure the data inaccuracies introduced, the bank quantified the benefit of a 10% reduction in straight through processing trade failures to be worth 38.1 million. #3: Link MDM to a Bigger Issue The final principal dictates that, wherever possible, organizations need to explain how the MDM initiative will be of value to addressing strategic top-of-mind issues. Instead of competing for attention and funding, position the MDM business case as part of a larger business solution without devaluing the initiative. For example, there are several top-of-mind issues which MDM can help address including: " In the Financial Services sector Basel II has created the need for effective counterparty management, and increased competition requires improvements to the customer experience. " For Pharmaceutical companies current mandates such as the newly established physician gift-law , and the need to create unified customer views in the face of increased competition, government regulations, and corporate consolidation. " For Retailers customer loyalty programs are being deployed to better understand the buying habits of customers. Effective management of these programs requires unified, reliable customer data typically dispersed across geographies, multiple branded stores, and on-line. Understanding the customer holistically will increase Retailers ability to compete through improved marketing and cross-sell effectiveness, and lower costs of maintenance and mail handling for invalid and duplicate customers. " In the Manufacturing sector there is mounting pressure to correct perceived failures of prior CRM and data warehouse efforts. " For High Technology return on marketing investment and marketing analytics measurement demand accurate and unified customer views. " In Insurance companies acquisitions are driving the requirement for improved visibility across the organization. Untitled Document How to Sell Skeptics on the Value of Master Data Management Selling the Business Case is as Easy as 1-2-3 By doing your homework, gaining the cooperation of colleagues, and applying the three principles discussed earlier you can build an effective business case capable of winning over skeptics. Let s face it, decision makers need to have a clear and accurate understanding of the impact trusted data can have on the entire organization and determine the up-front ROI before embarking on any IT project especially when faced with competing priorities. To help collect and estimate costs savings and revenue impact; companies should consider conducting a MDM ROI Analysis to develop a thorough cost-benefit analysis for a MDM solution. More specifically, an ROI audit should quantify the value of probable benefits and estimate the initial investments and ongoing cost of managing the MDM solution. The resulting analysis should also be used to help determine the potential cost savings and revenue impact of implementing a MDM solution. By first presenting the potential cost savings, then strengthening the business case with revenue impact and finally linking it to a bigger business issue, you just may find that convincing skeptics of the benefits of MDM is much easier than you thought possible. About the Author Joe DosSantos is Practice Manager, Business Integration Services at Siperian, Inc., developers of an award-winning, adaptive platform for master data management. For further information, contact the author at jdossantos@siperian.com or visit the company s website at http://www.siperian.com. Siperian, Inc. 1820 Gateway Drive, Suite 109 San Mateo, CA 94404 USA Toll-free: 1-866-SIPERIAN Email: contact_us@siperian.com Online: www.siperian.com Siperian, Inc. 2007. All Rights Reserved.5
