ROI Analysis for an electronic Document Management Solution

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IDC claims companies spend up to 10% of their revenue on managing document production, distribution and associated devices. This not only translates to a huge financial commitment for mid-level and larger corporations but also opens them to considerable risks. Further, due to stringent regulations, organizations are under continuous pressure to maintain proper documentation across the entire value chain.

The Case for DMS
As information flow continues to grow at a dizzying pace, document management is emerging as a key area of process attention. A study by BAE systems discovered that about 80% of all workers waste an average of half an hour every day, retrieving information while almost 60% expend an hour or more duplicating the work of others. IDC estimates that an organization with 1,000 knowledge workers wastes between $2.5 - 3.5 million a year in superfluous or erroneous document related activity. Needless to say, this is an area that can no longer be ignored.

Almost everybody can agree that the old paper and manual management regime is outmoded in the current environment. For mid to large sized organizations, the move to an integrated, automated solution is typically less the question of ‘if’ and more ‘when’.

The case for a DMS is robust with most companies recognizing it as a ‘bottom line’ enterprise application. However, it is still extremely important to be able to judge its true ROI and justify the investment decisions that must be made along with its implementation. This is not a simple task, but there are clear and well defined ways to conduct an analysis.

Analysis of Key Document Management Activities
This section highlights cost savings by automating certain key activities of managing documents by comparing paper based to electronic based system.

Creation and Archiving
In a paper based system documents are created manually and then scanned for archival, based on importance. For faster retrieval, the documents to be archived are indexed alphabetically, chronologically or in any other predefined order. Once indexed these documents are then stored as hard copies or on micro films. Being manual, the process is error prone, time consuming and expensive. The process is also not ‘retrieval-friendly’ as documents often have to be removed from storage and taken back to the desk for access, which can lead to loss of important data and prevent simultaneous use of the document.

In DMS, documents once created are automatically indexed and archived for easy and faster retrieval. Documents can be easily retrieved by any word or phrase in the document through a search. The robust backup system also ensures that none of the documents are misfiled or lost during the archival process.

DMS also guarantees integrity of data by restricting the access of the documents to genuine users. In a paper based system all these capabilities are conspicuous by their absence.

The table below shows savings on Creation & Archival activities.

Savings on Creation & Archival Activities Savings From Improved Creation and Archival Process   Current   With MetricStream (Liberal Scenario)   With MetricStream (Conservative Scenario) No of Documents created and archived in a quarter 500   500   500  Time taken in creating and archiving a document   1hour   5 minutes   10 minutes Storage Space, Equipment, Supplies $600.00   $20   $50 Labour Cost (per document)   $20   $5   $10 Creation and archival cost per quarter $40,600   $10,600   $20,600 Annually: (No. of annual docs *Labor cost per document)+ (Storage ,Equipment & Supplies cost)             Lost/Incorrectly Filed Document Labor Costs per document $250   $250   $250 2000 Total Documents per year             0.50% of Misfiles   $2,500   0   0 0.24% Lost Files $1,200   0   0 Annual cost for data loss   3,700   0   0 Annual security cost $500   $97   $115 Total Annual Document Storage & Retrieval Costs $44,800   $10,697   $20,715 Total Annual Savings        $34,103   $24,085

Modification and Change Control
In a paper based system, there is no defined or identifiable track of changes done to a document. Enterprises rely on documents to be processed efficiently through a step-by-step process. Unfortunately, when documents are manually pushed through this process there is a high probability of some documents being lost or overlooked. Moreover, multiple reviews translate into multiple versions of the document floating in the organization with no ownership or track of the changes made to the document.

However, in DMS it is ensured that document is forwarded to the appropriate user automatically at specified times, alerting the user of the necessity to process them. Multiple versions of the same document can be tracked with complete audit trail information. Further, DMS facilitates concurrent access of the document for review and later merges all changes with the master document. The table below shows savings on modification activities.

Savings on Modification Activities Savings From Improved Change Control   Current   Liberal Scenario   Conservative Scenario Number of Document Change Requests in a quarter 25         Time spent on document change request, when changes needed etc. (in hours)   0.50   0   0 Time spent to provide document copies to initiator to make the changes 0.25   0   0 Typical Time spent to identify who else needs to review changes and send them a review request (hrs.)   0.25   0.1   0.15 Typical Time spent to track and follow up with review committee (hrs.) 0.25   0.1   0.1 Typical time spent identifying & following outstanding review requests   0.25   0.1   0.1 Typical time spent in replacing paper documents with new versions $250   0.1   0.2 Typical time spent in closing out change requests   1   0.25   0.5 Time needed to print the approved version of the document and to take away older versions   2   0   0 Probability of an Audit 3%   0   0 % of Change control requests than an auditor may want to review   5%   0   0 Typical time spent in demonstrating that we have a good document control process 50   10   15 Total time spent in a year creating and managing change order process (hrs) 708   67   107 % of annual workload reduced that can be used for other high value added tasks     33.4%   31.3% Salary of a person incharge of change control $50,000         Total Annual Savings        $16,693   $15,632 Costs shown are for illustration only

Document Workflow
At any given time, a particular document may be required by more than one executive in an organization. In a paper based system, documents are usually photocopied for sharing and in case of data being stored on microfilms it is first converted into paper then photocopied. To add to this are the postage costs for distributing documents in a spread out organization.

In comparison, DMS ensures smooth flow of documents through the enterprise. Files can be shared and sent instantaneously across geographies without any additional cost. It even has the provision of concurrent access to a particular document making it highly cost and time effective.

The table below shows savings from improved document workflow

Savings on Modification Activities Savings From Improving Workflow   Current   With MetricStream (Liberal Scenario)   With MetricStream (Conservative Scenario) Number of documents that are used for various aspects of operations 2000         % of documents that are typically in high demand but have limited # of copies   10%         Time spent waiting for such SOP documents to come available, since they may be in use by someone else. (in hours)   0.50   0   0               Total time spent in a year creating and managing change order process (hrs)   400   0   0 Average salary of a person waiting for documents $50,000         Total Annual Savings        $10,417   $10,417 Costs shown are for illustration only

ROI for DMS
This model allows quantifying the saving from on improved productivity in all the key activities of document management that will be achieved by implementing the system. As DMS streamlines the document retrieval process, additional benefits are derived from reduced opportunity costs, compliance risks and increased overall productivity. The illustration here shows quantifiable benefits of implementing an automated DMS solution.

Savings from Automating Document Control     Liberal   Conservative   Low NPV   Med NPV Savings from improved creation and archival process $34,103   $24,085   $89,746   $63,383 Savings from improved change control   $16,693   $15,632   $43,929   $41,136 Savings from improved document workflow $10,417   $10,417   $27,414   $27,414 Total Annual Savings    $61,213   $50,134   $161,089   $131,933 Assume first year savings of above number 50%   20   7   1300 Assume second year savings of above number   90%             Assume third, fourth and fifth year savings of above number   100%

Non-Quantifiable Estimates
On further analysis, certain non-quantifiable estimates also have immeasurable yet increasingly significant benefits. Even though there are no comprehensive tools to gauge these benefits, the extensive advantages of non-quantifiable factors cannot be ignored. This process requires a look at the larger picture of a DMS from department level improvements to company-wide benefits.

Risk management & Decision Making: Sound business decisions and risk management rely on timely information. However, in a paper based system information is lost in silos in disparate computers as opposed to an electronic based system where information is just a click away. Timely access to information not only results in competitive advantage but also mitigates a company’s risk and raises efficiency by orders of magnitude.

Regulatory Compliance: The plethora of regulations governing every industry today ensures that organizations track every document through its complete life cycle. However, in long term paper based systems fail to provide satisfactory results, exposing an organization to risks of non-compliance. Also, there are privacy regulations that require companies to keep certain information confidential. Examples include employee health data and other privileged communications from different sources.

Security of Documents: Unlike in an electronic based system, where there are layers of security to protect a document, including password protection, encryption of documents and audit trails of people who accessed the document, risk of information theft is omnipresent in a paper based system. Such a theft can damage an organization to the extent of uprooting it from then business

Data Disaster Recovery: In a paper based system, data backups are plagued with cracks and even in a best scenario do not guarantee 100 percent data recovery. The man-hours lost in data recovery and creation of lost documents if converted into opportunity cost is huge. In an electronic based system there are multiple backups including offsite backups for data, which ensure business continuity and seamless workflow at all times.

Accountability: In a paper based system there is no track of who is making changes to the document and who is taking ownership. In DMS, audit trails ensure which document was accessed by whom and what changes were done, making employees more accountable for their acts. It also provides the much needed visibility to the senior management.

Process Consistency: In an organization different departments may have different approval processes, which in a paper based system, only add to the complexity of information drilling and collaboration. However, in DMS these processes are predefined bringing consistency in filing, naming conventions etc.

DMS creates a culture of compliance for recording business information, implements corporate quality control, enforces standards and guidelines, and mitigates risk caused by lost or unsaved documents.

The MetricStream Solution
MetricStream’s automated, enterprise-wide approach to document management provides a central repository to store and organize documents. This web-based module offers integrated collaboration and workflow tools that can be used to access, create, modify, review, and approve documents globally in a controlled manner. Powerful analytics and reporting capabilities rendered through graphical dashboards, allow each document to be tracked from origin to obsolescence. In other words, managers have complete visibility into every aspect of the system no matter how extensive or complex it is.

• Document Storage and Organization
  The solution provides a central repository for storing and organizing all types of documents based on various templates and classification criteria. Association between various documents allows easy cross-referencing and virtual documents and folders enable multi-dimensional logical groupings. Browser based search makes data retrieval fairly simple.
• Creation, Review and Approval
  Tasks for creating, reviewing and approving documents are assigned based on roles and responsibilities along with due dates; email notifications and reminders keep the process on schedule; escalations can be triggered when due dates are not met. Cross-functional teams can work on a document simultaneously. Flexible workflows for various stages in the document lifecycle can be configured and changed dynamically to suit the business requirements.
• Security and Access Controls
  Rights to view, modify, distribute, or print are granted based on roles and user groups; distribution lists can be defined for a document category and check in/check out controls are enforced. The system provides accurate time stamped audit trails with what, who, when and why information for document access, changes and comments. Electronic signatures capability based on robust authentication and authorization infrastructure ensures compliance to regulations.
• Metrics and Reports
  The MetricStream solution provides complete visibility into the system with easy document status tracking. A transparent system with each document traceable from any desktop in the organization makes document management a predictable and efficient process. Graphical executive dashboards and flexible reports with drill-down capability provide statistics and data by a variety of parameters like document types, status, audit history, in-process documents, approval cycle times, document usage summaries, average review times, etc.

Conclusion
The increasingly diverse and intensely competitive environment of modern businesses coupled with a constant demand for accountability has put pressure on companies to increase spending efficiency across the entire enterprise. DMS ROI is an established path to measure the efficiency and effectiveness of your document storage and processing expenses, and offers a novel way to strengthen your competitive position and manage document process. An exhaustive ROI analysis provides a transparent view of the profitability of implementing a DMS and vital insights in negotiating and making right investment decisions.