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Economic Benefits of a Document Management System (DMS)

A Document Management System (DMS) also known as Enterprise DMS or Corporate DMS maintains an electronic repository of documents. For example, the HR department typically accumulates dozens of physical documents per employee over an employee’s service period and such documents are kept in a folder in a cabinet or in a storage box in the archival location or even stored in a warehouse belonging to a third-party records management company. However, easy access to these physical documents is a problem since it has to be first retrieved and then brought to the desk of the person needing this document which takes time sometimes in hours or days and can be expensive as well. A DMS that keeps an electronic version of these documents can not only retrieve these documents in seconds but also permit multiple personnel access these documents at the same time from different geographical locations which is impossible for physical documents. In this blog we highlight economic benefits of a DMS to a company.

Document storage involves the following main expenses:

[if !supportLists]1. [endif]Cost of creating documents

[if !supportLists]2. [endif]Cost of storing documents

[if !supportLists]3. [endif]Cost for retrieving documents

Cost of creating documents has multiple components: creating forms such as employee information forms, health information forms, leave forms, PO’s, and so on; cost of making copies of such forms so that regulatory and policy requirements are met (in terms of duplicates and triplicates); and ad hoc documents such as memos, general correspondence, and notifications that are created during the process of doing business. On an average about 30 pages[if !supportFootnotes][1][endif] of documents are created per employee by the HR department. Since multiple copies of these documents need to be maintained, we can safely assume about 100 pages of documents per employee are kept by the HR organization. Since one sheet costs roughly ₹1 per sheet[if !supportFootnotes][2][endif] it easily costs at least ₹100 to create documents for an employee. Again at about 30 documents per folder, this means about three folders per employee are created. So a company recruiting 1000 employees per year will spend about ₹100,000 per year creating documents.

Cost of storing documents is the cost involved in developing processes and acquiring space to store documents physically. One filing cabinet requires six square foot of space - which can keep about 120 folders - about 40 employees’ folders. In Mumbai, India, per square feet cost for business space is about ₹50 per month which means to store 40 employees’ folders one needs to pay ₹300 per month. A company with 1000 employees will need to spend about ₹7500 per month in just maintaining records of active employees. Besides, companies have archival locations for their past and current employees. A typical archival location in a company in Mumbai, India, has an area of about 1000 square feet and this can store roughly records for 6000 employees at a cost of ₹50,000 per month or more. This means a company spends about ₹700,000 per year storing physical folders of active and past employees.

The last major cost component for document management is the cost of retrieving documents when needed. Given a typical ratio of one HR employee per 100 employees[if !supportFootnotes][3][endif] in a company, for a company with 1000 employees we need about 10 HR employees. Since one HR employee spends roughly 9 hours per week[if !supportFootnotes][4][endif] searching for information, this means 10 HR employees spend 10 work days (9 hours/work day) per week searching for information, which translates to roughly 500 work days per year of searching for information. This means about ₹500,000 per year cost for retrieving information assuming average HR employee CTC of ₹1000 per day.

The total cost for a physical document management system works about to be ₹1,300,000 per year just for the major cost drivers. This amount does not include the risk mitigation cost required for maintaining privacy and confidentiality of HR documents. On the other hand, a typical DMS initially costs about ₹700,000 for 10 user licenses and about ₹150,000 per year on AMC. There will be additional upfront cost to scan existing documents into the DMS, which we estimate at roughly ₹1,000,000. Therefore, a DMS pays for itself within two years and this fact is corroborated by a study by Iron Mountain[if !supportFootnotes][5][endif]. Moreover, DMS comes in-built with privacy and confidentiality mechanisms using strict access controls and encryption technologies. Therefore, risk mitigation costs, such as by purchasing insurance, is avoided altogether with a DMS.

Besides HR, other departments of a company such as Legal, Accounting and even Engineering & Design departments also pile up large stock of physical documents and they will also benefit economically by moving to a DMS. If multiple departments within a company are able to share the cost of DMS then the DMS will pay for its investment much faster than two years.

dMACQ DMS is an enterprise-scale browser-based DMS that provides document storage, search, retrieval, security, and audit for multiple concurrent users. dMACQ’s DMS can be hosted on-premise or on the cloud. Besides dMACQ also provides on-premise digitization services so that not only do confidential documents never leave the premises but also the installed DMS is deployed for immediate ROI. Moreover, investing in dMACQ DMS will not only pay for itself sooner but also provide state-of-the-art access technologies including mobile access to all employees in a company.

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[if !supportFootnotes][2][endif] and assuming a PPP of ₹16 per dollar.

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