Data Catalog Business Value: Assessment Factors, Benefits, and ROI Calculation
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So you’ve decided to implement a data catalog. But how do you measure success?
In this article, we’ll discuss the business value of a data catalog and how best to calculate return on investment. We’ll also explore how to optimize the business value of a data catalog.
Table of contents
- The business value of a data catalog: Factors
- What is the business value of a data catalog?
- Measuring data catalog business value
- Tips to optimize data catalog business value
- Data catalog business value: Related reads
The business value of a data catalog: Factors
How do you assess the business value of any technology investment? That’s a complicated topic. However, we can break it down into three major buckets:
- Key performance indicators
- Financial value
- Non-financial value
Key performance indicators
Key performance indicators are objectives that define success for your business. This bucket can include things like:
- Adoption rate and usage across the company (”x users will use the software y times a week within z months”)
- Data discovery efficiency, i.e., the time and effort saved in finding relevant data assets (“reduce data discovery time by x% through the data catalog)
- Cost savings through compliance, greater efficiency, and productivity, etc. (”achieve cost savings of $x per month/quarter/year by classifying data assets accurately and reducing duplication of efforts”)
The financial impact can be measured by a number of factors, including:
- Increased time to market for new features
- Increased speed in decision-making
- Reduced waste of resources; for example, fewer computing resources used for the same task, or reduced redundancy of overlapping resources
- Reduced waste of labor; for example, fewer people/person-hours required to complete a given task by automating previously manual effort and adopting more efficient processes for existing workflows
- Reduced delays; for example, providing self-service tools means engineering and support teams are no longer a bottleneck to starting critical projects
- Reduced incidents; for example, a reduction in expensive downtime or unavailability of critical systems, a reduction in costly compliance violations or data breaches, etc.
Replacing malfunctioning systems or processes can have material benefits such as reducing stress and frustration, eliminating friction between teams, and increasing technology literacy among staff. This leads to happier — and more productive — employees.
What is the business value of a data catalog?
So how can a data catalog deliver business values across the three above-mentioned categories?
The following list is by no means exhaustive. However, it should give you a good start in identifying your organization’s pain points and measuring value-add of a data catalog:
- Increased speed in finding data
- Increased confidence in using data
- Faster onboarding times
- Decreased compliance violation fines
- Decreased data breach incidents
- Decreased friction between teams
Now, let’s take a closer look at each factor.
Increased speed in finding data
The primary problem solved by a data catalog is the inability to find data. Because there’s no central location where all data is tracked, data ends up in isolated silos. Without a unified set of search tools, this can make data impossible to find.
By cataloging and classifying data and its associated metadata in one place, a data catalog provides financial value by reducing the number of hours employees spend hunting for data. It also reduces employee frustration when employees can’t find what they’re looking for.
Increased confidence in using data
Another key data problem that slows down decision-making is data provenance. Even if employees find data, how do they know it’s correct? Do they even know where it came from?
The hesitancy to use data of unknown origin or status can lead to missed business opportunities due to delayed decision-making. Even worse, it can lead to business losses if decision-makers end up using incorrect data.
Bad data is a bad problem. Gartner says bad data costs the average large company around an average of $15 million per year in losses.
Data catalogs address issues of provenance through features like data lineage, which track the flow and transformation of data assets across their lifetime at a company.
Other features such as data quality controls increase both the quality and consistency of data across data sources. Automation and machine learning help keep metadata up to date, further increasing data confidence.
It can be difficult to tie an economic figure to increased confidence, as some of the losses here are opportunity costs. However, running surveys of employee confidence in data can help gauge a data catalog’s impact on data use and decision-making over time.
Faster onboarding times
When new people join a team, it can take ages for them to learn not only where data lives, but to understand the lingo and terminology of the business.
Data catalogs cut down on onboarding time through features such as business glossaries and saved queries that span data sets. This impact can be measured directly in the time it takes employees to become productive in their new roles.
Also, read → Best practices for onboarding new data team hires
Decreased compliance violation fines
Severe HIPAA violations can cost up to USD $1.5 million a year. In 2023, Meta was fined a whopping 1.2 billion Euros for GDPR violations. These are numbers that could break businesses.
By implementing holistic, bottom-up data governance — through data classification, enforcement of security controls, and tracking of data lineage — data catalogs can reduce or even eliminate regulatory lapses brought about by a lack of proper data governance.
The return on investment in data governance alone — from fines, legal fees, loss of reputation, etc. — can be 500% or more.
Decreased data breach incidents
According to IBM, the global average cost of a data breach in 2022 was USD $4.35 million. Data breaches can happen easily in the absence of a data catalog, as sensitive data can be left properly unclassified or poorly protected in a data silo.
A data catalog provides insurance against data breaches through data governance controls such as role-based access controls, policy enforcement, and audit trails.
Decreased friction between teams
Without a self-service data catalog solution in place, business users need to funnel most of their data requests through data engineering and IT teams. This results in most data engineering teams being inundated with requests. That lowers morale on the data teams and increases business user frustration.
With a self-service data catalog in place, decision-makers no longer have to make requests to the data engineering team to find, clean, and correlate the data they need. Instead, they can query for it themselves using natural language searches. And business data stewards can take more direct, day-to-day control over the data that they own.
Now let’s see how to measure the business value of a data catalog and understand its impact.
Measuring data catalog business value
To measure the business value, you must calculate the total investment cost and then the financial value. Let’s see how.
Calculate the total cost of investment in the data catalog
To calculate the total business value of your data catalog, first, calculate how much you’ve invested. This can include:
- The yearly cost of the data catalog itself:
- If you’ve licensed a data catalog, calculate your total licensing costs for the system, per user, and for any additional licensed features.
- If you’ve built your own data catalog, this is the total cost of your development effort.
- Any capacity (e.g., cloud computing, storage) required to run your data catalog
- Personnel costs:
- These include IT resources required to set up, integrate, maintain, and support your data catalog.
- They also include project management costs, training, and continuous improvement investments.
- Any vendor expenses — outside help you hired to assist with systems integration efforts or to help onboard external partner systems.
Calculate financial value
Next, you can use the standard ROI formula calculation to calculate the total financial value of your investment:
ROI = [(Financial value – Project cost) / Project cost] x 100
Use the points discussed above regarding the data catalog’s business value to calculate the total financial value, including increased speed of common data tasks, regained opportunity costs, reduction in regulatory fines and expenses, etc.
Tips to optimize data catalog business value
Here are a few things you can do to extract even greater value from your data catalog investment:
- Choose the right data catalog
- Try before you buy
- Actively drive adoption
Let’s delve into the specifics of each factor.
Choose the right data catalog
Choosing your data catalog poorly can reduce ROI in a number of ways. For example, if it doesn’t integrate well with your existing data source or identity systems, you’ll sink more time and money into engineering resources than you originally budgeted.
To make sure you’re making an informed choice, use a guide such as the Forrester Wave data catalog evaluation. Forrester’s report breaks down data catalog offerings by three major criteria, including current feature offerings, the company’s strategy, and its market presence.
Try before you buy
Before committing the entire company to a data catalog purchase, ask if you can run a trial. Select a small-sized data project and work with the relevant business, data, and engineering teams to onboard it. Focus on achieving a “quick win” for all involved.
This small-scale experiment will help engineering and data teams understand what’s involved in onboarding a data catalog company-wide. It’ll also give business users a glimpse at the benefits a data catalog offers first-hand.
Actively drive adoption
People like to stick with what they know. Employees won’t flock to a data catalog unless you actively evangelize it. Define a comprehensive training program to ensure everyone, regardless of job role, can successfully use and extract value from your investment.
A data catalog is a significant and important investment for your company.
Measuring the business value of a data catalog provides quantitative and qualitative insights into its impact on data discovery, governance, collaboration, and more. It helps understand the benefits and justifies the investment in a data catalog.
Using the above guidelines and ROI calculations, you can demonstrate to your colleagues that your decision to invest in a data catalog was a wise one.
Data catalog business value: Related reads
- What Is a Data Catalog? & Do You Need One?
- AI Data Catalog: Exploring the Possibilities That Artificial Intelligence Brings to Your Metadata Applications & Data Interactions
- 8 Ways AI-Powered Data Catalogs Save Time Spent on Documentation, Tagging, Querying & More
- 15 Essential Data Catalog Features to Look For in 2023
- What is Active Metadata? — Definition, Characteristics, Example & Use Cases
- Data catalog benefits: 5 key reasons why you need one
- Open Source Data Catalog Software: 5 Popular Tools to Consider in 2023
- Data Catalog Platform: The Key To Future-Proofing Your Data Stack
- Top Data Catalog Use Cases Intrinsic to Data-Led Enterprises
- Business Data Catalog: Users, Differentiating Features, Evolution & More
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