Estimating the benefits of MDM (part six)
Benefits are often divided into two categories: quantitative and qualitative. Quantitative benefits (hard benefits) are those that can be estimated from cost savings, enabling new revenue opportunities, big data and analytics or avoiding scenarios in which a revenue opportunity will be lost (for example: customer churn).
Qualitative benefits deal with softer aspects like reputation risks and compliance issues.
In reality, there is no wall between qualitative and quantitative benefits. Some benefits which are considered quantitative may be difficult to evaluate for a given company in the context of its current business processes.
On the other hand, benefits traditionally placed in the qualitative category can sometimes be evaluated. For instance, benefits of improved compliance (see "The ROI of Master Data Management" by Rob Karel) are sometimes estimated in terms of avoided penalties that an enterprise could suffer without the improvements promised by MDM.
It is difficult, however, to quantify the cost of corporate scandals, or the ruined reputation of a company and its top executives, not to mention potential legal consequences.
From the business case methodology perspective, two high level approaches can be used to estimate an MDM impact:
- A traditional bottom-up approach quantifies MDM benefits by performing in-depth analysis of the current state processes, identifies their inefficiencies and develops an ROI model by showing how MDM can reduce costs and increase revenue
- A less traditional Economic Value (EV) approach provides a high-level estimate for the business impact of MDM and other information-centric initiatives
Next week, we’ll examine the traditional bottom-up approach.