If you judge by the stories we write and the conferences we sponsor, the data integration and management business is hot these days. Even C-level executives seem to be taking notice that a strong foundational technology and clean data are required to pave the way for their own increasing demand for analytic applications.When I talk to companies about MDM or CDI projects and eventually turn to the topic of return on investment however, I am usually told that ROI here is "squishy" and that benefits will hopefully be accrued in the future. Much of the groundwork in MDM is seen as an infrastructure requirement for information demand, or "table stakes" for competing in the marketplace.
That is why I was very interested to come across the results of or research published last week by Leslie Ament of Aberdeen Group. Her study, supported in part by readers of DM Review magazine, found that above average performing companies will find tangible ROI from investing in customer data management (CDM) solutions. In fact, Ament found that best in class organizations attained greater than 20 percent annual improvement in four key metrics: customer retention rate, partner and customer satisfaction, revenues, and data accuracy and match rates.
"The use of timely, complete and accurate customer information does improve customer service levels, does reduce operational cost, does increase revenues and does lead to higher customer satisfaction or partner retention rates," Ament told me. And at the end of the day it's all about revenues and customers, growth and retention."
The survey didn't start out to be about ROI. In her previous work, Ament had found that best in class companies did four things differently from the other benchmarked groups: they used both and predictive and operational BI more often; they extended the use of their CRM system more often; they outsourced more often; and they used customer data integration and data quality tools more often, (twice the rate of the rest). The rest of her work this year has been to drill down into those findings. But in light of the squishy ROI question, Ament seeded the survey with questions about measuring the value of CDM and conducted in-depth follow-ups with several respondents and other companies she has been working with.
As it applies to executive involvement, a startling finding was that 89 percent of line-of-business executives intend to participate in the decision-making process related to technology and service options. "The leaders, those that attain that 20 percent performance improvement in the four metrics measure performance on CDM investment on a quarterly basis," Ament says. "Interestingly, less than 15 percent of the companies surveyed measure both downstream KPIs and data effectiveness rates, they do one or the other. My take on this is LOB is measuring the downstream benefits unless they want that customer dimension of partner/customer satisfaction rates." While IT led selection in the case of master data management, measuring data effectiveness and data accuracy rates, the kicker is that "when companies are presented with a choice between MDM or CDM, they start with CDM because that's where the fast ROI is."
Top-line benefits are bound to attract interest from the business side, though departmental needs for data synchronization and updates varies by function. "Financial services is fine with weekly updates but if you talk to somebody in the call center or marketing or sales, they need daily and or hourly updates," Ament says. "Corporate planning doesn't care if they get data weekly, that's timely for them. The same applies to HIPAA and government compliance, it's the front-office people that really need the 360 view of the customer updated at least daily if not hourly."
Departmental need for Data Synchronizations / Updates
The study found that organizations leverage customer data primarily for two reasons: one is strategic planning for operational decision support; where best in class tend to focus on revenues and customers. "For customer service and support, 64 percent of the best in class selected customer service and support as the top reason for using CDM solutions." Strategic planning was second; among the best in class 56 percent used it for strategic planning, only 35 percent of the average or below average respondents use it for strategic planning. "They're not using it to look for visibility across the organization."
Ament figures her research could help an organization build a business case for investing in CDM. Then again, all that senior executive interest may have already moved companies off the dime: more than 85 percent of survey respondents said they will invest in CDM within the next 24 months. "Companies clearly want to gain that visibility," Ament says. "From where I sit, it's pretty exciting."
The full report findings are available here.
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