To maximize ROI, most companies are very focused on revenue-building. Some companies also recognize the value of saving money. And a few companies even have the foresight to operationally support the new business they are trying to generate lest the company crumble under the weight of good fortune. Enterprise Content Management solutions (ECMs) contribute in all three of these ways, but by far the most common reason organizations implement ECMs is cost reduction, and for good reason.
This is the first article in a five-part series, “Moving Beyond Cost Reduction as a Driver for ECM Implementation.”
There’s no doubt about it—ECM implementation is a great way to save money. Here are some of ways ECM systems reduce cost:
- Process efficiencies. ECM implementation creates process efficiencies by eliminating all the wasteful gaps in business processes and by removing the non-value-adding time people are spending. Take a payroll process, for example. Maybe you have a team of 10 doing non-value-added data entry—just a lot of data entry people sitting there tapping away, typically making frequent errors due to the monotony of the work. With an ECM, you can cut 10 FTEs down to two; plus, those two probably won’t be doing data entry anymore. They will be doing more analytical thinking, more problem-solving. Chances are, those two people actually have the skills and the institutional knowledge to create true value for the organization if their roles are elevated beyond non-value-add duties. Even if some retraining is required, training is much less expensive than finding new employees. Cha-ching. Much money saved.
- Better metrics and KPIs. ECMs provide data for decision making. With an ECM, you can tell if your team is being efficient with their time. You can instantly see if there’s someone on the team who is spending time in wasteful ways. When you are responsible for KPIs, you can track the progress of your team and relay better information up the chain of command. Suppose an executive asks, “What am I paying out to my customers?” The response in an organization without an ECM is typically, “I have no idea unless I ask somebody in accounts payable, and it will take them 3 days to put all of this information together into a report for me.” That’s not really good use of anyone’s time, and meanwhile the executive is ill-equipped to make a good, educated decision quickly. That’s money and opportunity lost.
- Contract management. ECM solutions enable organizations to automatically track payment terms, contract amounts, cumulative amounts paid and renewal dates. Equipped with this information, you may decide to renegotiate new contract terms for volume discounts or, on the flip side, lower guaranteed amounts to limit your liability to certain vendors.
- Copying costs. Consider what most organizations have invested in massive copying machines, paper, toner, maintenance, and power to maintain a paper-based document system. Copy machines alone can be upwards of $50,000 to $100,000 each. Even if you lease them, you’re still probably paying $50,000 to $100,000 for only a couple of them. And then factor in the maintenance and supply costs that go along with those machines. By implementing an ECM and digitizing the majority of your processes, your copying costs can go down significantly.
- Storage costs. Companies offering offsite data storage options make a fortune storing and shredding paper! Digitization eliminates this out-of-pocket expense.
- Distribution costs. How much are you spending on faxing, postage, FedEx? Are you still mailing checks and sending contracts out in hard copy? There are a number of ways an ECM can reduce distribution costs as well.
So, back to the issue of ROI. How do you really calculate the ROI on implementing an ECM? For starters, you can calculate the direct cost savings you will achieve across all your business processes by reducing or eliminating FTEs and the other costs listed above. But that’s just a start. In addition to these direct cost savings, you’ll want to also consider the other advantages of ECM that are not directly related to reducing spend. More about that in the next article.
Next in this series: “The Top 5 ECM Advantages That Go Way Beyond Cost Reduction”
Authored by Dale Hopkins