A Doculabs White Paper - Quantifying ROI for ECM

8/2/2019 A Doculabs White Paper - Quantifying ROI for ECM

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A D o c u l a b s Wh i t e Pa per

Quantifying Return on Investment for

ECM: A Methodology
http://www.doculabs.com/


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2009 Doculabs, 200 West Monroe Street, Suite 2050, Chicago, IL 60606(312) 433-7793 [email protected].

Reproduction in whole or in part without written permission is prohibited.Doculabs is a registered trademark. All other vendor and product names are

assumed to be trade and service marks of their respective companies.
mailto:[email protected]?subject=MOSS%20White%20Papermailto:[email protected]?subject=MOSS%20White%20Paper


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Table of Contents

1. Introduction 1

2.Whats the Best Way to Quantify the Potential Impact 3of ECM within an Organization?

3. Doculabs Methodology 7

4. Sample Business Cases 8

5. Closing Recommendations 10

6. About Doculabs 11


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Introduction

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Given the volumes of unstructured information inorganizations today, it should be easy to make the business

case for technology initiatives that can help get thatinformation under control. Enterprise content management (ECM)technologies and processes are designed to do exactly that: tocapture, manage, archive, and deliver information, both within andoutside organizational boundaries.

It shouldbe easybut its not. Doculabs knows from experience thatorganizations struggle when it comes to effectively quantifying thereturn on investment in ECM. We see many organizations facingsignificant content management challenges, but which nonethelesscant seem to allocate funding for ECM initiatives whether fortargeted projects affecting specific business processes or forinfrastructure initiatives designed for enterprise-wide deployment.

The reasons vary. Sometimes its because IT has too many otherhigh-priority projects on its plate. In other organizations, ECM mayhave a bad track recordfrom projects that either went over budget,or over time, or that achieved adoption rates far lower than the initialprojections.

But many ECM initiatives dont get funded or dont get fast-tracked

for the simple reason that IT cant make the business case for ECM.Too often we see business cases that fail to quantify the hard-dollarreturns, or that suffer from gaps in cost data, or that are based onROI models that are less than complete. Then an already weakbusiness case gets buried in spreadsheets, and ECM gets sidetrackedyet again for lack of executive buy-in.

Let there be no doubt: There is a business case to be made for ECMtechnology.

Consider that 80 percent of the information within an organization isunstructured: word processing files, email, spreadsheets, webcontent, images, graphics, and all the other digital assets that getcreated for use in business processes. In most organizations, fully 90percent of this unstructured information goes unmanaged, andindustry estimates are that this unmanaged information is growing ata rate of 36 percent per year.

Figure 1: Problems Making the Business Case for ECM
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But the picture gets even more complicated. Organizations arebecoming more distributed than they were in the past. As a result of

globalization, cross-continent, cross-culture, multi-language, hyper-collaboration environments will soon be the norm, if they are notalready. Furthermore, the business environment is subject toincreasing regulation, and is also becoming increasingly litigious. Inthe U.S., post-Enron regulatory changes have mandated thatorganizations regard information management as an essential part ofrunning their businesses.

Whether you consider it from a compliance and litigation viewpoint,through a cost-cutting lens, or from a productivity enhancementperspective, ECM technology is an integral component of the ITinfrastructure within an organization.

In the current economic climate, however, its imperative todemonstrate hard returns for any IT initiative, including ECM. Inmany organizations, that also means determining the ranking ofECM relative to other requests for IT spend, in order to prioritizethe order of spend in the area of content and process management.Finally, its absolutely critical to package the message so that theimpact of the ECM initiatives you propose will be clear to executivemanagement. Bottom line: If you cant demonstrate the value of

ECM within 10 minutes in an executive presentation, thechances are the funding will (once again) go to other projectsthat doshow the hard returns.

So how do you make a credible business case for ECMparticularlywhen ECM has to compete with a multitude of other requests for ITdollars?

In this white paper, Doculabs provides the best practices andapproaches you need to justify ECM-related expenditures. We also

present Doculabs Business Case Modeling Framework, a methodicalapproach that we have used to assist organizations in developingECM-specific business cases that demonstrate hard and soft returnsfor executive management. Doculabs has the tools that can help youmake the case for ECM in your own organization.

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To learn more about Doculabs Business CaseModeling FrameworkDoculabs has developed a Business Case ModelingFramework a methodical approach designed toassist organizations in developing ECM-specificbusiness cases that demonstrate hard- and soft-dollarreturns for executive management.To learn more about this service or our other content-

and process-related consulting services, visit the website atwww.doculabs.com, or call(312) 433-7793.


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T

he figure below shows some typical areas of spend for ECM.Note that we break them down by targeted initiatives

ECM projects designed to address specific businessproblems or areas of ECM functionalityversus infrastructureinitiatives, which we consider to be initiatives affecting the entireenterprise.

The significance of the demarcation between targeted initiatives,whether industry-specific or cross-industry, compared toinfrastructure-related initiatives, is that the sources of funding tendto be different. Furthermore, an organizations stage of maturitywithin the ECM lifecycle at a given point in time may dictate which

approach is taken. When putting together a business case, youshould consider your approach based on the organizational culture,

the appetite for spend, the maturity level of ECM, and theenterprises overall familiarity with the potential value that ECM canbring. While an infrastructure investment makes a lot of sense incertain instances, other organizations might find a targeted initiativea more favorable approach, given their funding constraints. In stillother organizations, proving out targeted value might be the firststep toward justification of an infrastructure-related spend for ECM.

A business case should have a specific focus, based on yourorganizations business priorities and its stated corporate businessgoals. So familiarize yourself with the content of the organizationsannual report. Know what your organizations business priorities are,and tailor your business case accordingly.

It will also help to define the type (and level of detail) of data youwill need to gather to support your business case. Also make sureyou know what initiativesboth major and minor, both ECM andnon-ECMare in the IT pipeline. That information will show youwhere ECM may be competing for funding, but it can also show youother initiatives that might potentially benefit from ECM capabilities,where you could tap into the budgets of other active projects.

When putting together the business case for any of these types ofinitiatives, consider the categories of benefits, classes of businesscases, expense category emphasis, and worker types that will beimpacted by your proposed initiative. The subsections on thefollowing pages discuss each of these areas in detail.

Whats the Best Way to Quantify the Potential Impact of ECM within an Organization?

Targeted

Initiatives

Infrast

ructure

Spend

Customer CommunicationsManagement

eDiscovery and Compliance

Contract Management

Other Horizontal Initiatives

Digitization / ProcessAutomation

SharePoint Co-existence

Email Management

Other Industry-specific Initiatives

Enterprise-wide Deployment

Figure 2: Typical Areas of ECM Spend


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Revenue lift:Benefits that help the organization increase revenues.(Example:customer communications technologies that integrate with

LOB systems, allowing for cross-selling and up-selling to existingcustomers)

Risk mitigation/compliance:Benefits that improve theorganizations ability to reduce corporate risk or facilitate its ability tocomply with regulations (Example:records management technologiesthat make it easier to manage discovery-related information in theevent of litigation)

Cost reduction:Benefits that decrease the hard-dollar costs ofbusiness processes (Example:imaging and e-forms technologies toreduce the amount of paper in business processes)

Business continuity:Benefits that improve the organizationsability to ensure that mission-critical functions and services can

continue uninterrupted during and after a disaster. (Example:imagingtechnologies and mirroring of repositories to ensure up-to-datecopies of business-critical documentation and data are maintained ingeographically dispersed locations)

Transformative:For organizations in the public sector, benefits thatallow a government department or agency to provide information toits constituents in a timely and accurate manner. (Example:imagingand e-forms technologies to digitize documentation and enabletimely response to Freedom of Information Act requests)

Benefit Categories

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Ask yourself: Which benefit category (or categories) align most closely with your organizations corporate business goals? Th ese are the benefitsthat are most likely to get the attention of executive management. Evaluate your proposed initiatives by how well they fit your organizations

business priorities, and prioritize and present them accordingly.


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Classes of Business Cases

Top-down vs. Bottom-up:A top-down business case is typically anorganization-wide business case that highlights macro-level ECMbenefits at an enterprise level. These tend to be credible only forhourly wage/variable capacity types of workers, where capacity

planning can be directly affected with even minor efficiency gains.(Example:Making information more easily accessible to customerservice reps in call centers throughout the organization, therebyreducing time required to service calls)

Bottom-up business cases, generally a more credible and moresuccessful approach, tend to be more precise for knowledge workersand also work rather well on the process worker-related activities andtasks, where certain patterns tend to recur in many areas. Not onlycan a particular line of business benefit from a process-level

drilldown, but those same ECM usage patterns can be applied toother processes with similar characteristics. (Example: New AccountOrigination optimization through imaging, e-forms, and workflow,which presents usage patterns similar to Retail Mortgage Processing)

Reallocative:This class of business case focuses on reducing costsfrom one area and allocating the savings to another area. (Example:Suppressing print for customer communications and reallocatingthose savings for modernizing the personalization platform forelectronic customer communications)

Retrospective:The retrospective business case focuses on analysisof a particular event or scenario and demonstrates how the outcomewould have been different if ECM technology were in place.(Example:an instance of litigation discovery, showing the actual costs

of the discovery event and the cost reductions with ECMtechnologies in place)

Embedded:This class of business case focuses on demonstratingthe ability of ECM to enable an existing and already funded initiative,where ECM acts as an enabler for the in-flight effort. (Example:Using the document management and records managementcapability sets of ECM to enable archiving for an ERP initiative thatis already funded and underway)

Reformative:The reformative business case tends to highlight thestructural, business model-related or highly strategic changes thatrequire aspects of ECM in the critical path. (Example:A businessmodel, such as outsourcing, that the organization seeks to pursue,where ECM technologies such as digitization and processautomation are prerequisites for undertaking a distributed sourcingenvironment)

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Next, consider the various classes of business cases. As the examples suggest, there are different circumstances in which each class is appropriate:


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Expense Category Emphasis

Your business case should also take into consideration the category of business expense into whichyour organization is likely to classify your proposed ECM initiative: as a capital expense or as an

operating expense. The reason this is important is that in certain organizations, funding is materiallyeasier in one category over the other, depending on the organizational priorities and macro trendsthat dictate the business climate at the time. Some prefer capital expenses over operational expenses,and others the reverse.

A further factor to consider is how the costs for ECM implementations (both initial and ongoing)are allocated across the business. Its important to consider a fair and equitable allocation of costs toincentivize adoption across the organization. This is in contrast to what typically occurs in mostorganizations, where the first business unit to volunteer for ECM functionality incurs a vast majorityof the initial costs. This inequitable allocation of costs is a disincentive for adoption, and the result isa deployment that gets off to a slow start. A better approach in large infrastructure projects issimultaneous deployment of multiple projects over a longer time period, where IT carries the costs on its books. This approach can then becoupled with chargeback strategies where basic functionality for ECM can be provided for a low cost, and more advanced functionality isprovided with a value-based pricing model from IT to the business.

Finally, as you craft your business case, consider the general type (or types) of worker your proposed ECM initiative is likely to impact.

Process worker:Its easier to calculate costs (and therefore hard-dollar benefits) because benefits

will be measurable in terms of unit costs; its also easier to enforce utilization, because ECM willlikely interface with process workers LOB systems. Yet many process workers dont make full useof the available ECM functionality, which means the investment goes underutilized and the potentialbenefits arent realized.

Knowledge worker:Benefits that impact knowledge workers are more likely to be soft-dollar innature; its difficult to quantify hard-dollar benefits. It can also more difficult to attain end-user

utilization, because ECM tends to be an adjunct to knowledge workers existing applications. Adoption is also a critical hurdle; most knowledgeworkers need to be convinced of the business benefits ECM provides (and they can devise ingenious work-arounds if you fail to convince themof those benefits).

Worker Types


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Doculabs Methodology

Define Criteria:Evaluate existing business processes forpotential benefit from ECM (i.e. revenue lift, risk mitigation/compliance, cost reduction, business continuity), using a set ofdefined criteria. See table on this page for sample criteria.

Prioritize Processes:Assess the potential impact of ECM oneach business process and prioritize processes, using yourdefined evaluation criteria.

Depict the Current State: Create a view of the current process,

applying current-state metrics and facts. Include data specific toyour organization (costs, volumes); supplement with industrybenchmark data in areas where your own data is incomplete.Where possible, also include an analytic/ heuristic model thatshows how other organizations in your industry approach theprocess.

Project the Future State:Develop a view of the desired futurestate with estimates of the improvements enabled by deploymentof ECM technologies. Use industry benchmark data to projectthe costs of the future state.

Quantify the Benefits: For each process, aggregate and analyzethe hard and soft benefits (i.e. revenue lift, risk mitigation/compliance, cost reduction, business continuity).

Communicate and Socialize: Perhaps the most important stepof all, when it comes to obtaining executive buy-in. Develop aneffective communications model and socialize it with theexecutive team. Doculabs recommends developing an interactivevisualization of the business case to communicate the businesscase graphically, in a succinct, easy-to-understand format.

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Criteria Description

Business Priority

Assessment of the level of priority that therequesting business unit has placed on the projectrequest or initiative

Strategic Alignment

Evaluation of how the project request aligns withthe organizations major strategies or stated goals

Magnitude ofPotential Return

The relative level of benefit that can reasonablybe expected to be portrayed by the processanalysis work

Impact of PotentialReturn

The areas of the business that will be impacted ifthe scenarios are automated

Process Complexity

General complexity of the process

Visibility

Identification of how visible the scenario is froman enterprise perspective

Doculabs has developed a Business Case Modeling Frameworka methodical approach designed to assist organizations in developingECM-specific business cases that demonstrate hard- and soft-dollar returns for executive management. Following are the steps:


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Compliance Initiative: E-Discovery ROI Model

Problem: Repetitive and high costs of producing documents forlitigation discovery

Category of Investment:Targeted initiative

Addressable Audience: Legal

Approach for ROI: Retrospective, using organization-specific andindustry data

Key Benefits: Improve management of potentially discoverableinformation and reduce the volume of case-specific discoverableinformation that requires costly legal review

Potential Pitfalls Avoided: In many cases,organizations dontjustify a proactive effort for use of ECM in e-discovery largelybecause they have not yet faced a major and costly litigation. This

business case demonstrates how a few changes in variables in a pastexperience can dramatically change the cost and risk implications foran organization, thereby justifying the use of ECM as part of aproactive approach.

Sample Business Cases

Following are two business cases developed using Doculabs Business Case Modeling Framework, showing examples of interactivevisualizations as a tool for communicating and socializing the business case to executive audiences.

If you would like have Doculabs present the interactive visualizationof this data please [email protected]


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Infrastructure Example: Shared Services ROIModel / System Rationalization

Problem: Inability to achieve high rates of adoption for ECM;

inability to roll out ECM functionality efficiently

Category of Investment: Infrastructure

Addressable Audience:IT and LOB executives

Approach for ROI:Top-down and reformative within IT and froma time-to-deployment perspective

Key Benefits: Improved ability to target ECM functionality to theneeds of different users groups; improved efficiency in rolling out

ECM functionality. This factory-based shared services approachinstills a repeatable process within organizations that can result in 4-to 6-week implementation times.

Potential Pitfalls Avoided: Many organizations invest in ECM, butare unable to rapidly provision applications and achieve broad-basedadoption of ECM. Without a well-defined implementation approachand strategy for ECM, approximately 50% of organizations will incurcost overruns, long times to deployment, and low adoption rates. Ashared services approach dramatically reduces these inefficienciesand can lead to 30 to 40 percent improvements in deployment

efficiency, compared to a one-off implementation approach.

If you would like have Doculabs present the interactive visualizationof this data please [email protected]


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Closing Recommendations

Doculabs has helped many organizations develop businesscases for ECMwith both targeted initiatives and

infrastructure initiatives. As you begin to make the businesscase for your own ECM initiatives, keep the followingrecommendations in mind:

Identify Low-Hanging Fruit:Determine the areas of opportunityfor ECM that have a high probability of potential return. Look at thebenefit categories and determine which ones apply.

Select Modeling Approach:Agree upon the modeling techniqueand combinationsi.e. the top-down vs. bottom-up, reallocative,retrospective, embedded, and reformative models discussed in thiswhite paper.

Leverage Best Practices:Use proven logical models and industrybenchmark data to support your business case, and use visualizationmodels to communicate your business case to executivemanagement.

Use a Hybrid Model:Use your organizations specific data in asmany places as possible and compare to industry averages.

Use a Proven Business Case Modeling Framework:Doculabsprovides consulting services in business case development, using itsBusiness Case Modeling Framework. As you prepare to develop abusiness case, consider the design goals listed to the right to ensuresuccess of the effort.

1. The basis of a credible business case isrelevant, organization-specific data on thecosts, volumes, and other metrics around your

current business processes.

2. Many organizations dont compile thesemetrics; the data simply dont exist. And even ifit does exist, you might not have a relativecomparison of the severity of the issue.Doculabs recommends using a model thatuses not only internal organizational data, butalso industry benchmark data.

3. The data then needs to be applied to theanalytic and heuristic models, with the rightlogic, assumptions, and parameters to helpyou create defensible scenarios todemonstrate how your proposed initiative willprovide quantifiable returns on investment, not

just an enumeration of the soft benefits.

4. The most critical piece of the business case iscalculating an ROI and then communicating it

to executives in sophisticated yet easy-to-understand visual and interactive models. Abusiness case should always be able topresent what-if analysis, showing causes andeffects resulting from changes in assumptions.Finally, a good business case should be simpleenough to review in a few minutes with anexecutive audience, but still display therobustness of the analysis.


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About DoculabsDoculabs, Inc., is a consulting firm that focuses on strategic issues associatedwith content management and related technologies. Founded in 1993,Doculabs recognizes that managing unstructured content is fast becoming amajor business priority.

Doculabs has an established track record in helping its clients developstrategies for bringing content under control. Doculabs understands thetechnologies and the applications at both ends of the content managementspectrum, from the simple to the complex. For more than 10 years, Doculabsconsultants have helped clients identify their specific content managementrequirements and the technology applications of greatest business benefit.Most important, our recommendations are completely objective. BecauseDoculabs does not sell software or integration services, you can be sure that

our content management recommendations will truly meet your specificneeds.

Hundreds of leading organizations within the Fortune 1000, as well as federal,state, and municipal government agencies, have turned to Doculabs forassistance with their content management strategies, including ways to helpthem make effective use of ECM technologies as part of their complianceprograms.

For more information about Doculabs, or for further information on the

Business Case Modeling Framework presented in this document, visit the website atwww.doculabs.comor call (312) 433-7793.

200 West Monroe StreetSuite 2050Chicago, IL 60606

(312) 433-7793www.doculabs.com

E-mail Doculabs at:[email protected]

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A Doculabs White Paper - Quantifying ROI for ECM

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