edrms business cases - icognition.com.au · icognition pty ltd edrms business cases (long form)...

ICOGNITION PTY LTD

EDRMS Business Cases (long form)

Records Management, Business-specific and

Enterprise Information Implementations

Nigel Carruthers-Taylor, Principal Consultant, iCognition Pty Ltd

2/1/2010

Abstract: This long form white paper conducts a comprehensive cost-benefit analysis of three

implementation options for Electronic Document and Records Management Systems (EDRMS):

Records Management, Business-specific, and Enterprise Information Implementations. A short form

version of this paper is also available. It outlines the business case for each option and determines in

what circumstances each option would be considered. The EDRMS business cases are compared to a

‘Do Nothing’ option. In the example used in this analysis, of an organisation of 500 staff and using

the assumptions detailed in this paper, a pure cost-benefit analysis approach shows the Enterprise

Information implementation is ahead by an order of magnitude over the next best option. The

Enterprise Information option further consolidates its lead when taking into account the non-

quantifiable benefits. This must be tempered by the change management effort of transitioning the

organisation to predominately EDRMS usage and limited access to other repositories, which can be

significant. The results can also be influenced by key business drivers that can heavily influence the

non-quantifiable benefits and justify other implementation options. Thanks to Dave Mitchell, Greg

O’Shea, Duncan Jamieson and Melanie Rogers for feedback and advice in developing this paper.

EDRMS Business Cases (long form) 2010

EDRMS Business Cases (long form) © iCognition Pty Ltd.

Contents Executive Summary ................................................................................................................................. 3

Business Case Options ........................................................................................................................ 3

Options Comparison ........................................................................................................................... 3

Conclusion ........................................................................................................................................... 4

About the Author ................................................................................................................................ 5

EDRMS Business Cases ............................................................................................................................ 6

1. Purpose ....................................................................................................................................... 6

2. Business Case Options ................................................................................................................ 6

3. Costs and Benefit Summary ........................................................................................................ 6

3.1. Costs .................................................................................................................................... 6

3.2. Benefits ............................................................................................................................... 7

4. Options Analysis .......................................................................................................................... 8

4.1. Option 0: ‘Do Nothing’ ........................................................................................................ 8

4.2. Option 1: Records Management Implementation ............................................................ 10

4.3. Option 2: Business-specific Implementation .................................................................... 13

4.4. Option 3: Enterprise Information Implementation .......................................................... 16

5. Conclusion ................................................................................................................................. 19

Appendix A: Costs and Benefits Details ................................................................................................ 21

Costs .............................................................................................................................................. 21

Benefits ......................................................................................................................................... 22

Appendix B: Notes on Cost-Benefit Analysis Method ........................................................................... 25



Executive Summary

Business Case Options

This paper will discuss three business case options for Electronic Document and Records

Management Systems (EDRMS), as well as a ‘Do Nothing’ option. The options are:

0. Do Nothing: an EDRMS is not implemented, but efficiencies are applied to existing business

processes.

1. Records Management implementations: where the implementation is enterprise-wide and

users are directed via a policy on when and how to capture corporate records to the EDRMS.

2. Business-specific implementations: where implementation(s) occur within particular

business units or to meet a specific business process requirements (e.g. Ministerial or claims

processing).

3. Enterprise Information implementations: where the EDRMS is implemented across the

entire organisation such that all, or the majority, of documents are captured to the solution,

regardless of their status in the document lifecycle.

The paper broadly compares quantifiable and non-quantifiable costs and benefits for each option in

a five year Total Cost of Ownership (TCO) model for an organisation of 500 staff.

Options Comparison

Option 0: ‘Do Nothing’

The ‘Do Nothing’ option is to not implement an EDRMS in any form, but to increase the efficiency of

existing business processes through continuous business efficiency improvements, better policy

development, marketing and communication of the policy, and improved information storage

arrangements.

The findings of a quantifiable analysis for this option show that the Net Present Value (NPV)1 is

considerably negative at -$1.2M. This is mainly due to the ongoing growth of onsite and offsite

storage, and the productivity cost of increased search and retrieval times.

Option 1: Records Management Implementation

This option is currently the most common form of implementation in Australia. Typically users are

allowed to continue existing business processes and use existing information stores, but EDRMS

document registration steps are established when ‘finalising’, approving, emailing or archiving

documents, or creating key or vital records.

The quantifiable analysis for this option shows that the NPV is slightly positive with a benefit to cost

ratio of 1.09. This indicates that the project is ‘line ball’ purely on quantifiable terms, and the non-

quantifiable benefits such as business efficiencies and compliance issues are key to ensuring that this

type of implementation has a strong business case.

1 Net Present Value (NPV) is the sum of the values of the individual cash flows (benefits less costs), discounted to reflect

the time value of money and other factors such as investment risk. It is a standard method for using the time value of

money to appraise long-term projects. Refer Appendix B for more detail.



Option 2: Business-specific Implementation

This option is common in private industry organisations where a particular cost centre or business

process (e.g. claims or investment processes) is targeted for the implementation. In Government this

type of implementation is common for Ministerial or Executive Correspondence management

systems.

The cost/benefit of this option will depend on the extent of the implementation to be achieved. In

the example provided in this paper, of a business process implementation that covers 40% of the

organisation, the result shows that the solution achieves a negative NPV of -$309,000. This is

because the cost investment is high for the limited scope of the implementation. Therefore, this

option should only be considered where the business process or business unit has a strong non-

quantifiable business case based on improved client service, including faster and more effective

responses to key stakeholders or clients.

Option 3: Enterprise Information Implementation

This option is emerging in Government and captures all or most documents upon the point of

creation directly into the EDRMS. This can include all incoming and outgoing emails. Very few staff

are exempt from this type of solution, and in this way 100% utilisation (or close to 100%) is achieved.

The quantifiable analysis for this option shows that a NPV of $2.4 M is achievable, mainly due to a

significant increase in productivity savings, where search and retrieval times are reduced2. This result

includes the additional change management cost of moving to this type of solution. With nearly

100% usage of the solution, the non-quantifiable savings are also significant, including a significant

reduction in compliance risks. There is also the potential for reduced IT data storage costs over time,

and the ability to make significant steps toward a ‘Green IT’ certification if other technologies such

as virtualisation are included3.

Conclusion

In the example used in this analysis, of an organisation of 500 staff and using the assumptions

detailed in this paper, a pure cost-benefit analysis approach shows the Enterprise Information

implementation is ahead by an order of magnitude lead over the next best option. This is shown in

the summary table below.

Option Net Present Value

Benefit/Cost Ratio

Internal Rate of Return

OPTION 0: Do Nothing -$1,009,000 (2.80) -

OPTION 1: Records Management Implementation $184,000 1.09 0.14

OPTION 2: Business-specific Implementation -$309,000 0.78 (0.16)

OPTION 3: Enterprise Information Implementation $2,437,000 2.00 1.66

The Enterprise Information option further consolidates its lead when taking into account the non-

quantifiable benefits, despite the change management effort of transitioning the organisation to the

new solution.

2 Refer Option 3 Benefits, p17 for details

3 Refer Option 3 Benefits, p19 for details



This result can be influenced by key business drivers that can heavily influence the non-quantifiable

benefits. For example:

1. For large (>5000 staff), very large or disparate organisations, the Records Management or

Business-specific implementations are more likely to have a stronger business case, as the

logistical effort required in transitioning a large organisation to an Enterprise Information

implementation is likely to be substantial.

2. For high value business processes or business units, a Business-specific implementation can

achieve cost neutral or marginally negative quantifiable cost-benefit results. In these cases

the business efficiencies, client service and compliance non-quantifiable benefits must exert

a strong influence on the business case.

3. Combinations of Enterprise Information, Records Management or Business-specific

implementations may also be appropriate for large, very large, or disparate organisations.

About the Author

Nigel Carruthers-Taylor is Principal Consultant and Director of iCognition, a company that provides

advice, implementation services and solution designs to organisations seeking enterprise

Information Management (IM) outcomes. Nigel has over 15 years experience in IM and helps

organisations develop IM Strategic Plans, define solution requirements, and design and implement

IM solutions such as Electronic Document and Records Management Systems and Collaborative

Portals.

He has developed a number of business cases, including detailed cost-benefit analyses, for a variety

of organisations, including NSW Department of Education and Training, Department of Foreign

Affairs and Trade, and Department of Environment and Heritage. Nigel has also been a project

director, project manager, solution architect and business analyst on a variety of EDRMS

implementations. He regularly gives presentations at national and local conferences and events.



EDRMS Business Cases

1. Purpose

This white paper aims to conduct a comprehensive cost-benefit analysis of various implementation

options for Electronic Document and Records Management Systems (EDRMS). It outlines the

business case for each option and determines in what circumstances each option would be

considered. The EDRMS business cases are compared to a ‘Do Nothing’ option.

2. Business Case Options

This paper will discuss three business case options for EDRMS and a ‘Do Nothing’ option:

0. Do Nothing: an EDRMS is not implemented in any form, but increases in efficiency of

existing business processes are implemented through continuous business efficiency

improvements, better policy development, marketing and communication of the policy, and

improved information storage arrangements.

1. Records Management implementations: the implementation is enterprise-wide and users

are directed via a policy on when and how to capture corporate records to the EDRMS.

Typically this involves allowing users to continue existing business processes and use legacy

information stores (e.g. network drives), but adding document registration steps to the

process when ‘finalising’, approving, emailing or archiving documents.

2. Business-specific implementations: where one or more implementation(s) occur that are

aimed at achieving discrete high value business unit or business process specific outcomes.

For example an EDRMS implementation in a particular division or branch, or an

implementation to meet the requirements of a particular business process, such as a

Ministerial, Executive Correspondence, claims management or insurance process.

3. Enterprise Information implementations: where the EDRMS is implemented across the

entire organisation such that all, or the majority, of documents are captured to the solution,

regardless of their status in the document lifecycle. In these implementations access to

network and personal drives is either removed or restricted, and/or existing document

repositories (e.g. SharePoint libraries or line-of-business system stores) are replaced by the

EDRMS repository.

3. Costs and Benefit Summary

This paper broadly compares quantifiable and non-quantifiable costs and benefits in a five year Total

Cost of Ownership (TCO) model for an organisation of 500 staff. Appendix A: Costs and Benefits

Details provides more detail on the costs and benefits derived for the analysis, including references

where appropriate. Appendix B provides details on the cost-benefit analysis methodology applied.

3.1. Costs

The cost-benefit model uses the following quantifiable costs:

� Software licence and maintenance costs derived from an EDRMS market test conducted in

2008, as well as general research on indicative costs in late 2009. Includes scanning

software.



� Hardware costs include operating systems and assuming a centralised solution. Also

includes document scanners.

� Database costs assume Microsoft SQL in a centralised implementation.

� Third party implementer costs to analyse, install, configure and implement the solution to

the requirements of the organisation.

� Migration costs have been excluded, except for the Enterprise Information Implementation

Option which requires all documents to be moved across to the EDRMS. In other options it is

assumed that the users will selectively migrate relevant documents into the EDRMS using

the tools provided by the EDRMS.

� Training costs train-the-trainer training from the vendor is assumed, followed by end-user

training by the internal project team using an on-site training facility.

� Ongoing Support Costs – vendor is the cost of the vendor to support the solution beyond

the initial implementation.

� Ongoing Support Costs – MS SQL Data Base Administrator (DBA) contractor to ensure the

database performance meets requirements.

� Internal Project Team is the cost of the internal project team to manage the project and

transition the organisation to solution use.

� Travel and Living is the cost of travelling to and from sites for the variety of activities that

will be required to be undertaken during implementation and support.

� Other (e.g. incidental software and utilities).

In this model a 10% risk and contingency factor has been added to take account of either

implementation risks or forgotten tasks that vary during implementations.

A number of costs have been purposely excluded for the purposes of this evaluation including,

system selection and scoping studies. Data migration has also been excluded, other than network

drive migration for Option 3, the Enterprise Information Implementation Option. It is assumed that

in the other options the users will migrate the required documents to the system themselves. Refer

to Appendix A for further detail on exclusions.

3.2. Benefits

Quantifiable Benefits

The following benefits or savings have been quantified:

• Hardcopy file storage savings are measured in offsite or outsourced storage costs, as well as

the cost of storing files onsite.

• Printing savings are calculated on a per page printed cost, which is the average cost per

page of consumables such as paper and printer cartridges, printer replacement over time,

and printer installation and administration.

• Productivity savings: Productivity savings are calculated on the average time lost per day in

searching for the correct information, measured against average salaries4. It is difficult to

quantify these productivity savings, as results are often interpreted as unavoidable staffing

operational costs. However, it is valid to measure productivity savings in terms of time spent

4 Derived from an EDRMS Survey on Information Usage that was conducted in 2008 in a NSW Government agency



against average salaries, resulting in an effectiveness or productivity saving. Both the

Commonwealth and the NSW Governments5 state that the use of these types of benefits is

encouraged in a cost-benefit analysis of options.

Non-Quantifiable Benefits

The following non-quantifiable benefits have been identified:

1. Improved service delivery: the productivity benefits of searching and finding information

quicker will have a multiplier effect in better service delivery and information re-use. The

correct and authoritative information can be quickly found and delivered to the key

stakeholders, such as a Minister, Executives, external parties or to a review/legal/audit

process, resulting in better client satisfaction. Additionally, the quality and accuracy of

information generated and reported will increase, the speed of service delivery will increase

over time, and there will be fewer barriers to knowledge retention resulting in consistency in

service delivery.

2. Compliance risk reduction: Use of an EDRMS considerably reduces the risk of non-

compliance to legislative, legal, governance, or accountability requirements. An EDRMS

reduces the overall the risk to the organisation of not managing its information effectively.

These risks include:

• inability to fully satisfy evidential requirements, legal discovery orders, or explain certain

decisions to stakeholders.

• inability to fully satisfy FOI requirements, Parliamentary and Ministerial correspondence,

compliance audits, and other inquiries or reviews; and

• lack of accountability of officers and ability to prove appropriate governance.

3. Reduction of filing time: A reduction of time to file documents, given that the majority will

be filed electronically, will be achieved with an EDRMS.

4. Reduction of hardcopy file ‘wait times’: Time is spent by each employee waiting for files to

be delivered for action. This time is not easily quantifiable, but a small increase in

productivity can be expected with an EDRMS.

5. Platform for innovation: Procuring an EDRMS provides a path to innovation where

knowledge sharing and other productivity efficiencies can be leveraged from the EDRMS

infrastructure over time. This includes integration with other line-of-business systems to

achieve a single authoritative repository of information, automation of processes via

workflow, improved collaboration capabilities, and automated content publication.

4. Options Analysis

4.1. Option 0: ‘Do Nothing’

The ‘Do Nothing’ option is to not implement an EDRMS in any form, but to increase the efficiency of

existing business processes through continuous business efficiency improvements, better policy

development, marketing and communication of the policy, and improved information storage

arrangements.

5 Commonwealth of Australia (Department of Finance and Administration), January 2006, Handbook of Cost-Benefit

Analysis, p46 and NSW Treasury, July 2007, NSW Government Guidelines for Economic Appraisal, p73



The business efficiency improvements are costed as several consulting jobs and internal staffing

costs, estimated at $100,000 over the five years. The cost of the policy developments and marketing

are expected to be around $70,000 in Year 1 in internal staffing costs (e.g. records or information

manager and associated staff), and $10,000 each year after that. Improved hardcopy storage

arrangements are also estimated at $100,000 over the five years, consisting of equipment, internal

staff costs, and project costs.

A full detailed analysis of the current situation is required to understand the opportunity cost of

doing nothing in the organisation. This analysis would include the rate that hardcopy storage is

growing, and the increased difficulty in finding and retrieving information efficiently.

Even with the ‘Do Nothing’ efficiency improvements it would be reasonably expected that the key

benefits or savings would have a negative effect over time. Both on-site and off-site hardcopy

storage would be expected to continue to grow despite sentencing and disposal, printing costs are

likely to marginally increase as information demands grow, and productivity efficiencies will degrade

over time. The following table provides an estimate of this negative effect, shown as negative

percentage reductions because of the continued growth in these areas.

Savings Year 1 Year 2 Year 3 Year 4 Year 5 Total

Reduction percent -5% -5% -10% -10% -15%

Reduction in Offsite Storage Cost -$4,500 -$4,500 -$9,000 -$9,000 -$13,500 -$40,500

Reduction percent -5% -5% -5% -5% -5%

Reduction in Printing costs* -$18,270 -$18,270 -$18,270 -$18,270 -$18,270 -$91,350

Total -$22,770 -$22,770 -$27,270 -$27,270 -$31,770 -$131,850

Productivity and Efficiency Savings Year 1 Year 2 Year 3 Year 4 Year 5 Total

Reduction percent 0% -2% -3% -5% -5%

Reduction in Onsite Storage Cost $0 -$4,200 -$6,300 -$10,500 -$10,500 -$31,500

Achievable target -5% -5% -10% -10% -15%

Staff Efficiency Productivity Benefits -$85,767 -$85,767 -$171,535 -

$171,535 -

$257,302 -$771,905

Total -$85,767 -$89,967 -$177,835 -

$182,035 -

$267,802 -$803,405

As a result of this quantifiable analysis, the following five year TCO cost-benefit can be derived using

a discount rate of 7%. The analysis shows that the Net Present Value is considerably negative with a

Benefit/Cost ratio of -2.8. This is mainly due to the ongoing growth of onsite and offsite storage, and

the productivity cost of increased search and retrieval times.

Item Total ‘000

Capital $150

Recurrent $160

TOTAL COSTS $310

Benefits / Savings -$938

NET COST/BENEFIT -$1,248

NPV -$1,009

Benefit/Cost Ratio (2.80)



4.2. Option 1: Records Management Implementation

This option is currently the most common form of implementation in Australia. The EDRMS is

implemented enterprise-wide and users are directed via a policy on when and how to capture

corporate records to the EDRMS. Typically users are allowed to continue existing business processes

and use existing information stores such as network drives, SharePoint libraries, and line-of-business

document stores. However, EDRMS document registration steps are established when ‘finalising’,

approving, emailing or archiving documents, or creating key or vital records.

Cost

The following cost has been attributed to this option. In this model EDRMS and database licences are

required for the entire organisation, scanning software and hardware has been introduced, and new

EDRMS, database and event servers have been installed. A third party implementer has been

chosen, an internal project team established, and costs have been allocated for ongoing support of

the solution for the five year period.

Item Year 1 ‘000

Year 2 ‘000

Year 3 ‘000

Year 4 ‘000

Year 5

‘000

Total ‘000

Software Licences $375 $375

Software Maintenance Costs $75 $75 $75 $75 $75 $375

Scanning Software $22 $2 $2 $2 $2 $30

Scanning Hardware $15 $1 $1 $1 $1 $19

Hardware Costs $50 $5 $5 $5 $5 $70

Database Costs $97 $16 $16 $16 $16 $161

Third Party Implementer Costs $150 $50 $50 $0 $0 $250

Migration Costs $0 $0 $0 $0 $0 $0

Vendor Training Costs $40 $10 $6 $0 $0 $56

Ongoing Support Costs - vendor $20 $20 $20 $20 $80

Ongoing Support Costs - DBA contractor $36 $18 $18 $18 $18 $108

Internal Project Team $208 $116 $116 $116 $116 $670

Travel and Living $10 $2 $2 $2 $2 $18

Other - e.g. incidental software and utilities $10 $3 $3 $16

Raw Total $1,088 $318 $314 $255 $255 $2,228

Risk & Contingency (10%) $109 $32 $31 $25 $25 $223

Total (ex GST) $1,197 $349 $345 $280 $280 $2,451

Note that in this model the following internal project team is assumed:

Internal Project Team Full Time

Equivalent Salary ‘000

Total ‘000

Direct Project Staff

Director 0.1 $130 $13

Manager (e.g. EL1) 0.5 $110 $55

Project Officer (e.g. ASO6) 0.7 $90 $63



Support Staff

Admin Officer (e.g. ASO4) 0.3 $70 $21

IT Officer (e.g. ITO2) 0.3 $90 $27

Business Unit Staff Involvement

Project Liaison (e.g. ASO6) 0.2 $90 $18

Manager (e.g. EL1) 0.1 $110 $11 Total ex GST $208

The Full Time Equivalent (FTE) on the project and support staff is significantly reduced for post

implementation support, with no business unit staff involvement required.

Benefits

The following table defines the savings in quantifiable terms, both in direct savings on the current

offsite storage and printing costs, and in productivity and efficiency savings for onsite storage space

and search and retrieval times.

The percentage reduction or achievable target rows in the table indicate the most likely percentage

that the reductions can be actually achieved in that year. In this Records Management

implementation the ability to affect user’s existing patterns of behaviour is low because of the

minimal changes to existing practices, so the percentage chances of the storage and printing savings

being achieved is low. However, the productivity targets percentages are high given the moderate

level average productivity time saved, which is set at 12.5 minutes per day.

Direct Savings Year 1 '000

Year 2 000

Year 3 '000

Year 4 '000

Year 5 '000

Total ‘000

Reduction percent 0% 10% 10% 15% 15%

Reduction in Offsite Storage Cost $0 $8 $8 $11 $11 $38


Reduction in Printing costs $0 $37 $55 $73 $73 $238

Total $0 $44 $62 $84 $84 $275

Productivity and Efficiency Savings Year 1 '000

Year 2 000

Year 3 '000

Year 4 '000

Year 5 '000 Total


Reduction in Onsite Storage Cost $0 $42 $42 $53 $53 $189

Achievable target 30% 40% 50% 60% 70%

Staff Efficiency Productivity Benefits $292 $390 $487 $585 $682 $2,437

Total $293 $432 $530 $638 $735 $2,626

The productivity and efficiency savings is calculated as follows:

Item Best Case Worst Case Likely Case (Av.)

Employees 500 500 500

minutes/day saved 20 5 12.5

Average Salary $65,495 $65,495 $65,495

Working days/year 261 261 261

Working minutes/day 420 420 420



Salary costs per minute $0.60 $0.60 $0.60

Productivity benefit after 1 year $1,559,405 $389,851 $974,628


a discount rate of 7%. The analysis shows that the net present value is only just positive with a

benefit/cost ratio of 1.09 and an Internal Rate of Return of 0.14.

Item Total ‘000

Capital $1,419

Recurrent $1,039

TOTAL COSTS $2,458

Benefits / Savings $2,903

NET COST/BENEFIT $445

Net Present Value $184

Benefit/Cost Ratio 1.09

Internal Rate of Return 0.14

This indicates that the project is ‘line ball’ purely on quantifiable terms, and the non-quantifiable

benefits are key to ensuring that this type of implementation has a strong business case. In many

Government organisations, or compliance-influenced companies, the non-quantifiable benefits are

strong enough to overcome a neutral or negative quantifiable analysis results. In particular, business

efficiencies and compliance issues are key drivers for many organisations and can be strong

influencers on risk reduction.

In these types of organisations the likelihood of any one of the identified compliance risks arising is

medium, but the seriousness is potentially high. Using an AS/NZS 4360:1999 – Risk Management

Standard risk analysis approach, a medium likelihood with a high seriousness is a Grade B risk, where

mitigation actions to reduce the likelihood and seriousness should be identified and appropriate

actions implemented. That is, the risk can be assessed as high enough to require an EDRMS, and thus

overcome a neutral or negative return on investment.

In addition to the non-quantifiable benefits identified in Section 1.2, the following additional non-

quantifiable benefits would arise from a Records Management implementation:

1. The records repository managed by the EDRMS should only contain information objects that

meet the corporate definition of a ‘record’, so therefore the repository should be ‘records

rich’ and only contain the relevant ‘nuggets of gold' that are key to the organisation’s

functions.

2. There is minimal change to the way staff already work using this approach, so the EDRMS

should not greatly disrupt existing staff productivity.

Findings

This option is the usual implementation approach used in Government EDRMS solutions, and

neutral, negative or just positive cost/benefit results are common. Therefore non-quantifiable



benefits are the key to the business case for this type of implementation, and the systems are

usually justified by the risk management approach of meeting compliance requirements.

However, if this approach is applied to large or very large organisations (e.g. 5000 to 10,000 or more

staff) the cost/benefit would improve significantly if a ‘low impact’ implementation were to occur

across the organisation; that is, if the software is made available to all users but the project staffing

costs were maintained at the minimum level required.

Interestingly, it is the last two non-quantifiable benefits identified above that have been the subject

of concern for many audits and assessments of existing implementations of this sort. Many

organisations have found that the user adoption in this model of implementation ranges from 30-

50%, although in a few cases it reaches a maximum of 80% where a ‘records oriented‘ culture exists.

Therefore the ‘rich repository of records’ is not often achieved, as not all of the vital corporate

records are captured. The lesson from this experience is that if a good culture of records capture is

not already in place before this type of implementation, the EDRMS is unlikely to change the culture.

4.3. Option 2: Business-specific Implementation

This option is common in private industry organisations where a particular cost centre or forms-

driven business process (e.g. claims or investment processes) is targeted for the implementation. In

Government this type of implementation is common for Ministerial or Executive Correspondence

management systems.

Note that the cost/benefit of this option will depend on the extent of the implementation to be

achieved, for example what percentage of the organisation will use the solution and the nature of

the implementation for the users. For example a correspondence or forms based solution may only

be used by 40-50% of staff but may achieve 100% coverage for that particular information type, or a

generic implementation into a discrete business unit may only achieve 100% user adoption with 50%

coverage of all the information managed in that unit.

In this analysis it has been assumed that the implementation will cover 40% of the organisation, and

will be a business process focused implementation that is aimed at capturing 100% of the records for

that business process. However, the business process records only represent 50% of the information

types generated in the areas using the solution. These assumptions are quite typical of a business

process focused implementation such as a Ministerial and Executive correspondence process.

Cost

This option’s cost model mirrors Option 1 (the Records Management implementation), but the cost

of this option is reduced because of the discrete nature of the implementation. A reduced number of

EDRMS and database licences are required (well over half the cost of Options 1 & 3 in this example),

and the third party implementer costs are also almost half of Options 1 & 3. However, the scanning

solution and hardware for the EDRMS and database remains the same, as do all other costs except

the internal project team.

The internal project team is smaller by 10% compared to Option 1, and 21% compared to Option 3.

This is because it is assumed that while the direct project staff can be reduced, the business unit in

which the implementation is to occur, or which is responsible for the target business process (e.g. in



this case the Ministerial Unit), will require a higher involvement to achieve the outcomes required.

This is shown in the table below.


Equivalent Salary '000

Total '000


Director 0.1 $130 $13

Manager (e.g. EL1) 0.4 $110 $44


Support Staff





Manager (e.g. EL1) 0.2 $110 $22

Director 0.1 $130 $13

$212

The FTE on the project and support staff is significantly reduced for post implementation support,

but support is required by the business unit staff to ensure ongoing achievement of the benefits.

Benefits

The percentage reduction or achievable target rows in the table below indicate the most likely

percentage that the savings can be actually achieved in that year. In this example of a Business-

specific implementation, the printing and storage savings are set to a high percentage because of

the focus on the targeted information type (Ministerial correspondence in this example). However,

because this information type only represents 50% of the types of information managed in the areas

that use the solution, the actual reduction figure is low.

The search and retrieval productivity savings percentage for this information type is also set high

because of the narrow focus on the targeted information type. However, because of this narrow

focus only an average of 7.5 minutes per day is saved across the user base, which is only 40% of the

organisation.


Year 2 000

Year 3 '000

Year 4 '000

Year 5 '000

Total ‘000




Reduction in Printing costs $29 $44 $58 $66 $66 $263

Total $34 $53 $69 $78 $79 $313


Year 2 000

Year 3 '000

Year 4 '000

Year 5 '000

Total ‘000






Staff Efficiency Productivity Benefits $140 $164 $187 $211 $222 $924

Total $158 $190 $222 $251 $263 $1,079


a discount rate of 7%. The analysis shows that the solution (in this example) achieves a negative Net

Present Value with an Internal Rate of Return of negative 0.16. This is because the cost investment is

high for the limited scope of the implementation.

Item Total ‘000

Capital $989

Recurrent $669

TOTAL COSTS $1,658


NET COST/BENEFIT -$264

Net Present Value -$309


Internal Rate of Return (0.16)

This negative return on investment must be assessed against the non-quantifiable benefits, which in

many organisations is strong enough to overcome a negative quantifiable analysis results. In

particular, business efficiencies and client service are key drivers that can exert a strong influence on

business cases for this type of implementation.

The business efficiency benefit is often high for this type of implementation because of the high

value of the business process being targeted, or the business unit that the EDRMS is focused on. For

example, Ministerial or Executive correspondence is key to delivering high quality and timely

information and advice to key stakeholders and the organisation’s clients, and the same can be said

for claims or insurance form processing. These processes are critical to operations, and achieving

fast and effective turnarounds is paramount to the organisation’s operations and future.

The other non-quantifiable benefits identified for Option 1 apply, but in particular the following

benefits should be emphasised:

1. The additional productivity benefits in having a rich source of the targeted information type

available for re-use in the process e.g. in this case, other Ministerial documents to copy

from.

2. Compliance risk reduction may or may not be critical in this implementation type, but it

certainly is an important by-product that should be counted as a benefit for this option.

3. Often implementing these types of solutions can lead to further innovations and

productivity savings for the business process or unit, including further process automation

(e.g. using templates or pre-prepared forms), building in client feedback processes, or

building in streamlined or ‘fast tracking’ processes.

Findings

This Option should only be considered where the business process or business unit has a strong non-

quantifiable business case. The actual implementation is highly likely to be cost negative or neutral,

and without a strong non-quantifiable business driver the business case is unlikely to succeed.



However, often a high value business process or business unit can present good non-quantifiable

benefits based on improved client service, including faster and more effective responses to key

stakeholders or clients.

It should also be noted that in the case of many Ministerial or claims processing systems the system

life expectancy can be longer than five years, in which case an analysis of quantifiable cost benefits

over a longer term may produce a positive or neutral result.

4.4. Option 3: Enterprise Information Implementation

This option is emerging in Government as ‘new thinking’ in the approach to managing information in

a holistic sense. The idea is to not burden the user with deciding when a document becomes a

record, and to capture documents upon the point of creation directly into the EDRMS. This can

include incoming and outgoing emails. Very few staff are exempt from this type of solution, and in

this way 100% utilisation (or close to 100%) is achieved.

Little, no, or closely monitored access to any other information repositories is enforced, and all

documents are migrated from drives into the EDRMS during the ‘go live’ event. Some

implementations allow users to temporarily save documents to a limited source (e.g. a My

Documents directory), but force the user to move the document to the EDRMS after a defined

number of days, otherwise it is deleted. Other implementations allow a personal folder/file in the

EDRMS for drafting purposes but limit the number of documents that can be saved to this folder/file.

Some implementations do not use folders or files at all, and the EDRMS is just one big ‘bucket’ of

documents, which removes the issue of file creation and management from the user.

Cost

This type of implementation has a cost model based on Option 1 (the Records Management

implementation), where the software and hardware costs, as well as the training and general

support costs, are the same. However, there is an additional document migration cost (estimated at

$90K in this 500 seat example), additional services from the third party implementer to work closer

with the organisation’s internal team ($180K in Yr 1), and an increased internal project team cost

(estimated to be 20% larger than the Records Management team). The cost of ongoing support from

a qualified DBA is also higher, as the solution will grow faster and will need closer performance

monitoring.

The internal project team is larger because a greater change management process is required, with a

strong focus on ensuring staff concern over major changes in processes is addressed. Strong

executive support and direction is required, thus needing more liaison and advice. Therefore it is

assumed that a contracted professional project manager is engaged to ensure the transition occurs

smoothly. Further, more IT and administration support is required to achieve the Enterprise

Information implementation. This is shown in the table below.


Equivalent Salary '000

Total '000

Contracted Project Manager 0.25 184 $46


Director 0.2 $130 $26

Manager (e.g. EL1) 0.6 $110 $66




Support Staff





Manager (e.g. EL1) 0.2 $110 $22

Total $307

The FTE on the project and support staff is significantly reduced for post implementation support,

but support is higher than the Records Management approach because of the reliance on the

EDRMS as the only repository of information.

Benefits

The quantifiable benefits of an Enterprise Information implementation are higher than the other

options. The productivity and efficiency savings is calculated on a best case of 30 minutes per day

and a worst case of 15 minutes per day, creating an average of 22 minutes per day6. This is highly

likely to be achieved, given the pervasive nature of an Enterprise Information implementation and

almost 100% utilisation. This is regardless of what personal repositories or folders are provided as

temporary stores. Therefore an 80-95% percent chance of achieving these savings or efficiencies is

likely, so the productivity is saving estimated at $4M over the five year period.

Additionally, with a 100% (or near 100%) utilisation rate, the reduction in onsite storage is likely to

be high, as will be printing savings. However, offsite storage, even though it is a higher percent

reduction than the other options, is not likely to achieve significant reductions over the five year

period, even though growth will be slowed. Beyond the five year period higher reductions may be

expected as these legacy files are disposed of, but this is out of scope for this analysis.


Year 2 000

Year 3 '000

Year 4 '000

Year 5 '000

Total ‘000




Reduction in Printing costs $183 $219 $256 $274 $274 $1,206

Total $183 $227 $271 $297 $305 $1,281


Year 2 000

Year 3 '000

Year 4 '000

Year 5 '000

Total ‘000




Staff Efficiency Productivity Benefits $780 $877 $877 $926 $926 $4,386

Total $802 $920 $941 $1,032 $1,032 $4,722

6 Derived from an EDRMS Survey on Information Usage that was conducted in 2008 in a NSW Government agency




a discount rate of 7%. The analysis shows that the Enterprise Information implementation achieves a

Net Present Value of $2.4 M with an Internal Rate of Return of 2.00.

Item Total ‘000

Capital $1,729

Recurrent $1,075

TOTAL COSTS $2,804


NET COST/BENEFIT $3,200

Net Present Value $2,437


Internal Rate of Return 1.66

This indicates that this type of implementation will achieve quantifiable savings much larger than the

other options. With 100% (or close) usage of the solution the non-quantifiable savings are also

significant. In this type of implementation the compliance risks are reduced to a higher level than

other options, as all information is being captured to the solution. Using an AS/NZS 4360:1999 – Risk

Management Standard risk analysis approach, most likely the solution would reduce the compliance

risks to a low likelihood, and even though the seriousness of the risks is high, the risk is reduced to

Grade C level, where mitigation actions need to be identified and costed for possible action only if

funds permit.

This must be tempered with the fact that the EDRMS will now contain draft and ephemeral

information that would normally not appear in a records repository. This may mean that users and

information managers will need to be more judicious in deciding which information is the

authoritative source, and draft and ephemeral should be identified by the creators in some manner

(e.g. via metadata, tags or internal document markings).

However, it should be noted that all information held by an organisation, including draft and

ephemeral information, is subject to legal and audit processes regardless of where it resides. This

issue is at the heart of the argument of what is a record, and an Enterprise Information

implementation removes this issue from the user. Therefore an Enterprise Information

implementation can be close to 100% certain that the organisation’s entire information holding is

available for discovery or compliance assessment, thus reducing the cost and risk of responding to

these types of events.

Anecdotal evidence of these types of implementations also shows reduced IT data storage costs, as

well as reductions in growth over the five year period. Initially the removal or reduced use of

network and personal drives will achieve a saving, but most of the cost is transferred to EDRMS

storage. The EDRMS storage will be cheaper to maintain because of its centralisation, but the costs

are hard to quantify for the purposes of this evaluation.

Notably, because of the use of EDRMS version control and close to 100% usage of an authoritative

information source, there is a significant reduction in duplications. Additionally, staff can use

emailing pointers or shortcuts to documents in the EDRMS, rather than emailing the document



itself, further reducing duplications. This can result in significant cost avoidance in IT storage growth.

At this stage this author has no hard details on the extent of growth reduction for this benefit,

although one organisation has identified this cost avoidance as ‘significant’.

The final potential benefit for this type of implementation is a complex one that could be measured

in both quantifiable and non-quantifiable terms. Details on this benefit are still emerging, as the

benefit is the ability to make significant steps toward ‘Green IT’. This benefit is complex because it

must be mixed with other technology innovations such as power consumption and server

virtualisation technologies. However, moving to an Enterprise Information implementation and

removing network and personal drives is a major step toward achieving a Green IT certification.

One organisation, Australian Crime Commission, implemented the Enterprise Information option

and was the first organisation to receive a significant ‘Green IT’ certification from certification

authority Computers Off Pty Ltd7. The ACC reduced the number of hardware servers by 45 per cent.

In a Media Release by Minister of Home Affairs, The Hon Brendan O’Connor MP, the Minister said

“The ACC will also save approximately $80,000 per annum in power and $43,000 per annum in

licensing and maintenance fees”. Andrew Cann, CTO of ACC also said “the iCognition [Enterprise

Information] solution was a major contribution to the ACC decommissioning 71 file servers’.

Findings

The Enterprise Information option derives significant quantifiable and non-quantifiable benefits,

with a cost/benefit ratio of 2.00 and Internal Rate of Return of 1.66 (in this example). However, it

should be noted that the change management steps required to achieve an Enterprise Information

implementation is significant and must be taken into account in the final analysis of this option.

The executive and the organisation must be determined and committed to the change required to

achieve this type of implementation, and support for the project team in overcoming objections and

obstacles is crucial. Further, particular attention must be given to the EDRMS interface and

configuration to ensure ease of use and simplicity in capture and access to information. This is the

reason why many organisations tie this type of implementation to a user portal or collaborative

workspace.

Despite the order of magnitude difference to the other implementations, this type of

implementation may not be appropriate for very large or disparate organisations with a number of

cost centres. This is because the project team size, and effort required to achieve an Enterprise

Information implementation in such an organisation is likely to outweigh the benefits, or the time

required to implement the change may be too long to achieve.

5. Conclusion

In the example used in this analysis, of an organisation of 500 staff and using the assumptions

detailed in this paper, a pure cost-benefit analysis approach shows the Enterprise Information

implementation is a clear winner with an order of magnitude lead on the next best option. This is

shown in the summary table below.

7 The Computers Off Label is the computer industry's guide to help business, government and individuals identify

organisations that are doing their part to reduce their power consumption and in turn reducing their CO2 emissions. Refer

www.computersoff.org.



Option Net Present Value

Benefit/Cost Ratio

Internal Rate of Return

OPTION 0: Do Nothing -$1,009,000 (2.80) - OPTION 1: Records Management Implementation $184,000 1.09 0.14

OPTION 2: Business-specific Implementation -$309,000 0.78 (0.16)

OPTION 3: Enterprise Information Implementation $2,437,000 2.00 1.66

The Enterprise Information option further consolidates as the clear leader when taking into account

the non-quantifiable benefits. The compliance risk is minimised, business efficiencies are maximised,

and the platform for further innovation is well established, with further potential for storage savings

and ‘Green IT’ certification. However, it must be noted that the change management and transition

issues must be considered when choosing this option.

However, when taking into account key business drivers, which can heavily influence the non-

quantifiable benefits, the following results are likely for particular circumstances:

1. For large (>5000 staff), very large or disparate organisations, the Records Management or

Business-specific implementations are more likely to have a stronger business case, as the

logistic effort required in transitioning a large organisation to an Enterprise Information

implementation is likely to be too great. The Records Management implementation will

achieve greater benefits than the Business-specific implementation, although a large (>5000

staff) or very large organisation may find the capital cost of an enterprise-wide

implementation difficult to secure.

2. For high value business processes or business units, a Business-specific implementation can

achieve cost neutral or marginally negative cost-benefit results. The overall costs will be

minimised because of the focus on the business process or business area. In these cases the

business efficiencies, client service and compliance non-quantifiable benefits must exert a

strong influence on the business case.

3. Hybrid implementations, e.g. using an Enterprise Information approach in one division or

branch, and a Records Management implementation across the rest of the organisation will

highly likely produce a reasonable positive cost-benefit, depending on the extent of the

Enterprise Information option. Combinations of Enterprise Information, Records

Management or Business-specific implementations may also be appropriate for large or very

large, or disparate organisations.



Appendix A: Costs and Benefits Details This Appendix provides further details on the costs and benefits used in the analysis. Most of the

calculations are based upon the author’s knowledge and experience in the IM market, including

having consulted for many government and non-government organisations ranging from 30 staff to

100,000 staff. Costs have also been derived from experience in implementing over 30 EDRMS

implementations.

Costs

The cost-benefit model uses the following quantifiable costs:

� Software licence and maintenance costs include the initial EDRMS and scanning software

licence purchase, and ongoing product maintenance support for version upgrades, bug fixes

and software vendor product helpdesk support. The EDRMS software costs are indicative of

the more popular EDRMS products and have been derived from a market test conducted in

2008 as well as general research on indicative costs in late 20098.

� Hardware costs include operating systems and are calculated on the assumption of a

centralised solution and multi-tiered products that require middle-tier servers to operate.

� Database costs assume Microsoft SQL in a centralised implementation.

� Third party implementer costs to analyse, install, configure and implement the solution to

the requirements of the organisation. At a high level, the tasks for the third party will include

project initiation and management of key tasks; analyse and document solution

requirements; develop change management, solution architecture and transition plans;

design, build, configure and test the solution; install the solution and transition it to

production.

� Migration costs have been excluded, except for the Enterprise Information Option which

requires all documents to be moved across to the EDRMS. In other options it is assumed that

the users will selectively migrate relevant documents into the EDRMS using the tools

provided by the EDRMS.

� Training costs include train-the-trainer training as well as administration, power user and

technical training conducted at an offsite training facility. The internal project team is

assumed to conduct the end-user training using an on-site training facility.

� Ongoing Support Costs – vendor is the cost of the vendor to support the solution beyond

the initial implementation, and includes onsite technical, configuration, business analysis,

enhancement and training support.

� Ongoing Support Costs - DBA contractor is the cost of a contracted resource to ensure the

database performance meets requirements.

� Internal Project Team is the internal project team cost to project manage and transition the

organisation to solution use. This includes enacting the change management and

communication plan, defining policies and procedures for solution use, training end users,

scanning documents, and administering and supporting the solution. The internal project

8 Market test conducted for large Government organisation consisted of a questionnaire issued to seven EDRMS vendors.

General research included assessment of costs against products in the NSW Government Contract 2602: GSAS Information

Asset Management Systems (IAMS) Software Applications.



team cost is defined for the actual implementation term, and then a restructured and

reduced team is defined for the outlying support years.

� Travel and Living is the cost of travelling to and from sites for the variety of activities that

will be required to be undertaken during implementation and support.

� Other (e.g. incidental software and utilities) is the cost of any additional software or

utilities, or small variations outside of the normal implementation processes, that is required

to deliver or manage the overall solution.

In this model a 10% risk and contingency factor has also been added to take account of either

implementation risks or forgotten tasks that vary during implementations.

The following costs have been purposely excluded:

• Business case development

• System selection processes

• Scoping Studies

• Costs of staff external to the internal project team attending activities associated with

analysis and implementation events (e.g. workshops and interviews)

• Physical record disposition

• Data migration, other than network drive migration for the Enterprise Information Option. It

is assumed that the users will migrate the required documents to the system in the other

options.

• Distributed solution architecture options

• Disaster recovery solutions

Benefits

Quantifiable Benefits

The following benefits or savings have been quantified:

• Hardcopy file storage savings are measured in offline storage costs, as well as the cost of

storing files onsite. The offsite storage cost includes storing and retrieving hardcopy records

at a third party site, and has been estimated at $75,000 per annum based on an average for

organisations the size of this organisation . Onsite storage is calculated as a efficiency

savings and is based upon an average of $250 per sq M of building rental costs, and an

estimate of 1.5 sq M per staff for the file storage space.9

• Printing savings are calculated on a per page printed cost, which is the average cost per

page of consumables such as paper and printer cartridges, printer replacement over time,

and printer installation and administration.10

Type of print cents per

A4 page

cents per

A3 page

Black and White 9 30

Colour 50

9 Figures extrapolated from a large NSW Government organisation’s costs.

10 ibid.



• Productivity savings: It is difficult to quantify productivity savings, as results are often

interpreted as unavoidable staffing operational costs. However, it is valid to measure

productivity savings in terms of time spent against average salaries, and use this figure as

an effectiveness or productivity saving. Both the Commonwealth and the NSW

Governments11 state that the use of these types of benefits is encouraged in a cost-benefit

analysis of options.

Productivity savings are calculated on the average time lost per day in searching for the

correct information, measured against average salaries. The average salary was derived

from a NSW and Commonwealth Government mid-level clerical or administrative officer

salary of $65,495, calculated in 2008.

The average time is estimated based on an EDRMS Survey on Information Usage that was

conducted in 2008 in a NSW Government agency. This survey showed that 38% of

respondents spent 30 minutes to one hour per day searching and retrieving files and

documents, and 30% spent between one to 1.5 hours per day. Based on the data gathered,

the best case, worst case and average case in time spent searching and retrieving

information is calculated and multiplied by an average public service salary for this type of

organisation.

Non-Quantifiable Benefits

Additionally, the following non-quantifiable benefits have been identified:

1. Improved service delivery: the productivity benefits of finding information quicker will have

a multiplier effect in better service delivery and information re-use. The correct and

authoritative information can be quickly found and delivered to the key stakeholders, such

as a Minister, Executives, external parties or to a review/legal/audit process. Additionally,

the ability to find, access, share and re-use information across the organisation will increase

the quality and accuracy of information generated and reported. With an EDRMS there will

be fewer barriers to knowledge retention, and the quality and speed of service delivery will

increase over time as more users exploit the information captured and managed in the

system. Essentially this addresses the key business drivers for an EDRMS that is often

identified in most organisations.

2. Compliance risk reduction: In organisations that need to meet compliance requirements,

the need to keep authentic, accurate, reliable and complete records is high. Use of an

EDRMS considerably reduces the risk of non-compliance to legislative, legal, governance, or

accountability requirements. .An EDRMS reduces the overall the risk to the organisation of

not managing records effectively. These risks include:

• inability to fully satisfy legal discovery requirements and explain certain decisions to

stakeholders. This could result in a loss of legal action, loss of trust, rise in complaints or

loss of clients, forced restructures, and other costly and embarrassing situations.

11

Commonwealth of Australia (Department of Finance and Administration), January 2006, Handbook of Cost-Benefit

Analysis, p46 and NSW Treasury, July 2007, NSW Government Guidelines for Economic Appraisal, p73



• inability to fully satisfy FOI requirements, Parliamentary and Ministerial correspondence,

compliance audits, and other inquiries or reviews. This could result in embarrassment to

the organisation and costly reviews of governance arrangements; and

• lack of accountability of officers and ability to prove appropriate governance. This could

result in embarrassment, costly reviews, embezzlement, corruption or stealing.

3. Reduction of filing time: A reduction of time to file documents, given that the majority will

be filed electronically, will be achieved with an EDRMS. The EDRMS Survey on Information

Usage showed time spent committing documents to files varied significantly from a few

minutes printing documents and putting them on a file, to up to a four hour block if people

were preparing for a meeting or finalising an issue. With an EDRMS the time saved filing can

range from several minutes per day to potentially an hour for bulk capture items. This is

particularly so for emails and larger documents. Given the difficulty in measuring this

benefit, it has been identified as a non-quantified productivity saving.

4. Reduction of hardcopy file ‘wait times’: Time is spent by each employee waiting for files to

be delivered for action. The EDRMS Survey on Information Usage showed this time is 30

minutes per day on average (58% of responses). Again, for purposes of this evaluation, this

cost will be identified as a non-quantified efficiency saving.

5. Platform for innovation: Procuring an EDRMS provides a path to innovation where

knowledge sharing and other productivity efficiencies can be leveraged from the EDRMS

infrastructure over time. This includes integration with other line-of-business systems to

achieve a single authoritative store of information, automation of processes via workflow,

improved collaboration capabilities, and automated content publication.



Appendix B: Notes on Cost-Benefit Analysis Method This paper uses the following cost-benefit analysis methodology. All definitions of terms are from

Wikipedia.

• All costs and benefits are calculated across a five year Total Cost of Ownership model.

• The benefits and costs are then analysed to a Present Value (PV). PV is the value on a given

date of a future payment (benefits less costs) or series of future payments, discounted to

reflect the time value of money and other factors such as investment risk. Present value

calculations are widely used in business and economics to provide a means to compare cash

flows at different times on a meaningful "like to like" basis.

• A discount rate of 7% has been applied in this analysis. The Commonwealth Government

Handbook on Cost-Benefit Analysis, (p xiii), states: “The discount rate used should generally

reflect the opportunity cost of capital – that is the return on capital foregone in alternative

use of the resources” and, (p 63), “In considering the appropriate discount rate, a natural

starting point is the Australian Government’s borrowing rate.” The Government borrowing

rate for a 5 year term at the time of writing was 6.54. This has been rounded up to take

account of other risk factors.

• The Net Present Value (NPV) is then calculated. NPV is the sum of the values of the

discounted individual cash flows (Present Value). It is a standard method for using the time

value of money to appraise long-term projects.

• The Benefit/Cost Ratio (BCR) is also calculated for each option. BCR is an indicator that

attempts to summarize the overall value for money of a project or proposal. A BCR is the

ratio of the benefits of a project or proposal, expressed in monetary terms, relative to its

costs, also expressed in monetary terms.

• The Internal Rate of Return (IRR) is also defined for each option. The IRR on an investment

or potential investment is the annualized effective compounded return rate that can be

earned on the invested capital. In more familiar terms, the IRR of an investment is the

interest rate at which the costs of the investment lead to the benefits of the investment.