When you are building a business case to invest in purchasing or expanding
an ECM system, determining your organization’s return on investment (ROI)
essential to securing funding. Calculating ROI is an exercise that helps you identify and quantify the business value you will gain from investing
in ECM, but many organizations struggle to find an accurate methodology for calculating ROI
Estimate current document handling and storage costs.
For each cost factor, find out how much is currently spent on a monthly basis. The example below is for a relatively small office, with only 10 employees
that handle paper documents. Expand and adjust accordingly for your unit.
Estimate the impact of a document management system on your operations. For each cost item, estimate how much of a reduction can be expected as a result
of implementing ECM. Think realistically about the effect the new system will have on the enterprise operations. Build sensitivity analysis into calculations
through the use of best-case and worst-case scenarios for various factors. The values below are simply suggestions.
Multiply the savings (percentages) by your initial cost factors.
This provides a best- and worst-case scenario of the monthly savings that your unit will realize as a result of more efficient content management.
Outline the costs associated with ECM.
These costs will vary significantly from department to department, especially in the area of conversion expenses (i.e. document imaging required to convert
paper documents into digital files).
The return on investment should be the net annualized document handling
savings divided by the total ECM costs, as a percentage. Using best- and worst-case
scenarios should enable managers to arrive at a high and low estimate for the ROI.
List additional savings and benefits gleaned from ECM.
The ROI calculations above only take into account acutely measurable benefits. Consider as well the following categories when making a business case in
support of ECM. If any of the items below can be quantified, they should certainly be added to the calculations above.
- Regulatory compliance. An ECM system may be less of a choice, and more a requirement. Regulations such as HIPAA enforce guidelines for document retention
and retrieval in public entities.
- Communication and collaboration. More readily available documents improve collaboration and idea-sharing among employees.
- Project management. Better access to information can shorten cycle times for projects and improve teamwork.
- Security and access control. Digitization of information allows a greater degree of control and monitoring of access to sensitive information.
- Disaster recovery planning. Computer archives can be easily backed up or sent to off-site locations. Digitized data is much less likely to be lost
- Consolidation of information. A central information repository makes it easier to access information, reduces error rates and multiple copies, allows
easier version control and better serves clients because all client information is in one place.
- Reduced carbon footprint. The amount of paper wasted by an enterprise can be significantly reduced when using digital documents instead of paper. This
not only saves on excessive cost, it also optimizes workflow.