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Building a business case for MDM

When you want funding for master data management (MDM), it's all in how you ask.

IT departments need to be all business when requesting funding for master data management (MDM).

The IT group of Minneapolis-based Carlson Hotels Worldwide knew it needed MDM and customer data integration tools to fix the problems created by having 600 different property management systems at its franchised hotels. But rather than IT simply requesting funding to fix the infrastructure problems, the group went to the business units to discover their issues around inconsistent data, said John Kolodziejczyk, director of IT.

The marketing department wanted to grow its loyalty programs, but couldn't accurately identify and segment customers across multiple databases. Another group wanted to know how many hotel guests were opting for rooms with premium mattresses, but with disparate system coding, it was almost impossible to tell.

When the request for MDM funding went before the board, Kolodziejczyk easily demonstrated how the company's data management problems were limiting business. He was able to show how fixing these problems would enable key business initiatives, like improving customer communication and reporting.

Carlson's executive vice president of marketing even championed the funding request, rather than someone in operations. Now, Carlson is implementing IBM's WebSphere Customer Center and Kolodziejczyk has had extra money added to his budget to address more MDM problems./p

When establishing the need for an MDM initiative, there are some key steps to follow.

Recognize that MDM is a technique, not a tool

"[MDM] is a set of business processes and technology, not just one or the other," explained Bill Swanton, research vice president with Boston-based AMR Research Inc.

MDM is a technique used to define key business objects, such as vendors, products and customers, consistently and accurately wherever they are used, he explained. MDM software is middleware, implemented so that all systems can use a single source for definitions. The other, equally important part of MDM is data governance, which addresses the business processes that are creating the inconsistent definitions.

Budget for data governance improvements

MDM projects that don't budget for improved data governance will fail, Swanton said. He said that if companies don't address the flawed business processes creating the data problems, implementing MDM software is throwing money away.

Addressing problematic business processes is major part of his MDM project at Carlson, Kolodziejczyk agreed. The company has laid the groundwork by advocating a culture of data stewardship over the last few years, which he expects will make training and processes changes easier to roll out to employees.

Align MDM with strategic business goals

In Swanton's experiences, companies rarely approve MDM as a standalone project. More often, he sees MDM addressed within the scope of another plan. For example, MDM might be approved when companies can't get value out of an existing investment because of data problems.

This may be the case in ERP implementations, where data consistency is required to make the system work. MDM is also critical to large data warehousing projects, where inconsistent definitions or multiple names for the same business object become obvious problems when data is consolidated.

"A lot of times MDM is a follow-up investment, to really unlock the value of an investment you already made," he said.

Swanton said another MDM motivator is when a company can't do something it wants to do, like understand its customers, grow sales or provide accurate business reports. Using real-world examples of how MDM can help solve known business problems is a good way to get projects funded, he said.

Find business sponsors

Carlson's IT group made a conscious decision to position MDM as an enabler of key business activities, rather than an important infrastructure upgrade, Kolodziejczyk said. IT explained to potential business sponsors how the technology could help them and brought them on board as supporters.

IT didn't even need to prove the potential ROI of their MDM investment, Kolodziejczyk said, because the business sponsors could prove ROI for their own strategic projects enabled by MDM.

"Start with the business. It's never about the technology. Be sure you get the business sponsors and buy-in first, and that you can clearly align what you're doing from a technology perspective to the business," Kolodziejczyk said.

Consider risk and compliance issues

Another way to justify spending on MDM is to quantify the potential risks of data problems, said Malcolm Chisholm, consultant with Holmdel, N.J.-based, Inc.

"Risk management is just as important as cost management," Chisholm explained. In the age of compliance, companies need to consider both the tangible and intangible cost of bad data, he said.

While some data problems just increase shipping or mailing costs, other MDM issues, like inaccurate business reports, can have more dire consequences, such as jail time for executives.

This story also appears at, part of the TechTarget network.

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