Quantifying ROI and Developing a Business Case for ECM

If you can’t demonstrate the value of enterprise content management (ECM) within 10 minutes in an executive presentation, it’s likely that the funding will -- once again -- go instead to other projects that do show the hard returns. It’s imperative to demonstrate a solid return on investment (ROI) for any IT initiative, particularly for rollouts of ECM technologies.

I calculate ROI a few different ways in almost every project I do – in order to decide among a number of possible courses of action. Then many of our clients will use the same methods to rank ECM relative to other requests competing for IT spend.

Being able to develop and present a solid business case is critical not only to making good decisions, it’s also critical to packaging the message so that the impact of the ECM initiatives you propose will be clear to executive management. This post presents the fundamentals for making an effective business case, particularly:

  • The types of initiatives you should assess
  • The types of benefits you should go after
  • The types of business case you should develop
  • The types of data you should use in your business case

I then pull it all together and outline the methodology: the sequence of steps you should take to create the business case.

Types of Initiatives

First, distinguish between targeted and infrastructure initiatives. Targeted initiatives are ECM projects designed to address specific business problems or areas of ECM functionality. Infrastructure initiatives are projects that affect the entire enterprise.

The significance of the demarcation that contrasts targeted initiatives (whether industry-specific or cross-industry) with infrastructure-related initiatives is that the sources of funding tend to be different. Furthermore, an organization’s stage of maturity within the ECM lifecycle at a given point in time may dictate which approach is taken.

When putting together a business case, you should consider your approach based on the organizational culture, the appetite for spend, the maturity level of ECM, and the enterprise’s overall familiarity with the potential value that ECM can bring. While an infrastructure investment makes a lot of sense in certain instances, other organizations might find a targeted initiative a more favorable approach, given their particular funding constraints. In still other organizations, proving out targeted value might be the first step toward justification of an infrastructure-related spend for ECM.

Types of Benefits

Ask yourself: Which types of benefits align most closely with my organization’s corporate business goals? These are the benefits that are most likely to get the attention of executive management. Evaluate your proposed initiatives by how well they fit your organization’s business priorities, and then prioritize and present them accordingly. Here’s a partial list:

  • Revenue lift:  Benefits that help the organization increase revenues. (Example: customer communications technologies that integrate with LOB systems, allowing for cross-selling and up-selling to existing customers)
  • Risk mitigation/compliance:  Benefits that improve the organization's ability to reduce corporate risk or facilitate its ability to comply with regulations (Example: records management technologies that make it easier to manage discovery-related information in the event of litigation)
  • Cost reduction: Benefits that decrease the hard-dollar costs of business processes (Example: imaging and e-forms technologies that reduce the amount of paper in business processes)
  • Business continuity: Benefits that improve the organization’s ability to ensure that mission-critical functions and services can continue uninterrupted during and after a disaster. (Example: imaging technologies and mirroring of repositories to ensure up-to-date copies of business-critical documentation and data are maintained in geographically dispersed locations)

Types of Business Case

Next, consider the various types of business cases. There are different circumstances in which each type of business case is appropriate. Your approach may be one or a combination of these types. Your goal here is to create defensible scenarios to demonstrate how your proposed initiative will provide quantifiable ROI, not just an enumeration of the soft benefits.

  • Top-down Business Case:  A top-down business case is typically an organization-wide business case that highlights macro-level ECM benefits at an enterprise level. These tend to be credible only for hourly wage/variable capacity types of workers, where capacity planning can be directly affected with even minor efficiency gains. (Example: Making information more easily accessible to customer service reps in call centers throughout the organization, thereby reducing time required to service calls)
  • Bottom-up Business Case:  This is generally a more credible and more successful approach. It tends to be more precise for knowledge workers and also works rather well on the process worker-related activities and tasks, where certain patterns tend to recur in many areas. Not only can a particular line of business benefit from a process-level drilldown, but those same ECM usage patterns can be applied to other processes that have similar characteristics. (Example: New Account Origination optimization through imaging, e-forms, and workflow, which presents usage patterns similar to those in Retail Mortgage Processing)
  • Reallocative Business Case This class of business case focuses on reducing costs from one area and allocating the savings to another area. (Example: Suppressing print for customer communications and reallocating those savings for modernizing the personalization platform for electronic customer communications)
  • Retrospective Business Case:  The retrospective business case focuses on analysis of a particular event or scenario and demonstrates how the outcome would have been different if ECM technology were in place. (Example: an instance of litigation discovery, showing the actual costs of the discovery event and the cost reductions with ECM technologies in place)
  • Embedded Business Case This class of business case focuses on demonstrating the ability of ECM to enable an existing and already funded initiative, where ECM acts as an enabler for the in-flight effort. (Example:  Using the document management and records management capability sets of ECM to enable archiving for an ERP initiative that is already funded and underway)
  • Reformative Business Case: The reformative business case tends to highlight the structural, business model-related, or highly strategic changes that require aspects of ECM in the critical path. (Example: A business model, such as outsourcing, that the organization seeks to pursue, where ECM technologies such as digitization and process automation are prerequisites for undertaking a distributed sourcing environment)

What Types of Data Should You Use?

Use your own internal data. The basis of a credible business case is relevant, organization-specific data on the costs, volumes, and other metrics around your current business processes. Also use industry benchmark data. Many organizations don’t compile these metrics. The data simply don’t exist. And even if it does exist, you might not have a relative comparison of the severity of the issue. We recommend using a hybrid approach to data that uses not only internal organizational data, but also industry benchmark data, and compares the two.

Creating the Business Case

Creating-the-Business-Case

When you put the above pieces together into a process that you can actually execute and end up with a convincing business case, it looks something like this:

  1. Define the Criteria:  Ask: Which benefit type/types align most closely with your own organization’s corporate business goals? These are the benefits that are most likely to get the attention of executive management, whether they are one, or a ranked combination of, revenue lift, risk mitigation/ compliance, cost reduction, business continuity, or something else.
  2. Prioritize the Processes:  Evaluate the most promising of your existing business processes for potential benefit from ECM. Assess the potential impact of ECM on each business process and rank those processes, using your defined evaluation criteria. Evaluate your proposed initiatives by how well they fit your organization’s business priorities, then rank and present them accordingly.
  3. Depict the Current State:  Create a view of the current process, applying current state metrics and facts. Include data specific to your organization (costs, volumes). Supplement with industry benchmark data in areas where your own data is incomplete. Where possible, also include an analytic/ heuristic model that shows how other organizations in your industry approach the process.
  4. Project the Future State:  Develop a view of the desired future state with estimates of the improvements enabled by the deployment of ECM technologies. Use industry benchmark data to project the costs of the future state.
  5. Quantify the Benefits:  For each process, aggregate and analyze the hard and soft benefits in terms of your chosen criteria (revenue lift, risk mitigation/ compliance, cost reduction, business continuity).
  6. Communicate and Socialize:  Don’t blow it after doing all the heavy lifting. This is the step where you get or lose executive buy-in. Develop an effective communications model and socialize it with the executive team. If possible, create an interactive visualization of the business case to communicate the business case graphically, in a succinct, easily understood format.

The most critical piece of the business case is calculating an ROI and then communicating it to executives in sophisticated, yet easy-to-understand visual and interactive models. A business case should always be able to present “what-if” analysis, showing causes and effects resulting from changes in assumptions. The business case should be simple enough to review in a few minutes with an executive audience, but still display the robustness of the analysis.


Rich Medina
Rich Medina
I’m a Principal Consultant and co-founder of Doculabs, and the resident expert in using ECM for information lifecycle management.