Handling Paper in a Digital Age: The Impact of Document Management

Handling Paper in a Digital Age

The Impact of Document Management

February 2012

Nathaniel Rowe

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and

represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc.

and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

February, 2012

Handling Paper in a Digital Age: The Impact

of Document Management

The modern world is full of amazing technology, capable of sending

information instantly around the globe at the push of a button. In this

environment, one might think that data bound to physical pieces of paper is

a relic of the past - instead, the opposite is true. Aberdeen's January 2012

survey of 176 organizations worldwide reveals that the volume of

documents and unstructured data is growing by over 30% per year, and

organizations in industries like healthcare, banking, insurance, and the public

sector are struggling to reconcile the worlds of digital and physical data.

Document management solutions are aimed at combating these problems.

Aberdeen's research shows that these solutions offer essential support for

fast, low-cost document processing, and overall data visibility.

Business Context: Pressures of Document Processing

Mortgage applications, insurance claims, tax returns, patient records, grant

submissions, contracts - paper documents such as these surround and

impact our lives. For many businesses, these documents form the backbone

of daily operations, from accepting their submission, to faxing them between

different divisions or business partners, to the various methods of their

handling and processing. Aberdeen's research has observed a continuing

evolution away from paper-based business practices and toward digital files

stored as unstructured data - information in text or image formats that

don't fit neatly in a traditional database. As organizations try to reduce

costs, improve process efficiency and establish compliance with various

government legislation and industry regulations (e.g. SOX, HIPAA, PIPEDA),

digitizing these documents becomes an important first step. The growing

amount of documents and unstructured data presents an additional

challenge for companies trying to use and analyze this underlying

information. Nearly half (49%) of the 176 organizations surveyed reported

their basic business processes rely on some manner of paper documents

and / or digital unstructured data, and over half (51%) of their business data

is stored in these formats.

Effective management of documents and unstructured data is a critical task

for every organization. When asked to identify their top data management

pain points, Aberdeen's survey respondents said that using and processing

documents takes too long (reported by 39% of organizations) and costs

too much (29%), and that the document volume is growing too quickly

(29%).

Organizations can either invest in technology to capture and manage this

unstructured information, or they can continue to rely on traditional,

Research Brief

Aberdeen’s Research Briefs

provide a detailed exploration

of a key finding from a primary

research study, including key

performance indicators, Best-

in-Class insight, and vendor

insight.

"You must have senior

management support for a

document management

initiative. Take plenty of time to

evaluate how each department

uses and processes its

documents - then how the rest

of the company will use and

access them. Trying to do too

much at once may get you in

trouble."

~ IT Staff Member

Mid-sized ($50M - $1B)

North American

Utilities company

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manual operations. As one might expect, companies that adopt these two

strategies report dramatically different performance.

Performance Benefits of Document Management

To examine these solutions' impact on business performance, Aberdeen

divided the pool of responding organizations into two groups: the 119 that

had invested in document management, and the 57 that had not. Companies

in the former category reported superior performance in almost every area,

but especially in metrics concerning time, data visibility and cost.

Improved Speed

One of the main difficulties when handling physical documents is that none

of the computerized tricks and tools for digital information apply. To take

advantage of modern data systems, documents must be converted into

electronic data. This is generally a quick procedure, with the difference

between top performance and poor performance measured by only a few

minutes per page. However, when that gap is multiplied by thousands and

thousands of documents, small differences are greatly magnified.

Once the documents are digitized, they must be managed; unfortunately,

digitized documents are often stored in an unstructured format that can be

difficult to search. As Table 1 shows, organizations with document

management solutions performed the initial capturing phase more quickly,

and through improved classification and categorization of this data could

also search their library of electronic documents faster, to find exactly what

they needed.

Table 1: Better Productivity through Document Management

Performance Metrics Doc. Mgmt

No Doc.

Mgmt

Performance

Benefit

Time to scan / capture one

document

2.2 minutes 3.6 minutes

1.4 minutes

faster

Employee time spent looking

for information (hours per

week)

3 hours 5 hours 2 hours less

Ability to get information

within the timeframe desired

78% of the

time

65% of the

time

13% more

often

Time-to-information,

y-o-y change

17%

reduction

7% reduction

10% more

improvement

Time-to-decision,

y-o-y change

13%

reduction

4% reduction

9% more

improvement

Time spent on document

processing, y-o-y change

11%

reduction

1% reduction

10% more

improvement

Source: Aberdeen Group, January 2012

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Increased Visibility

The value of any piece of data extends beyond the task or purpose to which

it is first assigned. Once a mortgage is processed, for example, it becomes

part of the organization's entire mortgage business. The individual data point

contributes to current and historical trends and patterns for the enterprise.

Decision-makers can only identify these trends, however, if the data was

captured accurately and completely, can be easily discovered, and is

compatible with the enterprises' business intelligence (BI) or analytical tools.

These tools can provide drill-down reporting on performance by division or

employee, predictive tools to forecast future business or customer demand,

and dashboards to present these data points in an easily visualized graphical

format.

As Table 2 shows, organizations with document management systems can

leverage a greater percentage of their business data, and reported the

largest performance gains in data visibility. For more information on how

accuracy and quality of data can impact an organization, see Aberdeen's

February 2011 report,

Turning Pain into Productivity with Master Data

Management.

Table 2: Better Data Visibility through Document Management

Performance Metrics Doc. Mgmt

No Doc.

Mgmt

Performance

Benefit

Amount of data that is

accurate / reliable

81% 73%

8% more

accurate

Amount of data complete

and up-to-date

77% 72%

5% more

complete

Amount of business data

discoverable / searchable,

y-o-y change

19% increase 10% increase

9% more

improvement

Overall visibility into

business data

14% increase 6% increase

8% more

improvement

Source: Aberdeen Group, January 2012

Lower Cost

Since over half of all core business processes involves documents or

unstructured data, it stands to reason that this data is intrinsically linked to a

large portion of an organization's operational expense. Document-specific

costs can be identified in two major areas: in the initial capture phase, and in

remediating errors from document processing.

Document capture includes the employee's time to prepare the paper, the

price of purchasing and maintaining machines to scan the file, and the

software that digitizes, formats, corrects and classifies the resulting image. A

document management solution is a large initial investment, but the true

test of value is how different methods scale over time. Because these low-

maintenance solutions simplify and streamline the document capture

"The cost of NOT doing

document management is

horrendous"

~ Manufacturing Director

Small (<$50 M)

North American

Lumber manufacturer

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process, they allow a higher volume of documents to be processed for the

same cost. Organizations with document management tools spent half as

much per document as those that had not made this investment (Table 3).

Table 3: Lower Cost through Document Management

Performance Metrics Doc. Mgmt

No Doc.

Mgmt

Performance

Benefit

Cost to capture one

document

19 cents 37 cents Spent 49% less

Errors per 1,000 documents

processed

14 20

30% fewer

errors

Document processing cost,

year-over-year change

13%

reduction

3% reduction

10% more

improvement

Document processing errors,

y-o-y change

12%

reduction

4% reduction

8% more

improvement

Overall operational expense

for document processing,

y-o-y change

10%

reduction

2% reduction

8% more

improvement

Source: Aberdeen Group, January 2012

Error rates and remediation form the second part of the cost equation.

Human error is inevitable, and organizations that rely on manual processes

usually see more errors. The accumulation of little problems can have a

great financial impact on an organization. In a best case scenario, the error is

caught and the offending document is corrected and reprocessed, often

doubling the cost of processing the entire case. In a worst case scenario, an

error could ruin a deal with a client or customer, lose a sale, result in a bad

business decision, or cause an organization to be penalized with fines or

non-compliance fees. Due to the range of possible fiscal penalties, it can be

difficult to assign hard numbers to error remediation, but the direct link

remains: more errors produce more cost.

Organizations with document management systems reported 30% fewer

errors than their competitors, and also showed a 12% reduction in errors

over the past twelve months. This contributed to their 10% reduction in

overall operational expense for document processing in the past year. A

further evaluation of the potential savings of these solutions will be

presented later in this document.

Roadmap to Success: Collaborate and Automate

Improving document processing across an entire organization is no easy

task, and no single solution will solve every problem. As repeatedly

confirmed by Aberdeen's research, a proper document management

initiative must be supported by additional hardware, technologies and

policies to ensure the best performance.

"Document management

success comes when you can

see the big picture, and

visualize the end result. Keep

the final goal in mind even

when you tackle simple,

immediate needs. Also, finding

a good way to identify and deal

with revisions of documents

that have a many to one

relationship is key to a

successful implementation."

~ Customer Service Staff

Small (<$50 M)

North American

IT services company

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These contributing steps fall into two main groups, which spring from the

top strategic actions organizations are taking to address their problems with

documents and unstructured data:

• Collaborate. Forty percent (40%) of all organizations reported their

top action was to broaden collaborative access to documents across

all departments and functions.

• Automate. Thirty percent (30%) of all organizations reported their

top action was to implement or improve the automation of their

document processing.

Collaborate

The division of data into distinct silos, owned by a different departments or

groups, is a major obstacle to data management. In global organizations,

silos often use incompatible systems and store data in different languages or

formats. Getting information from a different part of the company can be a

time-consuming, frustrating, thankless task. Even in smaller organizations,

when data is kept apart, visibility into basic operations is reduced, and

employee productivity suffers.

Aberdeen's research over the past several years has shown a growing trend

toward a more open, collaborative approach to data. Data sharing comes in

a variety of shapes and sizes, and a truly comprehensive collaboration plan

often includes everything from instant messaging, presence information, live

meetings, streaming video, voice and telephony capabilities, fax and

document sharing portals. The December 2011 report on

Business

Optimization through Integrated Communications: In the SoMoClo™ (Social

Mobile Cloud) Era examines this in more detail, but the basic premise

remains the same: when data is shared easily, the business benefits.

This philosophy extends outside the firewall to an organization's clients,

customers and partners. Allowing others to submit data in a format that can

be easily identified and processed improves productivity, and customer /

client satisfaction. Business partnerships also benefit from easy and secure

data exchange, as discussed in

Data Quality and the Supply Chain: The Benefits

of MDM and Portals (October 2011).

Automate

Organizations with document management solutions were much more likely

to have automated at least part of their document processing cycle. The

performance benefits cited above are directly related to the fact that 60% of

these organizations automated at least half of their document processing.

Eighty percent (80%) of organizations without document management, on

the other hand, indicated that their document processing was almost

entirely manual. Technologies that automatically capture, share, transmit, or

format documents, or eliminate manual elements of the processing cycle,

are powerful enablers for organizations.

"Our current state of manual

processing is extremely

cumbersome. It requires a

significant amount of redundant

data capture, and there is no

ability to manage data in real

time"

~ IT Manager

Mid-sized ($50M - $1B)

North American

Gov't / Public Sector

organization

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It is important to prioritize document solutions based on the company's

overall maturity. The following solutions are separated into baseline

technologies that provide a solid foundation for document handling, and

high-impact enablers that organizations with document management use to

set themselves apart from the pack.

Figure 1: Baseline Technologies for Document Processing

Source: Aberdeen Group, January 2012

As Figure 1 shows, the above technologies have high adoption rates by

organizations with mature document management initiatives, but also have

also been picked up by some companies without document management.

The top priorities for organizations investing in improving their document

processing should include document scanners and document capture

software, to enable fast, scalable data capture. Optical Character

Recognition (OCR) allows a computer to identify text within an image file

(like a scanned document), and transform the picture to a digital text file.

Since text files are easier to search, analyze, and tag with metadata and

descriptions, this can greatly aid in managing unstructured data. Integrating a

document processing system with Simple Mail Transfer Protocol (SMTP)

allows the system to send and receive email, linking it to the most common

form of digital communication. Finally, internal web portals and other

collaboration tools enable document sharing across departments, while

supporting better security, audit trails, and version control.

For organizations that have already adopted these tools and are looking for

competitive differentiation, Figure 2 shows the technologies more likely to

be used by companies with document management systems - the same

companies that reported the better performance seen above.

"Despite being a very large

company, our current

document and content

management systems are

limited to different functional

groups. I believe that a unified

corporate approach is better

and would yield improved

cross-functional sharing and

decision-making.

~ Quality Management Staff

Member

Large (>$1B)

North American

Aerospace / Defense

organization

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Figure 2: High Impact Technologies for Document Processing

Source: Aberdeen Group, January 2012

Organizations with document management have invested in each of these

tools at much higher rates than other organizations - up to 21 times the

adoption rate in one case. External web portals extend collaboration to

customers and business partners. Integrating documents with enterprise

applications and Enterprise Content Management (ECM) systems

requires a high level, enterprise-wide approach to managing unstructured

data. Popular applications like Enterprise Resource Planning (ERP),

Customer Relationship Management (CRM) and supply chain tools can

increase in reach, accuracy and utility by incorporating new data sources.

ECM systems often contain all of the features of document management

systems, as well as support for other types of unstructured data, often with

a single interface for access and management. Business process

automation tools, integrated with collaborative systems and document

management, can also improve speed and reliability. Finally, Fax-over-

Internet-Protocol (FoIP) improves upon this traditional method of

remote document transmission by reducing transmission costs and adding

features like fax routing and information rights management.

The ROI for Document Management

Return on Investment (ROI) provides the most concrete example of the

importance of document management solutions. Although ROI varies

greatly based on each organization's needs, budget and priorities,

Aberdeen's research allows us to examine the fiscal impact on an average

company. For this exercise, Aberdeen will examine particularly document-

centric industry segments, and establish a baseline from 36 organizations in

banking and financial services, healthcare, and government / public sector.

According to the data, an average company in these document-heavy

industries company fits the following profile:

"Content management has a

very broad and far-reaching

impact across our organization,

which made the initial

identification of a solution

difficult. Additionally, for such a

simple and high-value tool,

communicating the value of the

technology proved to be

challenging and required

significant vendor support"

~ IT Staff

Large (>$1B) European

Medical Device Manufacturer

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• They have nearly one petabyte of business data (925 terabytes), 45%

of which is comprised of documents or other unstructured data

(416 terabytes).

• This data is growing at a rate of over 31% every year. If the growth

rate holds steady, this organization will be dealing with 1.6 petabytes

of unstructured data in less than five years.

• Almost half (46%) their core business processes rely on

unstructured data, but only 77% of this information can be classified

as accurate, complete or reliable. This example organization

struggles with data quality and unstructured data.

• They might have invested in document capture software (only 63%

of this group have done so), but if they haven't, they certainly plan

to. Nine-three percent of the remaining organizations want to

invest within the next two years.

• They don't know how much their business could improve. A scant

8% of all organizations have developed an ROI for these tools.

• Employees at this company process 35 mortgages, loans, or claims

per month.

• Those dedicated to closing cases handle an average of 70 per

month.

• The company as a whole handles 1.5 million cases a year.

• The scanning or capture of a single document costs 19 cents and

takes over 4 minutes.

• For every 1,000 documents they process, they experience 22

errors.

This provides a baseline cost for document capture and processing, and the

potential cost savings of investing in improved performance. As Table 4

shows below, given the cost per document and the amount of total cases

processed per year, our average organization spends over $285,000 just on

the initial form capturing. By comparison, over two-thirds (67%) of

organizations with document management reported a cost-per-document-

captured rate of under 8 cents. Reaching this level of performance would

save this sample company over $135,000 dollars per year.

Reducing the error rate has a similar impact on a bottom line. According to

Aberdeen's research, completely capturing all the documents in a new

submission cost $3.37. Since not every document needs rescanning, we can

round down to an estimated $3.00 to find and correct an error and re-

process the affected documents (ignoring additional fees, penalties and lost

business). Using this assumption, the average organization loses almost one

million dollars a year due to errors. Again, comparing this average company

with the rest of the field reveals that 60% of all organizations with document

management systems reported error rates of less than 10 per thousand.

Improving to this level of performance leads to potential savings of over

half a million dollars per year.

"Document management will

require continuous

improvement to automate

work flow and expedite

document processing. The end

result should be based on clear

and unambiguous requirements.

Additionally, a phased approach

is the best method, not a big-

bang approach expecting to

capture all requirements in the

first implementation"

~ Manager of Quality Mgmt

Large (>$1B) European

Pharmaceutical manufacturer

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Table 4: The Potential ROI of Improving Document Management

Annual Costs

Average Company

(n = 36)

Top Performance

(n = 140)

Potential

Savings

Cost of document capture

19 cents per document 8 cents per document

$135,000 per

year

1.5 million documents 1.5 million documents

$285,000 total $120,000 total

Error remediation for document

processing

22 errors per 1,000 10 errors per 1,000

$540,000 per

year

330,000 total errors 150,000 total errors

$3.00 to fix an error $3.00 to fix an error

$990,000 total $450,000 total

Time spent on document capture

4.1 minutes per document 45 seconds per document

$2.5 million

per year

102,500 man hours per year 18,750 man hours per year

51 full time employees 9.4 full time employees

$3 million in total salary /

benefits

$564,000 in total salary /

benefits

Total Potential Annual Savings: $3,175,000

Source: Aberdeen Group, January 2012

Time is money, and no trivial amount of time is spent on document capture

and processing. Document management can reduce the cost of maintaining

full-time equivalent (FTE) employees that perform document capture tasks.

Given the average time per document, and using current published salary

information to form a rough estimate of $60,000 per employee (including

salary and benefits), our sample organization spends over $3 million a year

on its document processing workforce. However, 48% percent of all

organizations with document management systems reported capture times

of less than 45 seconds. If the average company improved their speed to this

level and reduced the total number of employees accordingly, the savings

could easily be more than $2.5 million dollars a year. Alternatively,

those 40 extra employees could be reassigned to other high-priority tasks,

or all 51original employees could be retained, now with more time to

process a much higher volume of work.

This basic framework shows a potential total ROI of over $3 million per

year as a result of improving document management to the levels of top

performers. It can serve as a shorthand projection for any company by

substituting actual values for the assumptions and averages stated above. If

these numbers aren't convincing enough, consider the following:

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Organizations in these document-centric industries have been trying to

improve their ability to manage larger workloads. In fact, they increased

their capacity and overall volume of mortgages and grants processed by 6%

over last year.

However, their overall data volume grew at over five times that rate.

Summary and Key Takeaways

Organizations struggle with unstructured data resulting from hardcopy

forms. This problem will only worsen as data volumes continue to expand.

To tackle these issues, organizations should consider the following:

• Invest in a document management solution. Organizations

with these tools vastly outperformed their peers in the time spent

on document processing, data visibility, and most importantly,

overall cost.

• Automate. Build a foundation for sustained success by investing in

baseline hardware and software to reduce manual efforts and

streamline the capture and management of documents. As data

scales up, automated tools like document capture software and

OCR will be the only way to improve a company's performance at

the same rate.

• Collaborate. Foster a mindset of sharing information among your

employees. Invest in web portals and tools to provide a centralized,

authoritative location to find the most up-to-date documents. Then

take these tools and extend them to your clients, customers and

business partners.

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For more information on this or other research topics, please visit

www.aberdeen.com

Related Research

Business Optimization through Unified

Communications: In the SoMoClo™

(Social Mobile Cloud) Era; December

2011

Data Quality and the Supply Chain: The

Benefits of MDM and Portals; October

2011

Invoicing and Workflow: Integrating

Process Automation to Enhance

Operational Performance; May 2011

Turning Pain into Productivity with Master

Data Management; February 2011

Author: Nathaniel Rowe, Senior Research Associate, Information Lifecycle

Management, (nathaniel.rowe@aberdeen.com)

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This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies

provide for objective fact-based research and represent the best analysis available at the time of publication. Unless

otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be

reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by

Aberdeen Group, Inc. (2011a)