If paper is flooding your office -- paper that is vital to your business -- you may be considering some options to address it. One option that merits review is document management outsourcing, where a third-party service company manages all or part of your paper flow. The solution involves an outsourcing company providing some or all of the following services: receiving your documents, scanning them, indexing them, uploading them into a browser-based access program, and redundantly storing the files. The flexibility of this solution, when combined with the recent state of the economy and limits on capital expenditures, makes a strong case for why the document outsourcing market has grown over the past five years. Industry analyst InfoTrends (Norwell, MA) estimates the U.S. document outsourcing market will reach a little more than $50 billion in 2005, a growth of 44% from $27.8 billion in 2000.

Is Document Management Outsourcing Right For You?
The benefits of an outsourcing solution are not limited to companies in particular verticals or of a certain size. The move to document management outsourcing is driven more by need, such as out-of-control or fluctuating volume, or complex invoices, to name a few. With that said, though, companies that exhibit such needs are typically in the financial, insurance, healthcare, retail, and manufacturing verticals. "Document management outsourcing works best for companies with data-intensive paper processes, and those processes tend to be in those verticals," says Bob Elliott, VP of business development for Virtual Image Technology, Inc. (Fort Mill, SC).

Fluctuating Volume Is A Key Reason To Choose Document Outsourcing
The volume of documents that drives companies to seek a document management solution varies greatly, as Trevor Brown, chief marketing officer at LASON (Troy, MI) expresses: "In corporate accounts payable, a critical point may be processing 5,000 paper-based invoices a month. A claims processing or healthcare payer application could have 5,000 documents a day before the volume becomes too large to handle. The pain is not purely a function of volume, though. A widely fluctuating document flow plays a big role in a company's challenges with an in-house operation."

Fluctuating volume -- surges of documents coming into the office at certain times, with mere trickles at other times -- often translates to outsourcing being an effective document management solution. Organizations that most typically exhibit seasonal or other fluctuations in volume are tax forms processors, mortgage and loan companies, and mail order catalogue companies, to name a few. Hank Boggio, senior VP of marketing at Archive Systems (Fairfield, NJ), cites an example of the mortgage industry, where the rise and fall of interest rates drives the rise and fall of paper coming through offices.

Weigh The Investment Of In-House Scanning
You may be thinking, "Why not bring an imaging and management system in-house?" That is not uncommon for companies inundated with paper. But the investment in an internal system requires a significant capital expenditure of $100,000 or more, and if the volume of documents you'll be processing isn't constant, it may be a waste of funds. For example, Company A and Company B may both process 2 million documents a year. However, Company A may process 1.5 million of those documents in a two-month period, versus Company B, where the document flow is spread throughout the year. An in-house scanning solution may very well work for Company B, and outsourcing is probably a better fit for Company A. Boggio expands on his example of the document flow fluctuation at a mortgage company, saying, "An internal imaging solution may have worked well at first, when rates were low and document management needs were high. Mortgage companies found they had to add more scanning workstations, more IT resources, and more storage capacity. Then, the interest rates rose, the volume of paper declined, and companies were left with unproductive equipment and staff they no longer need."

Also, an in-house scanning solution can be more complex and high-maintenance than anticipated, as Jeff Schor, VP and national sales manager for JP Morgan Chase Bank's (New York) content management solution, points out. "The technology associated with document management is constantly changing, with hardware and software upgrades needed every few years," he says. "An investment in the necessary equipment for in-house scanning is not a one-time fee."

You'll also need to consider the labor involved in the imaging and indexing of the documents, and maintaining the equipment. For processing the documents, you'll need to have adequate staff to organize the documents, scan them, re-sort them, shred or refile them, and finally, index the images. Your IT department will need to provide maintenance to the system, fixing problems and installing upgrades. "Organizations need to ask themselves, 'Do we really want our IT department to try and focus on another infrastructure like a document management automation solution?' and 'Does the department have the ability to properly support and administer the solution over time?'" says Boggio.

Volume Is A Major Determiner Of Document Outsourcing Costs
How much will it cost you to send your document management off-site? Pricing generally varies according to the array of services you choose. Obviously, you'll pay more for an end-to-end solution than for one or two steps in the process. But, some generalizations can be made: 1) Expect to pay some sort of start-up fee to get the solution off the ground. Says Boggio, "A simple business process might be in the $10,000 range to develop the pieces of the solution." 2) The complexity of your documents, in terms of manual labor to prepare them to be scanned, will affect pricing. "Scanning documents can run from 6 cents to 15 cents per page, depending on things like staples, paper clips, data entry, etc.," he adds. 3) After those considerations, volume is a key factor. The number of documents scanned and images uploaded and stored usually determine a monthly or quarterly fee. And as a customer's volume increases or decreases, the fee will adjust accordingly. "The volume-based pricing model works whether a company is large or small -- it will only pay for what is processed and/or stored," says Boggio.

Retain Security, Control In Your Outsourced Relationship
One other thing you'll need to consider is how comfortable you are with an outside company handling your documents. "Clients usually have a fear of outsourcing because they don't know who's scanning their often-sensitive documents, or how the documents are being handled," says Brown. You'll want to find out what procedures a service company has in place to address security, like tracking documents with bar codes, storing documents in secure control rooms, and shredding documents when the scanning is complete.

An outsourcing company can also provide reports that tell you what is where, in terms of documents flowing through the company. "If documents are coming into a client's mailroom, and its own people are processing them, the client knows what has come in. If the documents go directly to an outsourcing company, the fear is there. Clients wonder, 'How many invoices came in today?'" says Elliott. To address those concerns, the company can generate reports on daily activity that describe how many documents came in and where those documents are in the process of being loaded into the program clients will access.

Finally, look at a service company's customers. Does it have experience with companies like yours? A service company with a footprint in the financial services vertical will probably put your mind at ease more than one whose customers have less sensitive documents.