The murky world of market sizing

Defining a software segment’s market size is a tricky thing, partly because is all about what you include and what you exclude. Take MDM as an example. A much quoted IDC figure reckoned the MDM market would be USD 10 billion in 2009, implying a USD 5 billion market size in 2005 given compound growth of 14%. Such figures are regularly bandied about by the computer press, but mean little unless you qualify such statements by explaining what is included or excluded. For example this figure includes an estimate for services business associated with MDM. This is itself hard to pin down, but in my experience an MDM project where the software costs X will spend about 3X on services to implement it. Hence that USD 5 billion market size actually only has about USD 1.6 billion of software sales. Then MDM itself is a broad church, including CDI and PIM as well as a generalist MDM solutions such as those from Orchestra Networks and Kalido. I was still puzzled as to why even this USD 1.6 billion figure number was so large, but by deduction I think that the IDC figure was including data quality within the picture also. Fair enough, but it needs to be explicitly stated to make sense of the market, and as we will see still does not explain the gap.

Let’s come at this another way. A Gartner figure just released reckoned the CDI market was worth USD 310 million in 2006. This appears to be an estimate for software rather than services. Getting a figure for the product information management market is murkier, but I believe it will be broadly at a similar level. The generalist MDM vendors are these days mostly from smaller companies (products like Razza having been swallowed and digested by Oracle, and Stratature by Microsoft for example) and I doubt would add USD 100 million in software sales to this picture. Hence, adding PIM + CDI + specialist MDM (but excluding data quality) you get a software market of maybe USD 700M (probably a bit less), which is a far cry from the apparent IDC figure of USD 5 billion, or even the likely USD 1.6 billion of software revenues only. I still struggle to bridge the gap here, as the data quality market is not that large. Again you have to be careful about what is in and what is out, but other than leader Trillium data quality vendors are mostly very small (e.g. Exeros, Datanomic, etc) or are now buried within larger companies through acquisition (e.g. Informatica, Business Objects). However though I have seen estimates like USD 500M for the data quality market, again I wonder how much of this is services; personally I am unconvinced that the software sales of the data quality market would be much beyond USD 100M or so (companies like FirstLogic were not that large prior to their acquisition). So if we take the USD 700M figure and throw in USD 150M for data quality software sales (let’s be generous) this is still a far cry from the USD 1.6 billion estimate we arrived at earlier. Of all the analyst firms I respect the market size figures from IDC best, as they do actually check with the vendors what their revenues really are (they used to do this every year when I was running Kalido) but as you can see their MDM market size figure is still a mystery to me. If someone from IDC is reading this and can shed some light on it I would be interested to hear from them.

MDM is certainly growing quickly: each analyst firm agrees on this, and is clear enough from the number of companies entering the market or (more commonly) re-labelling existing products as MDM. However it can be seen that you can take a figure like the IDC 5 billion number, and also produce a valid market estimate of under USD 850 million, just based on what you include or exclude, for seemingly the same market. Quite a range. I guess it is hoping too much to expect the IT press to actually mention pesky caveats like what a number includes, since it is more headline inducing to say “MDM market worth $5 billion”, but if you are to actually use these figures to help with a decision then you would be well advised to dig deeper, below the headline numbers.

2 thoughts on “The murky world of market sizing”

  1. You are probably right in the sizing of the generic MDM market; I was erring on the side of generosity here as hard figures aer hard to come by. Such generic products have sold quite cheaply in some cases (Razza, now owned and likley dumped by Oracle, was around USD 70k only). In other cases I have seen generic MDM software sell for as much as USD 1 million, though I suspect that USD 200-300k is more the typical range.

  2. Andy,

    I agree with your observations about the fuzziness of this whole estimation thing and market estimates bandied about.

    I would like to better understand a few of your assumptions behind your calculations, especially the potential Generic MDM sales numbers.

    How did you size up the “generalist” MDM segment? From your comments, I understand there are a few “generic MDM” players left out there. I believe selling the notion of “generic” approach to managing master data is a very difficult task, as it involves believing in a long-term vision, in the face of so much publicity and pressure to deliver point solutions like CDI and PIM from vendors. From other reports (The CDI Institute), I gather that a typical CDI software license now costs around USD 1.2 million. What price could a generalist vendor hope to sell the product at? I guess it would be much less than the price for the CDI software.
    So, coupled with all these factors (few generic vendors, lesser prices and slower offtake in deals), I think you are quite generous attributing a figure of USD 100 million per annum, in current situations.

    Also, Can you share your experiences in positioning the generic MDM solution to organizations, pricing options etc?

    Best regards
    Shiva

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