Where and How MDM Adds Value to the

Business
Published: 26 June 2017 ID: G00320082

Analyst(s): Bill O'Kane, Simon James Walker

Master data management programs must be tied to key business drivers to

gain end users' commitment. Data and analytics leaders should use the
case studies illustrated here to communicate where and how MDM can
deliver clear business value.

Key Challenges
■ Enterprises that seek to achieve trusted views of master data frequently struggle to determine
the most appropriate business drivers for their MDM efforts. There may be several drivers, and
they are often widely distributed across the organization.
■ Master data management (MDM) programs are challenged to establish and maintain clear links
between the MDM investment and specific business initiatives. Links to MDM may not be
obvious or direct, particularly to business stakeholders.
■ Organizations either do not have an established framework to document and communicate the
business benefits of IT infrastructure modernization programs, or the framework in use is not
equipped to document the multiple, indirect benefits of these programs.

Recommendations
Data and analytics leaders managing data and analytics programs for information governance and
MDM must:

■ Create a causal link between key business drivers and MDM, by identifying how a trusted view
of master data enables business goals of running, growing and transforming the business.
■ Use the MDM scenarios in this research to help you identify possible value for your business
when aligning MDM with business drivers, and when tying higher-level business cases to MDM-
based improvements.
■ Use an MDM business case framework to gather and categorize metrics that support business
engagement and prioritization, and to minimize external disruptions.
 Table of Contents

Introduction............................................................................................................................................ 2
Analysis.................................................................................................................................................. 3
Identify How a Trusted View of Master Data Enables Business Goals................................................3
Identify Value for Your Business When Aligning MDM With Business Drivers..................................... 4
Use a MDM Business Case Framework to Gather and Categorize Metrics....................................... 8
Gartner Recommended Reading.......................................................................................................... 10

List of Figures

Figure 1. Examples of Business and/or IT initiatives and Efforts Enabled by MDM...................................4

Figure 2. The Gartner Business Value Model...........................................................................................9

Introduction
MDM can add value to the business in many different ways. It most often does so indirectly, as an
enabler for other business and IT initiatives. Some of these areas of potential benefit support
shorter-term or tactical efforts at helping the business operate more efficiently — that is, they help
to reduce the cost bases to "run the business." Some benefit areas of MDM are related more to
helping users "grow the business." That is, they help to increase the revenue and market share
within a given business model or framework. Yet other areas of opportunity fall into the "transform
the business" arena — for example, allowing customer support representatives to perform inside
sales activities enabled by trusted customer and product master data.

MDM alone is not sufficient to help you transform your business. But seeking to transform your
business without any discipline akin to MDM will lead to far higher costs related to data integration,
and to loss of efficiencies in duplicate efforts to manage business data.

Failure to align MDM to business drivers will result in multiple serious barriers to success that can
easily derail an MDM program. There barriers include lack of business engagement, inability to
develop measurable business-oriented key performance indicators (KPIs), discontinuity of executive
sponsorship, and contention for funding with other business initiatives.

As explained, MDM can support business value in three main areas:

■ Run the business — Resources consumed and focused on the continuing operation of the
business. Includes all nondiscretionary expense as part of the "run the business" cost.
■ Grow the business — Resources consumed and focused upon developing and enhancing IT
systems, digitalization of business processes, and the data in support of business growth
(typically organic growth). Includes discretionary investments in the "grow the business" cost.

Page 2 of 11 Gartner, Inc. | G00320082

 ■ Transform the business — Resources consumed and focused on implementing technology
systems that enable the enterprise to enact new business models. This is very much a "venture"
category, and is represented by activities such as development of the pervasive digital
business.

Analysis
Identify How a Trusted View of Master Data Enables Business Goals
In terms of MDM, these three areas of potential benefit can be explained as follows:

■ Run the business — By ensuring that all master data and hierarchy data is "clean" in a
business intelligence (BI) and analytical framework, analytical data can improve the accuracy of
reporting and analytics. It will thereby enable users to make decisions more efficiently and
effectively. The way the business operates will improve.
■ Grow the business — MDM, by domain, has a direct impact on several grow-the-business
initiatives. High-integrity customer master data can help any sales, service and marketing
initiative achieve its goals — for example, customer experience (CX) initiatives. Having a single
view of the customer, product and service will improve the ability of users to understand their
customers better. With high-integrity product master data, new products can be brought to
market much farther ahead of the competition, thus capturing more of the revenue stream.
■ Transform the business — MDM, once established, ensures that the entire enterprise operates
with one unified semantic model for all its primary master data objects. With MDM, any strategy
that seeks to transform the business (for example, new channels, new markets and new
businesses) can be enabled to deliver on its value proposition much more effectively and
efficiently. Enterprisewide MDM can significantly reduce the costs associated with
organizational integration by removing organizational barriers that inhibit information reuse.
MDM can significantly reduce transactions that suffer from excessive IT and business costs.
With MDM, transformation of the business can be achieved at a much lower cost by:
■ Improving the quality of data collected from external sources
■ Providing a foundation for modeling and simulation from different organizational
perspectives
■ Creating a controlled source of data that can be shared with external partners

MDM alone is not sufficient to create a world-class or globally dominant business strategy — but it
is quite challenging to create and sustain such a strategy or position without the enablement and
support of the MDM discipline. To the extent that it is applied toward the lower left of the spectrum
shown in Figure 1, MDM is defined, specific and often tactical in terms of use case, data domain,
scenario and implementation style. To the extent that it is applied toward the upper right, MDM is
much more holistic and on a broader basis across organizations, supporting a spectrum of use
cases, data domains, scenarios and implementation styles.

Gartner, Inc. | G00320082 Page 3 of 11

 Figure 1. Examples of Business and/or IT initiatives and Efforts Enabled by MDM

Source: Gartner (June 2017)

Identify Value for Your Business When Aligning MDM With Business Drivers
Explicitly define business-oriented scenarios that highlight good uses of MDM before you undertake
your MDM initiative. The following seven business scenarios have been derived from actual
customer dialogues and case studies. They derive value from MDM across the run, grow and
transform the business strategies.

Scenario 1. Financial Services — Increased Revenue/Growth

Enabled via MDM of customer data

Problem: A large financial services firm that has grown over the years via acquisition is unable to
provide a customer-centric CX because its application systems are based on its different products
and brands, not on its customers. There is no shared single view of the customer. The result is poor
customer service, with staff not knowing the full extent of the customers' relationships with the firm
when talking with them, and high rates of customer attrition due to low satisfaction and loyalty
levels. Salespeople are unable to effectively upsell and cross-sell to customers because they can't
get access to an accurate, complete view of which products the customer already has. In some
cases, marketing was actually making offers to what they saw as new prospects, only to find that
the customers already had equivalent products.

Page 4 of 11 Gartner, Inc. | G00320082

 Solution: MDM for customer data can provide the foundation for a shared, trusted customer profile
that can integrate with existing systems. It creates a centralized "golden" record or system of record
for customer data, such that all applications and business processes go to the system to determine
whether the right data was used and whether it is accurate. As such, MDM for customer data won't
do the cross-selling and upselling for you, but having a trusted view of customer data can be
leveraged by all processes for marketing, sales and service purposes. This leads to a more
customer-centric CX, and to improved cross-selling, upselling and retention levels.

Value contribution: Revenue (top line).

Scenario 2. Consumer Goods — Increased Revenue/Agility

Enabled via MDM of product data

Problem: A global consumer goods firm operates in a decentralized manner to be more market-
driven, but with centralized governance of corporate data. After many years of IT investment in
shared services and ERP programs, the firm continues to lose competitive share due to less-than-
desirable lead times to launch new products — a staple process in this industry. Launching a new
product through retail to consumers takes too long and is too convoluted in terms of a complex
process, spanning many departments and regions. Worse, the firm has found out that its flagship
branded products are losing market share due to a tarnished performance of its newer product in
the market, as a result of retailers not sharing product data with consumers on a timely and
accurate basis.

Solution: Without MDM, most systems, departments and trading partners store their own versions
of product data. It takes time to copy the data from system to system when a new product is
launched. MDM for product data can synchronize all product and location data across supply chain
processes to support customer service, returns and logistics, to ensure that the right data is used at
the right place. Retailers and their partners will get new products to shelves much faster and ahead
of the competition. MDM for product data won't launch new products, but it will make your new
product introduction processes faster, shorter and more agile.

Value contribution: Revenue (top line), and various lead and cycle time reductions.

Scenario 3. Device Manufacture — Reduced Cost/Operations

Enabled via procurement-oriented MDM

Problem: A midsize manufacturer of electronic devices is facing an uncertain economic future as

margins erode, material costs increase and logistics charges go "through the roof." A new CEO has
charged the vice president (VP) of operations to "cut, cut and cut again" to get out from under the
burgeoning cost structure that is threatening the firm's survival. With limited IT funds, the VP of
operations has little idea — other than asking for another set of reports — of how to find "fat" in the
business, where to streamline processes further or how to leverage relationships. He can get lots of
reports, but they always seem to take too long to deliver and never seem to align with the

Gartner, Inc. | G00320082 Page 5 of 11

 operational systems used to run the business. The result is a business report late in delivery and not
actionable when it is finally delivered, that in turn precludes effective decision making.

Solution: MDM for procurement will enable the business to identify duplicate inventory items. It will
reduce overstock by eliminating duplicate part numbers and supporting a process to ensure that no
new duplicates are introduced. A return on investment (ROI) for this scenario should be based on
the level of inventory reduction achievable, as MDM enables optimization of inventory management
by establishing a trusted view of product/material data. MDM can produce the same effect for the
supplier part master, enabling companies to better understand at a macrolevel from whom they are
buying. The return on this scenario will be based on the optimization of strategic sourcing and
purchasing power by establishing a trusted view of suppliers (the ecosystem). MDM for
procurement won't cut your expenses, but it will help your spending on data management and
procurement processes to leverage the assets you have in real time.

Value contribution: Expanded margin and lower costs.

Scenario 4. Financial Services — Risk Management

Enabled via MDM of customer data

Problem: A global financial services provider for institutional investors has counterparty data spread
across many different systems. This makes it time-consuming and costly to identify the legal entity
structure for a counterparty, and to match it to the exposures, collateral and risk ratings. This also
makes it difficult for the firm to manage risk with the accuracy, completeness and timeliness
required by Basel II regulations. To offset the potential risk, banks have to hold capital in reserve
funds, which for large banks could amount to billions of dollars that could be invested in other, more
lucrative ways. Basel II incentivizes banks to achieve accurate counterparty risk management by
enabling them to reduce the level of capital held in reserve, if they can accurately calculate
counterparty risk.

Solution: MDM for customer data can enable financial institutions to create a trusted source for
counterparty, legal-entity hierarchies. This can form the basis for an enterprisewide view of credit
risk exposure. MDM for customer data won't reduce your risk, but it can provide the foundation for
better risk management and the ability to reduce the regulatory capital held in reserve.

Value contribution: Reduced business exposure/risk.

Scenario 5. Retail — Compliance

Enabled via MDM of product data and procurement-oriented MDM

Problem: A large national retailer is hit with bad press and a consumer backlash over a spate of
stories in the news related to two different issues. A small product recall has blown up into a huge
embarrassment, after a recently launched product was found to contain materials that are illegal,
according to import rules and regulations. While the retailer followed procedures to recall the
product and compensate consumers, the story did not die due to a spate of other negative press
that emerged at about the same time. Another product, much more mature and well-known as a

Page 6 of 11 Gartner, Inc. | G00320082

 brand leader, was reportedly found to be manufactured in factories where child labor and poor
working conditions — including the production of excessive environmental byproduct waste — were
rife. These issues are not necessarily related in cause, but how management plans for and responds
to changes in behavior and to compliance, as well as how to reduce and be aware of risk, is
common.

Solution: Procurement-oriented MDM and MDM for product data, and even MDM for asset data, all
play a role in compliance and in reducing risk management. MDM for product and asset data can
help the enterprise achieve a single view of products and assets in a timely fashion. When problems
do emerge, users need to determine what materials are used where, and where in the supply chain
such problems are established. MDM for procurement data can enable an enterprise to create a
trusted source for supplier credential documentation, such as signed codes of conduct. They can
capture, on an enterprise level, the qualification status of suppliers. This can form the basis for an
enterprisewide view of supplier risk exposure. MDM for product data and procurement data won't
achieve compliance or reduce your risk, but can provide the foundation for better risk management
and compliance. The ROI for MDM for compliance can be constructed in part by estimating the
level of duplicate supplier qualification/risk assessment activities occurring within the organization,
and by estimating the reduction of risk from creating a systematic assurance that credential
documents are kept current.

Value contribution: Reduced costs, social acceptance.

Scenario 6. Healthcare — Reporting/Enhanced Decision Making

Enabled via analytical MDM

Problem: A healthcare provider is struggling to provide its users with necessary information on a
timely basis to handle its business. It has tried several initiatives, from developing new business
applications to deploying several data warehouses. It has adopted an enterprise data warehouse
strategy to support claims processing, payment and sourcing. After spending millions of dollars on
all manner of BI efforts, the firm has finally determined that no amount of BI investment can provide
what is needed: a process that aligns line-of-business users' governance efforts with the efforts of
the BI initiative. Thus far, too many efforts at cleaning the master data have resulted in lots of "one-
off" projects that met time-specific, siloed requirements, only to find that the data quality eventually
erodes, thus undermining the enterprise view of master data. An analytical MDM program has been
initiated to support a more holistic approach to managing these requirements. The discipline has
been applied to both the tactical nature of the previously implemented projects (thereby making
them "stickier" over time in terms of data quality), and the logical silos separating each of the efforts
(for example, conducting a metadata reconciliation to ensure that semantic difference are either
reconciled or understood across implementation efforts).

Solution: Analytical MDM will help align the uses of master data in a BI environment with the
operational governance routines that the line of business requires to improve decision making in the
firm. Analytical MDM won't improve the effectiveness or timeliness of decision making, but it will
ensure that the right master data is in the right place whenever a decision is needed.

Gartner, Inc. | G00320082 Page 7 of 11

 Value contribution: Faster, more-effective decision making that affects revenue, costs and agility.

Scenario 7. Telecoms — Business Performance/Agility

Enabled via MDM being implemented within an SOA/data service environment

Problem: In a rapidly changing environment, a key part of the business vision of a large
telecommunications operator is to provide its consumer customers with multiplay offers and
packages, including fixed line, wireless, ISP, IPTV, and more in the future as technologies and
markets evolve. However, the reality is that the operator has a legacy of multiple order management
systems, product catalogues, CRM systems, provisioning systems and billing systems that grew up
as the company evolved and acquired other companies. The operator needs far greater integration
and consistency between its different applications and data sources. It needs to have much greater
flexibility and agility in creating or customizing new applications and new product bundles. The
adoption of service-oriented architecture (SOA) is one part of the technology answer to the
challenge, but the operator has also realized that MDM — particularly for customer and product
data — is a key foundation for SOA; otherwise, there is no trusted source for the master data on
which the new SOA or composite applications and business processes depend.

Solution: MDM will help organizations achieve greater long-term success with strategic SOA
initiatives that lead to the composition of application and data services consuming data from
different sources. MDM won't create new composite applications or process orchestrations. But, by
supplying them with a trusted source of master data, it will ensure that the development of
composite applications and process orchestrations can be productive and speedy — and effective.

Value contribution: Competitive advantage through process agility, and enterprisewide ability to
adopt and adapt end-to-end business processes.

Use a MDM Business Case Framework to Gather and Categorize Metrics

A more comprehensive and specific list of business outcomes (categorized somewhat differently
than the groupings above) is represented in Gartner's Business Value Model framework and process
(see Figure 2). This model has been used by many organizations as a balanced scorecard to identity
and categorize both the initial and incremental benefits of successful MDM programs. Its use in
successful MDM programs is described in more detail in "Creating a Business Case for Master Data
Management" and "Toolkit: Building the Business Case for Master Data Management."

A structured framework to identify, describe and quantify the business benefits of MDM programs at
the process and financial metric levels can be invaluable to both justify, and subsequently prioritize
efforts within, these programs. Organizations sometimes have their own corporate standard for
developing ROI models for IT programs of significant cost. Many of those organizations have used
the Business Value Model to help generate input for their proprietary models. In cases where the
organization has no standard ROI model, the Business Value Model can be used quite effectively in
a stand-alone manner.

Page 8 of 11 Gartner, Inc. | G00320082

 Figure 2. The Gartner Business Value Model

Source: Gartner (June 2017)

Gartner, Inc. | G00320082 Page 9 of 11

 The Gartner Business Value Model can be "connected" to MDM and the governance of master data,
application data and other data or content via a "value pyramid," as explained in "Developing
Metrics for Successful Master Data Management." Use the framework set out in this note to relate
the benefits as explained above to the specific KPIs from the Business Value Model to the data
needed to support and trust them.

Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

"Four Essentials for Starting and Supporting MDM"

"The Seven Building Blocks of MDM: A Framework for Success"

"Creating a Business Case for Master Data Management"

"Toolkit: Building the Business Case for Master Data Management"

"Mastering Master Data Management"

"The Five Vectors of Complexity That Define Your MDM Strategy"

"MDM Primer: How to Define Master Data and Related Data in Your Organization"

"MDM Program Manager's Communications Handbook"

"Accelerate Business Value Using Gartner's Master Data Management Implementation Styles"

"Developing Metrics for Successful Master Data Management"

Page 10 of 11 Gartner, Inc. | G00320082

 GARTNER HEADQUARTERS

Corporate Headquarters
56 Top Gallant Road
Stamford, CT 06902-7700
USA
+1 203 964 0096

Regional Headquarters
AUSTRALIA
BRAZIL
JAPAN
UNITED KINGDOM

For a complete list of worldwide locations,

visit http://www.gartner.com/technology/about.jsp

© 2017 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This
publication may not be reproduced or distributed in any form without Gartner’s prior written permission. If you are authorized to access
this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner.com. The information contained
in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy,
completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This
publication consists of the opinions of Gartner’s research organization and should not be construed as statements of fact. The opinions
expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues,
Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company,
and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner’s Board of
Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization
without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner
research, see “Guiding Principles on Independence and Objectivity.”

Gartner, Inc. | G00320082 Page 11 of 11