In our work and research the biggest fear of implementing an electronic document management system is usually the cost and what if it does not work for our organization.
Implementing an electronic document management system requires a big budget. What we have to think of at the end of the day is its return on investment.
Cost Based Analysis helps an organization assess the financial and operational cost of implementing an Electronic document management system.
We tend to ignore the return on investment and concentrate on the short term upfront cost.
Many organizations would rather choose a cheaper option vis a vis the Return on Investment (ROI).
“An electronic document management system (EDMS) is a software system used for storing and organizing different types of digital documents in a central repository.”
What if we analyzed the cost versus benefits to see if it is really worth investing in an electronic document management system.This would help define for the decision makers it’s worth within the organization.
How does the internal business landscape work without an electronic document management system (EDMS)?
- Operating with paper documents : All the documentations would be in paper form. There would be a need for printers and copiers for duplication thus more paper production. The need to budget for purchase cartridges and toners and also repairs of the equipment. You have to budget for filing cabinets, files and boxes for paper storage.
- Enough space left for paper storage either within the workspace or a paper storage room allocated.
- Personnel deployed to manage, file and sort paper documents.
- Sharing of the documents externally is done through the use of courier service at an extra cost.
- Time is wasted by sharing the paper documents across departments personally or externally by use of courier service.
- Searching for documents is done manually by the archiving personnel which requires time. Emergency search would be a different ball game.
- Manually logging in and logging out of documents and manually recording in written form.
- Manually classifying and indexing of the paper documents.
- High possibility of each and every department managing their own documents with inconsistencies in their document handling.
- High possibility of not adhering to the retention policy and thus a high possibility of still having documents which have reached their retention period in store. More office space utilized.
- High possibility of having paper documents stored in spaces that can be used for other purposes.
How would an internal business landscape work with an electronic document management in place.
- Communication would go on without the need for paper documents. Sharing of documents is done digitally without the need for staff movement and courier service.
- Minimal or no paper use at all. Eliminates purchase of paper, printers, copiers and their consumables. There would also be no need for equipment repair eliminating these costs.
- All documents are in digital format thus there is no need for space to store paper documents. The available space can be used for other productive uses.
- Classification and indexing are automated, eliminating the need for manual work and increasing efficiency.
- Manual logging in and logging out of documents is also eliminated. This reduces human errors and improves tracking of documents.
- Document search ability is immediate on a need basis and can be done anytime and anywhere.
- Less cluttered environment to work in.
What are the costs of implementing an electronic document management system?
#1. Initial cost of implementing an electronic document management system
a) On premise
- Installation of the EDMS software
- User licenses [Read only, read and edit (write) etc] depend on pricing model
b) On cloud
- Subscription fees
- User licenses [Read only, read and edit (write) etc] depend on pricing model.
c)Hardware costs
- Servers
- Scanners
- Any network or additional infrastructure upgrade to support EDMS.
c) Installation costs
- Installation, configuration, integration and customization of the EDMS fees.
- Cost of migrating existing documents and data into the system.
d) Training costs.
- Cost of training the personnel on use of the new system.
- Cost of change management
#2. Continuous costs of implementing an electronic document management system:
- On cloud : Annual subscription and support services
- On premise: Maintenance, upgrades and support costs
- Continuous training and personnel onboarding costs
- Cost of audit and compliance to ensure the EDMS meets regulatory requirements (data protection).
- Cost of security control measures for example encryption, access controls
What are the benefits of implementing an electronic document management system?
- Cost savings in reduction of document storage space. This includes rent, utilities and maintenance cost.
- Cost savings from printing (either internally or outsourced) and associated costs such as buying paper, toners & cartridges.
- Cost savings in administration costs such as filing, retrieving and archiving documents. Both time and resources.
- Cost savings by automating workflows and eliminating manual tasks thus improving efficiency.
- Cost savings by improved regulatory compliance avoiding fines and penalties.
- Reduced risk of data loss and breaches which can lead to financial consequences.
- Increased income through improved productivity due to faster document retrieval and searchability.
- Improved communication and collaboration through shared access to documents thus quicker decision making.
- Quicker decision making because of organized and properly indexed documentation.
- Flexibility in adapting to new business processes and changes in document management at minimal cost.
- Cost savings in relation to waste management and environmental sustainability.
Costs Benefits Analysis
Cost Benefit Analysis can be calculated by using the break even analysis, or calculating the net benefits or payback period or even calculating the return on investment (ROI)
1. Calculating Net Benefits :
2. Calculating Returns on Investment :
3. Payback period:
This estimates the time it takes to recover the initial investment from the net benefits generated by the Electronic document management system.
4. Break even analysis
Is the point at which the benefits of implementing an electronic document management system starts outweighing the cost.
What are the qualitative gains of an Electronic document management system
Increase in employee morale
This occurs when there is ease of access to documents when required without having to take time off of their productive work. There is also reduced manual search for physical documents.
Increase in customer satisfaction
This is due to improved customer service due to ease of access to information and immediate response to their queries.
Improved company reputation due to improved data management and security practices.
Conclusion
By conducting a thorough cost benefit analysis, An organization can be able to make an informed decision on whether to invest in an electronic document management system.
The organization would also be able to choose a suitable EDMS by analyzing if its features are compatible with the organization’s needs and not rely on the cost of the EDMS to make a purchase.