Richmond/Tidewater ARMA & Old Dominion AIIM

1. Richmond/Tidewater ARMA & Old Dominion AIIM A New Approach to Cost Justifying ERM Systems Bill Neale, FileNet Corporation

2. Presentation Overview • How to reduce the future cost of compliance and records management • Using business process management (BPM) to build true business value • Effective electronic records management and tangible return on investment (ROI) • Where to look and how to calculate electronic records ROI

3. ROI Heads the List in ARMA Study • Cost/benefits models (ROI). • Risk and cost of legal discovery and audits. • Role of electronic records in compliance. • The relationship between collaboration, document management and electronic records. • The relationship between message archiving and electronic records. • The role of electronic records in WCM implementations. • Collaboration between RM, IT, legal and business professionals. Source: ARMA Electronic Records Initiative with Forrester Research

4. Why You Should Care How IT Dollars Get Spent • IT controls the budget but wants results. • 59% want payback within 18 months of which 1/3 want payback within 12 months. • Business case is required to get funding. • Company size has only small effect. • 90% if over 500k • 70% if over 100k • 44% if under 50k Source: The ROI Dilemma, 2004 Best Practices Study by Kotler Marketing Group and Software & Information Industry Association

5. Which Type of ROI is Important? • 67% use ROI as basis to evaluate IT investments and many also look at payback period (35%). • NPV (20%) and IRR (18%) not as widely used. • Know what financial metrics are going to be used to evaluate your electronic records project. Source: The ROI Dilemma, 2004 Best Practices Study by Kotler Marketing Group and Software & Information Industry Association

6. Anatomy of a Business Case • Sometimes referred to as cost/benefits analysis. • Situation analysis - Scope, stakeholders and purpose. • Methodology and research details - Include other options with pros/cons. • Justification - • Compliance risk reduction. • Intangible benefits. • Tangible benefits (ROI). • Implementation - Start small but think bigger • Recommendations - Measure the results.

7. How You Can Reduce Risk and Create ROI • Help educate about the value of the records in the business process not just the records themselves. • Retain what you need to, for only as long as you need to, as determined by law, regulatory statute and/or sound business policy. • Only destroy (delete) records at the right time, for the right reason and by the right person. • Enforce RM policy consistently and uniformly through process, not people … wherever possible. • Know the business case for electronic records . • Risk reduction = TCF (total cost of failure). • Business improvement = ROI (multiple areas). • Measure and document your results. • Will lead to increased funding and results.

8. Business Case for Electronic Records • Early solutions did not enable ROI. • Current cost and state of compliance and record keeping. • Do nothing? • Add staff? • Deploy technology? • Future cost of compliance and record keeping. • Increasingly complex requirements. • Process itself needs to be managed and audited. • Volume and types of records will increase. • Storage requirements will increase. • What and where is the ROI? • Risk reduction – the negative stuff • New business value (ROI) and improvement – the positive stuff

9. Records don't get captured from the business user. Records are incorrectly classified. Records aren’t getting destroyed at all. High storage costs are unnecessary and avoidable. Records are lost or destroyed too soon. Inability to produce in court leads to spoliation claims. Costly to recreate. Records are kept too long. Discoverable and very expensive to defend. Process information not recorded. Breaks legal chain of custody. Now required for audit and compliance. RM policy not enforced. Reliance on users to make decisions about records. IT systems do not implement RM policy. RM Policy … Most Organizations 85% have formal records management programs, 47% do not include electronic records. 38% do not regularly follow own RM policy 46% do not have formal process for holds, 65% do not include electronic records 93% believe outcome of future litigation based on electronic records policy, 62% doubt they could defend own records 67% doubt own IT department understands RM policy Survey data from Cohasset Associates “A Call To Action” AIIM and ARMA 2003 study

10. Business workers make mistakes. Not all records get declared. Many records get misfiled or lost. Process information not captured. Proof of process adherence required. RM policy inconsistently applied and not enforced. Little visibility into program effectiveness. Significant loss of worker productivity. Law of small numbers. Rely on Business Users? Large organizations lose a document every 12 seconds 67% of data loss is directly related to user blunders Business workers typically misfile 2-7% of all records Law of Small Numbers: Business workers take 5-15 seconds each time they declare a record. Actual use case …. 10 seconds X 72 records/day= 720 seconds/day= 12 minutes/day= 60 minutes/week= 1 hour/week (2.5%) Can any company afford a 2.5% drop in office productivity solely to declare records? Source: PRISM International, FileNet and National Archives and Records Administration

11. Business workers make mistakes. Not all records get declared. Many records get misfiled or lost. Process information not captured. Proof of process adherence required. RM policy inconsistently applied and not enforced. Little visibility into program effectiveness. Significant loss of worker productivity. Law of small numbers. Rely on Business Users? Large organizations lose a document every 12 seconds 67% of data loss is directly related to user blunders Business workers typically misfile 2-7% of all records Law of Small Numbers: Business workers take 5-15 seconds each time they declare a record. Actual use case …. 10 seconds X 72 records/day= 720 seconds/day= 12 minutes/day= 60 minutes/week= 1 hour/week (2.5%) Can any company afford a 2.5% drop in office productivity solely to declare records? Source: PRISM International, FileNet and National Archives and Records Administration

12. Simple Rules for Risk Reduction and ROI • Sounds complicated but not really … • Don’t rely on business users. Don’t rely on systems that rely on your users. Rely on your process instead. • Capture the process info (and data). • It’s required now anyway. • Retain what you need to, for only as long as you need to, as determined by law, regulatory statute and/or sound business policy. • Only destroy (delete) records at the right time, for the right reason as managed by the right person. • Enforce RM policy consistently and uniformly.

13. Know Your Risk or Total Cost of Failure • Consider the following areas of exposure: • Likelihood • Likelihood of experiencing a given information management failure? • Frequency • How often would your organization experience such a failure? • Magnitude • What would the magnitude of the failure be? • Potential Costs • What would the impact be on legal costs, fines, company and professional reputation, investor confidence, stock price, cost of reconstruction, etc. Sources: Information Nation by Randolph Kahn, Esq, and Barclay Blair and Records and Information Management by William Saffady

14. It’s About YOUR Process • The media centric active - inactiverecords model has changed. • The model is now content centric and the line between documents and records is very fuzzy … it’s the actual process that matters most. • Manage the process not just the users. User Process: • Create • Edit • Use • Publish - Transact • Search - Request RM Process: • Retain - Store • Migrate • Defend - Produce • Audit • Expunge - Archive LOB Time About 95% are supposed to be destroyed

15. Improving RM Process is Better Business

16. Optimizing RM Process is Optimum Business Practice RM Data Reports • View RM and LOB data in new ways. • Find exactly the right information (costs, bottlenecks, compliance threats, fraud, etc.) • Analyze, simulate and improve all business processes.

17. Case Study - Tracking Records and Enforcing Policy • Enforce RM policy to individual process and tasks. • Complete record of all users and tasks. • “Real-time” view and status of everything.

18. Process Driven RM Examples Record Declaration Transfer / Disposition Review / Disposition Destruction / Disposition

19. Understanding RM Process is Good Business Physical Records Process

20. The Positive Stuff - ROI Areas • Strategic business process improvement. • Improve the business process itself (1) and enable the users to be more productive (2). • Reduced electronic discovery costs. • Reduced storage costs. • Immediate ROI (1) and long term ROI (2). • Automatic records capture and precise classification. • Don’t let small numbers become large numbers. • Reduced records administration operations. • Electronic delivery of requested or inactive records.

21. Strategic Business Process Improvement Requirements Capture records for legal compliance. Scalable processes to manage growth through mergers / acquisitions. Process improvement with the banks adoption of Total Quality Management into the culture. Banks stated objective to be a top 5% performer. Desire to be an industry leader in efficiency and quality. ABC Bank customer process - BEFORE

22. Strategic Business Process Improvement • Results • Projected Cost Benefit • Payback - 35.8 months • IRR - 22.41% • Actual Results • Cost reduced 50-60% • $13 Million Saved Annually • Payback every 4-6 months • Other Projects Impacted by Results • TQM Focus and Flowcharting • Performance Matrix • Quality Forum • Compliance ABC Bank customer process - AFTER Performance and Value Prior to process improvement, the process took as long as 2 weeks. After process improvement, the process was reduced to 1 to 3 days and file information is available in 1 sec to 15 minutes (versus 2 to 15 days).

23. Business Process, Compliance and RM • Layering on RM and compliance policies • Records and process information automatically declared and accurately classified as a record. • Process is invisible to the end-users and ensures compliance with law, regulation or business policy. • RM policy is enforced invisibly across the line-of-business. Enforcing RM in the business process Records … Are always generated at the same milestones in the business process. File Plan Policy Management

30. Electronic Delivery … • Old news that might be new news … • Electronic delivery of requested or inactive records. • Migration of records is costly. • Cost and legal exposure of lost records is high. • Handling costs are high. • Shipments are costly. • Physical storage facilities are costly. • Multiple requests for same records are impossible and take time.

31. Storage Needs Over Time Document (content) use declines over time. As much as 65% of all documentsbecome records. Almost all records are ultimately destroyed.

32. Reduced Storage Costs • Instant Benefit Metrics • Declaration of existing electronic files to records enables immediate identification of records past retention date. These records can immediately be destroyed. • Long Term Benefit Metrics • Current input volumes. • Projected % of reduced input due to better classification. • Projected % of documents misclassified for retention period (usually longer than needed). • Projected % of documents that can be destroyed on time. • Impact of this reduction on system components should be to lower overall storage requirements and cost.

33. Storage Needs Over Time Records storage requirements will continue to dramatically increase.

34. Storage Needs Over Time ROI can be found by factoring retention policies against storage requirements.

37. Auto Declaration

41. The Ongoing Cost of Compliance Analyze Optimize Automate

42. Good Web ROI Stuff www.valuebasedmanagement.net Explanation of all financial ratios and cost/benefit best practices. www.cio.gov/documents/TheValueof_IT_Investments.pdf Guidance from Federal CIO Council on value measurement methodology (VMM) for Section 300. www.whitehouse.gov/omb/circulars/a11/current_year/s300.pdf OMB Circular A-11, Section 300. http://www.archives.gov/records_management/ policy_and_guidance/cpic_guidance.html Guidance for coordinating the evaluation of Capital Planning and Investment Control (CPIC) proposals for electronic records applications. http://www.dir.state.tx.us/eod/qa/intro.htm Useful templates and checklists for business case and cost/benefit analysis.