Getting Rid of Paper is Simple Arithmetic

I’m going to be honest, selling “scan and store” is boring.  When I get asked the value of simply scanning all the documents in a file room and storing them in a repository with a simple index, I become Rainman.  “That will be $10,000 and you’ll have a 1-year return on investment.”  Usually no one believes me and then I become John Forbes Nash Jr and quickly draw up the calculations on a white board.  So I thought it would be interesting to share my calculations.

Doing the Math – Software

Given the choice between file cabinets and uncontrolled network share, I will take the network share every time.  Replacing file cabinet storage of documents can be as easy creating a folder and naming structure that mimics the real world.  Should additional attributes, audit trails, and retention be a part of any formal file management solution?  Absolutely, it must be in the solution or platform.  But for “scan and store” it’s ok to start small.

Part of the series Calculating the Return on Investment with ECM.

When selling ECM I see a lot of management of documents with Access, Excel, or Word.  These approaches are good starts and fine for some smaller solutions.  But you might be surprised to find that you can often find a platform or dedicated solution in the $10,000 range that your organization can grow into.

So far we’re spending $10,000 on new software.

Doing the Math – Physical Space

A standard file cabinet holds 10,000 pieces of paper.  A 10×10 office will hold comfortably 16 file cabinets.  So we’re at 160,000 pages.  Keeping it simple and going with the high end, each page scans to a 2MB file.  That puts it at 320 GB.  Amuse me and say we fill up the room each year with financial records that need 7 years of retention.  We’re now at 2.25 TB.  Let’s just round up and make it 3 TB external drive that goes for $100 on Amazon and a second drive for a backup takes it to $200. While on Amazon, let’s add a $250 multifunction printer/ scanner to scan all the documents.

According to MarketWatch, you would pay $1.74 for a square foot of office space in Atlanta to $6.16 a sq ft in New York.  Splitting it “down the middle” $4 or $400 a month or $4,800 a year for that 10×10 office space.  But let’s just start with Atlanta and say $2,000 per year.  Of course there are those that might say that space savings isn’t savings, so keep the low number.  But I’m sure that new space will be used.

Summarizing physical space, we save $2,000 to $4,800 in real estate costs and we spend $450 in net new hardware purchase $450.

Doing the Math – People Costs

The cost of managing the file room is an interesting question.  This is where the use case becomes a question.  Of course a simple archive of reports or files may not have a dedicated manager.  While active file room operations may have one or two people on staff.  Let’s use $7.25 as the minimum wage.  For those of you that say file room personnel are paid more, that’s fine.  It just makes my numbers stronger.  Using the low minimum wage, we get $15,000 per year.  I’m not going to say we eliminate this going electronic, but I can argue that the costs will go down by half.

We’re also going to need help scanning and indexing documents.  We can estimate this as 30 hours per cabinet.  This can also be contracted out to local document services companies.  But to keep it easy, we’ll stick with in house costs.

There are also soft people costs that are hard to measure.  Eliminating the need to manage a file room allows that person to perform more valuable tasks to the organization.  A time study could show exactly how long it takes to retrieve a file physically versus how long in electronic format.  Unless there’s a regular queue waiting for the file room, this effort would be a waste of time.  But anecdotally I’ve heard of stories where a person needed to “go up five floors” to file their document.

Summarizing from a people perspective, we save $7,500 in file room staffing compensation.  We can also calculate conversion and deployment at 3 months.

Looking at the Numbers

New software costs $10,000
Net new hardware purchase $450
Total Costs – $10,450

Real Estate Savings $2,000 to $4,800.
File Room Compensation Savings $7,500
Total Savings – $12,300

Breakeven after deployment – 10 months
Deployment completed – 3 months

Return on Investment – 13 months

Other Factors

First paper doesn’t have a backup.  Let’s ignore the obvious large disasters that might occur.  I recall a customer site visit where we just finished talking about their most critical business documents.  As we stepped out of the conference room, I asked if the cabinets in front of me stored those critical business documents.  The answer was, “Yes.”  I then asked if the maintenance man with his head in the ceiling crawl space was working on the air conditioning drain pan that is on top of the file cabinet.  By my next visit, the cabinets were moved.

Single copy paper documents can go missing.  A missing document can keep an organization from selling a particular good, operating a specific piece of equipment, or make them subject to significant fines.  If these factors can have an effect on your document collection, then electronic documents are a must.  Regular audits are part of your file management process.  Auditing files manually can be a tedious process while electronically it can be running a simple report.

Getting Rid of Paper Makes Dollars and Cents

I know it’s a bad pun.  In all seriousness, the first step to a full blown ECM is “scan and store”.  For less than a file clerk’s salary a “scan and store” solution can help you avoid a document problem that could cost more than the entire executive team’s salary.

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