The Return on Investment of my Digitalization Project, Step by Step

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Quantifying the benefits and real costs of a digitalization project is the first step to take when you decide to make the investment in a digitalization project. In this whitepaper, we will guide you, step by step, through the process.

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The Return on Investment of my Digitalization Project, Step by Step

  1. 1. understanding documentsThe Return on Investmentof my DigitalizationProject, Step byStepQuantifying the benefits and real costs of a digitalizationproject is the first step to take when you decide to makethe investment in a digitalization project. In these pages,we will guide you, step by step, through the process.2013, March
  2. 2. understanding documentsDefining the contextTo explain the calculations that you should carry out, we’re going to propose some data. These figures arefor demonstrative purposes, but they also try to be as close to reality as possible.DATASize of the business: 50 peopleDocuments managed per day: 100 documentsNumber of filing cabinets: three cabinetsDimensions of cabinets: 41cm wide, 104 cm tall, 50 cm deepNumber of people who work with these documents: two peopleNumber of people who have to find documents to carry out their day-to-day work: 10 peopleNB: All of the workers in this example earn the legal minimum salary of 641.10 € in Spain.STEP ONE: Determine the costs of the current systemCalculate the real costs of maintaining your current paper-based filing system. Keep costs like these in mind:COSTS ARISING FROM WORKMonthly salaryProrated extra paymentsBase for Extra ExpensesSocial Security Costs (32% of base salary)TOTAL MONTHLY COSTS PER WORKERPrice per hour of workPrice per minute of workNumber of documents processed per dayAverage time (in minutes) spent processing each document**Labor cost per documentDaily labor cost of processing documentsAnnual document processing costs(220 working days per calendar year)641.10 €* 106.85 €* 747.95 €239.34 €987.29 €4.11 €0.07 €10060.41 €41.14 €9,050.20 €
  3. 3. understanding documents* - Costs specific to workers in Spain. This assumes that the worker in the example is earning the legalminimum salary; Social Security costs can range from between 32% and 35% of base salary.** - Time estimated is taken from a Price Waterhouse Coopers study of the time it takes one person to filea paper document in a well-organized filing system.COSTS ARISING FROM STORAGEThis calculation of the square meters needed includes the space to open the drawers of the filing cabinet.* - Average price per square meter in Madrid, Spain, in 2010, according to Cushman & Wakefield RealEstate Consultants.COSTS ARISING FROM LOOKING FOR AND LOCATING DOCUMENTSNumber of people who have to search for documents every dayAverage number of documents searched for each dayTime taken to find a document each day (minutes)Average number of documents lost each monthTime spent finding a lost document (minutes)Time spent per month finding lost documentsCost per minute of workDaily cost of looking for documentsAnnual costs of looking for documents(based on an typical working year of 220 work days)Monthly cost of locating lost documentsAnnual cost of locating lost documentsTotal costs arising from looking for and locating documents5106610604,620.00 €0.07 €21.00 €4.00 €924.00 €5,544.00 €Square meters occupied by a filing cabinetNumber of filing cabinetsAverage monthly price/sq. meter of office rental space (*)Monthly storage costsAnnual storage costs0.3075329.00 €26.75 €321.03 €
  4. 4. understanding documentsCOSTS TO MAINTAIN THE CURRENT SYSTEMAnnual document management costsAnnual storage costsTotal costs arising from looking for/locating documentsTotal annual costs for the current paper-based system9,050.20321.00 €5,544.00 €14,915.23 €To simplify cost calculations, we have not included the cost of having, in many cases, to go back andre-create or recover a document that’s been lost (for example, getting in touch with a vendor to see if hecan send us a copy of an invoice, or having to re-do a report that’s been misplaced, etc.)Nonetheless, it would be interesting to do some more detailed number-crunching to see just how muchmoney lost documents are costing you.Even by just including these costs, we can get a better idea of how much it costs your business to continueto work with a paper-based model.STEP TWO: Estimating the benefits of the new systemMake a calculation of the benefits that your business would get from a new digitalization system. Rememberthat, to pick a system that is best suited to your needs, you will have to think about a multitude of factors, suchas the kinds of documents that you want to digitalize (structured or not structured), if you want to digitalizegroups of documents, what processes you want to automate and the degree of precision that the tool offersyou.We will assume that our imaginary business chooses a system such as Athento for storage and capturinginformation, together with a Fujitsu fi6130 scanner that can digitalize forty to eighty pages per minute.That’s not small change if your business has to pay that, year in and year out.“Managing paper documents is costing your business approximately14,915.23 € every year.”
  5. 5. understanding documentsCHARACTERISTICS OF ATHENTO – DOCUMENT CAPTUREAutomatic classification of documents (accuracy rate)Data extraction (accuracy rate)98%98%With the new system, each new document would undergo the following process:- One person is in charge of putting the documents in the scanner.- Athento receives the documents in a monitored file.- Athento applies the semantic technology (and other technologies) to recognize each document within themonitored file.- Athento extracts information that is relevant to each type of document.- Athento digitally saves each document in the site that is relevant to what document type it is.As you can see, in the case of Athento, the only thing you need one person to do is to feed the documentsinto the scanner. This is one of the crucial factors that needs to be quantified. Another fundamental factor isthe accuracy rate, because if the system cannot recognize a document or extract its data, someone has tocarry out the process manually.So, first, let us calculate the time that two employees would need to use the system to manage documents:COSTS DERIVED FROM WORKPrice per second of workNumber of documents processed per dayTime (in seconds) it takes one person to feed documents into thescanner *Time (per day) used to scan documentsDaily costs of scanning documentsAccuracy rate of system extracting dataDocuments in which data extraction could fail (2%)Time spent on re-entering data manually (min)Time spent (per day) on re-entering data manually (seg)Cost of re-entering data manually10037,50.04 €98%0.21 €21,51800.00116666666667 €37,5
  6. 6. understanding documentsAccuracy rate of system that classifies documentsDocuments which have to be manually classified (2%)Time spent classifying a document manually (in seconds)Time spent (per day) classifying documents (in seconds)Cost of classifying documentsDaily cost of scanning documentsDaily cost of re-integrating dataCost of classifying documentsTotal costs derived from working with the new system98%225509.63 €46.20 €12.83 €0.06 €68.66 €Square meters occupied by each filing cabinetNumber of filing cabinetsAverage monthly square meter rental price *Monthly storage costsAnnual storage costs0.3075 €0 €29.00 €0.00 €COSTS DERIVED FROM STORAGE0.00 €* Since digital information storage does not require any physical space, this cost is reduced to 0.00 €.* - This time is calculated with a base of 80 documents, which is the maximum number of documents that thescanner can process in one batch. A person usually takes 30 seconds to feed a batch of 80 documents into ascanner. Data extraction and manual classification is based on the accuracy rate, and if the system works wellonly 98% of the time, a person will be required to manually do the work 2% of the time.Let’s continue to consider other benefits. This time, we’ll look at those costs that we can eliminate when weeliminate physical storage.BENEFITSCost reduction for time saved in manual labor: 8,981.54 €
  7. 7. understanding documentsCost reduction (labor and time spent) per yearCost reduction (physical storage space)8,981.54 €$321.00BENEFITSAthento uses a feature called Autotagging which reduces the time spent searching for documents by keepingthem accessible and grouped according to categories in a cloud of tags. Finding documents this way reducessearch times to an average of fifteen seconds per document.Let’s calculate the cost savings using this document search tool:COSTS ASSOCIATED WITH DOCUMENT SEARCHESNumber of people who have to search daily for documentsAverage number of documents searched per dayTime taken to find a document electronically, in secondsTotal daily time (in seconds) spent searching electronicallyfor documentsAverage number of documents lost every monthTime taken to find a lost document (in seconds)Average amount of time (in seconds) spent searching every monthfor lost documentsDaily cost of searching for documentsMonthly cost of searching for documentsYearly cost of searching for documentsTOTAL COSTS ASSOCIATED WITH DOCUMENT SEARCHESCost per second of workAnnual cost of searching for documents(based on an average work year of 220 days)510157501000.00116666666667 €00.88 €0.00 €192.50 €0.00 €192.50 €
  8. 8. understanding documentsBENEFITSCost reduction for work time savedCost reduction for storage space savedCost reduction for document searchesTOTAL ANNUAL COST SAVINGS8,981.54 €321.00 €5,352.00 €14,654.54 €STEP THREE: HOW QUICKLY WILL WE GET OUR ORIGINAL INVESTMENTBACK?Now we’re closer to being able to calculate the ROI on our digitalization project; but before we do that, we’vecertainly got to know how much money we’ll be investing.ATHENTO iDM PackageAthento iDMAthento CaptureImplementation1st year supportHardwareFujitsu fi6130 ScannerServer equipped with the necessary requirementsFIRST-YEAR INVESTMENT*23,000.00 €14,000 €9,000 €3,197.90 €2,000.00 €28,197.90 €* While contracting a multi-year support service program is not mandatory, it’s strongly recommended for theyears following the original investment. These prices serve as a guideline and could vary according to thedifferent components added or to specific development requirements.Once we know the total amount of the investment, we will be able to calculate the rate of ROI. Let’s do thatnow, using a maximum period of time of five years.INVESTMENTWith a new Athento-based document system, the business would reduce spending by14,654.54 €.
  9. 9. understanding documentsROI/Description Year 1 Year 2 Year 3 Year 4 Year 5 TOTALSavings Generated by the ProjectCost reductions – time saved, laborCost reductions – storageCost reductions – document searchesTotal savings generated by the projectProject CostsATHENTO iDM PackageFUJISTU fi6130 ScannerSupportTotal costs generated by the projectProgression of cost savings per yearServer equipped with necessaryrequirements7,858.85 €280.88 €4,683.0 €12,822.73 €23,000.00 €3,197.90 €2,000.00 €0.00 €28,197.90 € 3,800.00 €3,800.00 € 3,800.00 € 3,800.00 € 3,800.00 € 15,200.00 €2,000.00 €3,197.90 €14,654.54 € 14,654.54 € 14,654.54 € 14,654.54 € 71,440.89 €5,352.0 € 5,352.0 € 5,352.0 € 5,352.0 € 26,091.0 €321.0 € 321.0 € 321.0 € 321.0 € 1,564.88 €8,981.54 € 8,981.54 € 8,981.54 € 8,981.54 € 43,785.01 €23,000.00 €3,800.00 € 3,800.00 € 3,800.00 € 43,397.90 €-15,375.17 € -4,520.63 € 6,333.91 € 17,188.45 € 28,042.99 € 28,042.99 €In these calculations, we have also considered that it takes a month and a half to bring Athento up to full ope-rational capacity. As such, the savings generated during the first year are calculated on a base of 10.5months. These data show that our example company would recoup its investment starting from Year 3.At the end of the Year 5, you will have saved more than 28.000€.ROI
  10. 10. understanding documentsTotal savings generated by the projectTotal costs generated by the projectReturn on Investment (over five years)Year ROI payback takes effect71,440.89 €-43,397.90 €64.7%RESULTSYear 3Price per second of workNumber of documents processed per dayTime (in seconds) it takes one person to feed documents into thescanner*Daily costs of scanning documentsAccuracy rate of system extracting dataDocuments in which data extraction could fail (2%)Time (per day) used to scan documents0.00116666666667 €10037.537.5COSTS DERIVED FROM WORK0.04 €98%2An 64% return on investment means that we’ve made a great investment, not just getting the money investedback, but also producing profit, too.The solution I choose DOES affect my Return on InvestmentFinally, we’d like to point out that not all digitalization projects are going to deliver the same results. Manyfactors can affect the performance of the project; and, without a doubt, one of those factors is the decisionsthat we take regarding technological acquisitions. That is not because different hardware or software solu-tions have different prices. Rather, it is because not all tools are equally efficient – and this is especially truewhen it comes to software.For example: had we chosen a document manager such as Nuxeo, together with a capture application suchas Ephesoft, it would take us 45 seconds longer to find a document whose exact data we do not know or donot have, and the auto-classification process of tools such as these only provides an efficiency rate of 75%.If we consider that all of the other factors stay constant (costs associated with the previous system, the price,time needed to implement the solution), the benefits would be reduced. Let’s take a look:
  11. 11. understanding documentsTime spent on re-entering data manually (min)Time spent (per day) on re-entering data manually (seg)Cost of re-entering data manuallyAccuracy rate of system that classifies documentsDocuments which have to be manually classified (2%)Time spent classifying a document manually (in seconds)Time spent (per day) classifying documents (in seconds)Cost of classifying documentsDaily cost of scanning documents (220 working days per year)Daily cost of re-integrating dataCost of classifying documentsTotal costs derived from working with the new system1.51800.21 €75%15253750.44 €9.63 €46.20 €96,25 €152.08 €As you can see, this new system produces less savings related to costs derived from work.Now, in the following table we will consider the cost associated with document searches.
  12. 12. understanding documentsCOSTS ASSOCIATED WITH DOCUMENT SEARCHESNumber of people who have to search daily for documentsAverage number of documents searched per dayTime taken to find a document electronically, in secondsTotal daily time (in seconds) spent searching electronicallyfor documentsAverage number of documents lost every monthTime taken to find a lost document (in seconds)Average amount of time (in seconds) spent searching every monthfor lost documentsDaily cost of searching for documentsMonthly cost of searching for documentsYearly cost of searching for documentsTOTAL COSTS ASSOCIATED WITH DOCUMENT SEARCHESCost per second of workAnnual cost of searching for documents(based on an average work year of 220 days)5106030001000.00116666666667 €03.50 €0.00 €770.00 €0.00 €770.00 €As in the case of costs derived from work, savings associated with document searches are lower compa-red to the savings produced by Athento.Now, let’s calculate the ROI with the new system.
  13. 13. understanding documentsROI/Description Year 1 Year 2 Year 3 Year 4 Year 5 TOTALSavings Generated by the ProjectCost reductions – time saved, laborCost reductions – storageCost reductions – document searchesTotal savings generated by the projectProject CostsATHENTO iDM PackageFUJISTU fi6130 ScannerSupportTotal costs generated by the projectProgression of cost savings per yearServer equipped with necessaryrequirements7,785.68 €4,177.25 €€12,243.81 €13,992.92 68,215.49 €4,774.00 €8,897.92 € 8,897.92 € 43,834.59 €-15,954.09 € -5,761.17 € 4,431.75 € 14,624.67 € 24,817.59 €23,000.00 €3,197.90 €2,000.00 €0.00 €28,197.90 € 3,800.00 €3,800.00 € 3,800.00 € 3,800.00 € 3,800.00 € 15,200.00 €2,000.00 €3,197.90 €23,000.00 €3,800.00 € 3,800.00 € 3,800.00 € 43,397.90 €ROI19,942.19 €8,897.92 €8,897.92 €280.88 € 321.0 € 321.0 € 321.0 € 321.0 € 1,564.88 €4,774.00 € 4,774.00 € 4,774.00 €€13,992.92 €13,992.92 €13,992.9224,817.59 €
  14. 14. understanding documentsTotal savings generated by the projectTotal costs generated by the projectReturn on Investment (over five years)Year ROI payback takes effect68,215.49 €-43,397.90 €57.2%RESULTSYear 3As you can see, choosing Athento would mean that ROI would start a earlier than it would with the competi-tion’s product.We hope that we’ve been of help to you, but don’t forget that we’re always here to answer any questions thatyou might have.askourteam@athento.comTwitter: @yerbabuenasoftwww.athento.com

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