Mastering Data Management

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Consider the costs of MDM including time, money and technology

As we discussed last week, having a clearly defined MDM roadmap is essential for the success of your MDM initiative. But what should that roadmap look like? What should be included? Do you need a compass? Over the next several posts, we will explore the different domains that make up a roadmap. However, this post discusses potential costs for a typical MDM roadmap.

An MDM program’s cost can vary drastically. Some low end, home-grown solutions are built and maintained by one or two people. While rudimentary in terms of capabilities and industrial strength, such a solution can be well-tailored to the business needs and valuable for the business. We will not consider this scenario here.

Instead, we will assume that our reader is a stakeholder in an enterprise program that includes master data hub software purchased from one of the established MDM vendors.

Then the primary cost components include:

• Software
• Professional Services for software installation configuration, training and on-going support
• Hardware
• Initial integration cost
• On-going maintenance and integration
• Data stewardship costs (optional)
• Cost of subscription for third party data providers (optional)

Some basic costs for a hypothetical company with 5 million customers were estimated by Rob Karel of Forrester Research (The ROI of Master Data Management). The total estimated cost $3M was incurred by the hypothetical company over the initial implementation and first 3 years of production. This included:

• 20% on the MDM hub software license
• 40% on the professional services work (installation, configuration, analysis and integration)
• 12% on hardware.
• 28% on full time resources (annual cost of IT maintenance ($270k, and the annual cost of data steward resources $81k).

This annual on-going costs become predominant over years in the described scenario. The estimate was performed for a single domain (Customer). No third party data costs were included in the estimates.

Many MDM initiatives incur costs higher than $3M, while others are implemented for a mere fraction of the $3M budget. Some companies invested more in the initial product, but ended up with significantly lower ongoing IT maintenance costs. These are important factors in determining the annual cash flow and the MDM cost of ownership in the longer term.

Thus, the stakeholders of any MDM initiative should understand the factors responsible for cost variations of MDM initiatives through an analysis of the target state and the roadmap.

Next week, we’ll dig into the domains of MDM and how to define which ones belong on your map.

This is part of a series, Building an MDM Roadmap. For other posts and a complete index, view the Table of Contents.