Andrew White

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Andrew White
Research VP
8 years at Gartner
22 years IT industry

Andrew White is a research vice president and agenda manager for MDM and Analytics at Gartner. His main research focus is master data management (MDM) and the drill-down topic of creating the "single view of the product" using MDM of product data. He was co-chair… Read Full Bio

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How to determine ROI or return with MDM of the price is zero?

by Andrew White  |  February 2, 2010  |  3 Comments

Yves de Montcheuil of Talend, an OSS vendor that just released an OSS MDM offering, commented on a post of mine, defending (quite rightly) his organizations view of their OSS MDM solution.  One comment he made in his post made me think.  The comment I thought about was “cost”. 

MDM accrues a cost to an organization.  That cost includes some obvious and partially up-front costs such as software or subscription, hardware, services, and maintenance.  There are other costs that are less obvious and rarely budgeted for related to known and later unknown change management considerations. 

MDM also accrues value.  Value has been observed and reported related to revenue growth/protection, service level enhancements, reduction in time to market, business agility (though faster IT responsiveness), improved decision making, compliance, improved risk management, cost reduction, and improved operational efficiency. 

Then again, independent of real cost and expected value, the price offered by a vendor (of the technology) signals all kinds of things to buyers.  For example, I have taken numerous inquiries from end-users that go like this: “I have two vendors: A, and B, both selling me so and so.  One vendor’s software price is $500K; the other vendor’s price is “$2M.  What functionality is missing in the $500K priced offering?  What is extra with the other vendors offering?”  Buyers interpret many things from “price”, sometimes a vendors does not predict what.. 

Another perception is that the higher the price, the more important the investment.  After all, the bigger the ticket the more likely a ‘higher up’ manager, or board, has to approve the purchase.  Users tend to expect that “larger, more complex, more important programs” will attract higher costs (and offer up higher returns).

So what of an Open Source Software MDM offering like that on offer from Talend?  Can users now get hold of a free MDM offering?  Will prices for MDM solutions fall precipitously because of this release?  Is this OSS MDM offering really free?  What are the implications, obvious or hidden?  Will users perceive that the introduction of a free version of MDM (the product, not the discipline) suggest that MDM technology is commoditized?  Or that the importance of MDM has fallen so low, since the market has taken the price to “zero”?

Certainly, the possibility is that this is what will be perceived.  But, just to round out the thought, Talend does highlight that the OSS MDM offering has less functionality than their regularly licensed MDM offering.  One could look at the OSS MDM offering as “bait” that is meant to attract users to pay Talend, as they would have paid any other MDM vendor, for the “complete” product

It would seem obvious that OSS provides some downward price pressure on any market where its introduction has taken place.  But has MDM technology reached a state of maturity that implies commoditization?  If you look at the various technology components of an MDM technology (data modeling, data quality, workflow, analytics, dashboard, data services and so on) each of these parts are to some degree, mature.  But is the assembly of all these parts for the purposes of supporting the discipline of MDM mature?  No, they are not.  Of the many hundreds of end user interactions I have participated in, less than 10 per cent are what I would call “mature” and even those are not “done”; they have ongoing programs to add more domains, more use cases, more regions etc.  Certainly the technology needed to support the discipline of MDM is maturing quickly, but is the same as accepting a signal set by an OSS MDM offering?

A price of zero, implied by an OSS offering, should equate to a mature market or a low risk technology, or a faster return.  For some, few end user environments, OSS will do some of this.  My feeling is that for many, this won’t be the case – yet.

Footnote: Price pressure for many kinds of technology is high; and independent of this, some vendors readily drop their prices for all manner of reasons.  MDM pricing has not, thus far, fallen to the floor, but pressure on pricing remains strong.

3 Comments »

Category: Open Source MDM Talend     Tags: ,

3 responses so far ↓

  • 1 David Loshin   February 2, 2010 at 9:47 pm

    Interesting take, Andrew, although we have to be careful about equating “open source” with “zero cost.” The cost of adopting any open source product is essentially paid forward – the implementer is more responsible for what a commercial (non-open source) vendor often provides in interfacing, so the cost goes to internal development expenses instead of being capitalized for software purchase. You still end up paying for it somehow.

    Talend does have a free download, although the free version has certain limitations that are not present in the enterprise (i.e., paid for) version. In turn, a mature implementation will require the paid version, although one could still build an MDM system using the free download.

    That being said, I think there is a significant difference in philosophy between the Talend approach and the approach taken by the incumbent MDM product vendors. The Talend product is geared towards those who are designing and engineering an MDM approach into an evolving enterprise data architecture; other tools are add-ons after the fact, intended to supplement the absence of data quality/governance/semantic consistency constraints that a Telnd-engineered approach can bake right in. The Talend spin in capturing semantics and business rules within the metadata structure of the model is a good way to dovetail the master data services nicely with the master model.

    Meanwhile, I don’t think the other vendors need to be concerned about downward price pressure. Time will tell whether this approach will gain traction.

  • 2 Yves de Montcheuil   February 3, 2010 at 7:21 am

    Andrew, David, this is an interesting debate we are having here. I would like to add a few elements.

    First, you are right when you say that OSS is not synonymous of free. At least not in the “free beer” sense of the term. There is still a cost associated to the deployment of the solution, and we all know that MDM is not only about software but also about processes. And even with an OSS solution, you still need to model the data, design the DI and DQ process, perform the stewardship, etc. And if you need the enterprise features of Talend MDM Enterprise Edition – well, you have to pay for them. A lot less than what you would pay for other products, but still they are not free.

    Where I do not agree with David is on the concept that because it’s OSS, you end up spending more in implementation costs. That may be true with pure project-based OSS like Mural, but I believe that Talend has proven (with our DI offering) that you can get OSS software with a similar level of features, of ready-to-deploy capabilities, than proprietary solutions. And the same commitment from the vendor to make it work. This is the core value proposition of the Commercial Open Source (COSS) model.

    On the topic of price pressure, just look at the DI market 5 years ago, and where it stands today. I think everyone will agree that DI has democratized a great deal, with less and less manual coding, and more and more tools being used. OSS contributed to this democratization, thanks to the ease of adoption (just download it), and of course the price. All vendors have been forced to adapt. And Informatica’s official line may be that they never see us in the field, but in reality they know better. We are competing with them in an increasing number of deals – we win some, we loose some, hopefully more of the former. The truth is, OSS in general and Talend in particular has become a factor everyone in DI has to contend with. Our recent entrance in the Gartner DI MQ is probably the most visible (and symbolic) proof of this.

    Now, of course, we are still new in the MDM field, and I do realize that we have to prove that we can deliver. The next months will be crucial with that regard. Once we have proven that we are a contender in the MDM market, price pressure will start to apply on proprietary vendors. For the greater benefits of customers. We are looking forward to this.

  • 3 Stan Przybylinski   February 3, 2010 at 12:08 pm

    In the work I did in a previous position as a consultant, the acquisition cost was usually a small part of Total Cost of Ownership (TCO), as acknowledged by others above.

    This is one of the problems of software acquisition: decisions can be heavily influenced by the initial cost (which may be within a managers purview below a certain number), while the more important number, TCO, may not be fully considered.

    Stan