Selling MDM to Leadership: TCO Calculation

According to Gartner, the #1 reason for MDM failure is the lack of a business case to qualify and quantify data management value creation.  In this third session, learn more about how to evaluate the complexity of an MDM platform and the questions to ask to calculate the true cost of ownership in another informative & lively discussion with Bill O’Kane – Profisee VP & MDM Strategist, Harbert Bernard – Profisee Director of Value Management and Christopher Dwight – Profisee VP of Customer Success.


Listen to the Podcast!

Looking for the Slides?

Here’s part 1 on organizational readiness, and part 2 on understanding your why if you missed the prior sessions.


TCO Calculation – The Business Perspective

In this session, we will discuss more on understanding the components of TCO (total cost of ownership) that you need to take into account for the investment portion of your MDM project.  Harbert starts off the discussion sharing this vision:

Calculate MDM TCO | Profisee

Protip: There may be some additional costs that should play into your model.  Here are some questions to consider:

  • What does it look like/cost to upgrade new versions in future years?
  • What are the costs associated with moving from on-premise deployment to cloud?
  • What are the licensing options for on-premise vs cloud?
  • What about the use case you are starting with – does it need data stewardship immediately or are your data stewardship needs perhaps later down the line with additional use cases?

There are many options to consider with what deployment option works best for you, and you will want to include the downstream associated costs that may need to be considered into your TCO calculation.

Next, the guys discuss some of the surrounding costs including:

  1. Consulting – understanding the difference between using management consulting to help with some of the business and process changes that need to happen and working with the software vendor to get the technology piece right.  Also, be sure you are getting a detailed SOW (statement of work) vs the vendor that just wants to give rough estimates and not hone in on scope & what success looks like.
  2. Licensing options – perpetual vs subscription from a data standpoint and find out what works best with your company
  3. Sunk vs marginal costs – have to look at where you are today and going forward and not focus on the costs from past project work.  And then as you go forward, make sure to account for the marginal or changing costs that are possible.

There are some definite pitfalls to watch out for when calculating TCO:

  1. Failing to think beyond initial software license costs
  2. Full effort and resources needed to realize program benefits
  3. Under/mis-sizing license or technology – surprise future charges
  4. Future cloud migration – watch out for potential issues around any cost implications of moving to the cloud.

Q&A from the Webinar

How do we handle those costs that you may have been previously doing in another project – like perhaps some type of address verification service as an example?  What happens to those costs now that those services will be used or potentially used in the MDM project?

Bill:  That’s a great question.  The trick is figuring out is there a top-level bucket for the ‘good of the nation’ type expenses around governance, etc.  where you have 7 or 8 departments benefiting from this solution and spreading out those costs.  The alternative is that if the MDM project takes those costs on, then the business that is now relieved of those costs knows they are relieved of that cost burden because they are being managed through the master data management program and not simply that they just went away.  Ideally, this is handled by a business led data governance council.

Harbert and Christopher point out – ironically, sometimes a data management initiative uncovers data services, like D&B, that exist in multiple instances throughout a company (think companies that grow by acquisition), and an MDM project comes in and can help reduce that cost by only using one instance albeit now used effectively in the MDM project, and this reduction actually comes as a benefit in your TCO cost.

In the last session, we talked about think big, start small.  A great question from one of the attendees is “well, how do you account for these opportunities for additional projects with multiple use cases and/or multiple domains that could immensely benefit the organization after the initial project is completed?”

Bill: Well you need to understand how the vendors charge for adding domains especially (some can be up to 2x of initial investment) as it is not uncommon that once you have mastered customer data, you will next want to consider the intersection of customer and product.  Since in some platforms this could be additional costs, you will want to understand the potential costs of adding new areas to master within your MDM program with whatever platform you are considering.

Final question:  How often do you have to do this detailed TCO calculation?  We were planning on making MDM a part of a bigger project because it won’t be successful without clean data, so we got approval to just put the MDM project piece into this larger initiative we are doing.

Christopher and Bill state there is a significant risk of not taking the time to calculate the benefits of the MDM project piece.  You can do it, but if there are problems down the line in the bigger initiative, you will want to protect the work that has been done and you will more easily be able to show the benefits of MDM even in the bigger initiative.  And if the bigger project gets cut, you don’t want to put at risk the MDM component as well.  Having that value line protects you!

In summary, we learned:

There are many components to calculating a fully loaded and comprehensive total cost of ownership for your MDM project.

In the next session, we will get into program scope, figuring how to get some quick wins, where to focus, and the options you have when it comes to implementation styles.  Until then!

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