Cost/benefit Analysis for Implementing ECM, BPM Systems: Determining the ROI for a Significant Investment, Such as Adopting an ECM or BPM System, Is No Easy Task

By Allen, Doug | Information Management, May-June 2007 | Go to article overview

Cost/benefit Analysis for Implementing ECM, BPM Systems: Determining the ROI for a Significant Investment, Such as Adopting an ECM or BPM System, Is No Easy Task


Allen, Doug, Information Management


The adoption of enterprise content management (ECM) and business process management (BPM) systems is often spurred by regulatory and compliance concerns. As Thomas Hogan, Vignette president and chief executive officer, told Computerworld, the move to adopt ECM technology is driven by "two fundamental business catalysts":

1. How to render more value in terms of greater revenues or stronger loyalty

2. The need to understand how information flows within the enterprise because of compliance requirements

While these concerns underlie the value-driven justifications for the adoption of ECM and BPM technologies, they do not address the financial impact of their implementation.

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Executives who understand the level of investment involved with implementing ECM or BPM systems focus significant attention on their potential return on investment (ROI). This is especially the case in the initial implementation of such technologies, specifically in labor- and process-intensive applications. For some decision-makers, ROI is assumed, while for others, it is measured prior to system selection and acquisition. For the most sophisticated enterprises, ROI assumptions and projections are measured again after system implementation. Whatever the circumstance, evaluating the ROI between a digital and either a paper- or microfilm-based environment is an exercise worth pursuing prior to making an initial investment.

Developing effective ROI models should include the impact of implementing such solutions on both costs and revenues. While it may be challenging to project the revenue impact, systems that enhance an organization's ability to provide improved customer service or that enable it to manage increased numbers of customer transactions are those that are likely to have the highest return. Certainly, for financial services organizations like banks, insurance companies, and mortgage lenders, gaining competitive advantage and increasing revenues often are key factors in deciding to move forward with ECM or BPM solutions.

Cost factors involve both operational and capital expenses. Cost comparisons should span all costs, including for

* Employees

* Space

* Copying and media

* Supplies

* Information routing or distribution

* Equipment

* Communications

If they are to be considered verifiable and trustworthy, each category of costs should be traceable to the organization's overall budget and should not exceed budget line items.

Revenue projections are more challenging to develop, but where the potential impact on increasing an organization's capacity to do business is concerned, such revenue estimates can be a very real factor in an ROI model.

Comparative Cost Data

In order to evaluate cost factors, the following should be included in any comparison:

* Key Corporate Data: Understanding an organization's key statistical information is important for determining how attractive an investment might be. Understanding the burden rate (the benefit rate that can be applied to employee salaries), projecting an inflation rate, knowing the organization's tax rate (federal and any applicable state tax), and understanding an organization's investment interest rate (what the firm could receive by investing the same funds elsewhere), as well as the firm's specific method of calculating the rate of return on an investment, can be critical.

* Employee Costs: Include full documentation for job rifles, fully burdened hourly costs, and determination of the total full-time employees involved in the process or area being measured. Projected productivity savings must be included, as well as the costs associated with ECM or BPM systems support and administration. Document capture support and administration should also be fully quantified. To ensure relevance over time, these comparative costs should be summarized over a three- or five-year time span and should include any assumed inflation rates and transaction or file growth factors. …

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