Assessing ECM Strategic Planning and Implementation in the Financial Services Industry

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1 Implementation in the Financial Services Industry Tom Cobb, III Mike McGinty FIS Consulting Services

2 Revisiting ECM Utilization by Banks FIS Consulting Services recently updated and expanded Enterprise Content Management (ECM) is the strategies, methods and tools used to capture, research conducted on enterprise content management (ECM) manage, store, preserve, and deliver content within mid-tier banks. As the original paper was written two and documents related to organizational years ago, FIS determined it was time to follow up with processes. ECM tools and strategies allow the management of an organization's unstructured another survey revisiting industry progress toward ECM information, wherever that information exists. implementation with a bank sample similar in size and number. Association for Information and Image The original survey and findings provided a snapshot of how Management (AIIM) definition ECM was being practiced in general and how banks expected those practices to evolve and affect their business. The new research covers similar ground, allowing a comparison of how far banks have come regarding ECM utilization compared to two years ago. The studies, however, are not identical. This survey reviews bank responses through the prism of ECM strategic planning and implementation to a greater extent than our previous research, including areas banks tend to misinterpret or overlook completely when putting together an ECM initiative. A look at issues related to banks perceptions of ECM-related savings is also included. The current study benefits greatly from FIS refined approach to research and analysis, honed during two additional years of analyzing ECM initiatives and partnering with banks to implement them. This survey leverages that advancement to great effect. An Industry Standard Slowly Coalesces Undeniable surface appeal Talk to a financial services manager or executive and he or she is likely to agree that the quest for comprehensive ECM implementation and all it entails continues to be a focal point for the industry. Statistics bear this out. For example, Gartner estimates that the overall prevalence of ECM will increase at an 11 percent average annual growth rate through 2015, after growing at single-digit rates in previous years, thanks in part to strong demand from the banking and financial services industry. ECM is rapidly becoming, if not already, a standard expectation for banks doing business in the 21st century. The impetus to craft a paperless environment across the enterprise is understandable given ECM s undeniable surface appeal, which does not require a thorough knowledge of the required technology and processes to comprehend. Figure 1 provides an overview of what banks find compelling about ECM what is driving them toward the concept tangible advantages that can be appreciated by those with even cursory knowledge of such systems: 2

3 Improve process throughput (productivity) Improve speed of information access (customer service) Improve information searchability/shareability (knowledge of management) Reduce physical storage space (office cost) 68% 49% 44% 35% Secure record storage and retrieval (compliance) Reduce paper use and copying (environmental cost) Reduce postage, transportation and logistics costs (operational expense) Improve resilience to business disruption (business continuity and disaster recovery) Reduce data entry costs (direct labor savings) Increase the options to relocate our outsource functions (organizational flexibility) 30% 26% 26% 12% 8% 3% Figure 1. Paperless Banking Drivers Source: FIS 2013 ECM Survey Productivity and customer service advances top the list. Other improvements fall under the umbrella of reduced office and operational expense, whether it be saving on labor costs, reducing the hassle associated with compliance or making it easier to access the information required to do one s job. FIS Consulting Services believes pervasive demand for ECM solutions position it as an emerging industry trend that extends beyond the scope of a temporary competitive advantage. ECM implementation is evolving into table stakes for what it will take for a financial institution to remain competitive in the long haul. However, adoption by the industry remains incomplete. While banks understand what they can gain by implementing a comprehensive ECM approach, they struggle to do so. This gap between a bank s goals and where it currently stands is not insurmountable, but it takes more than surface recognition of the benefits to do so. Plotting a course to traverse the distance takes foresight and planning, which many small- and mid-size banks have yet to execute adequately. Until a bank s ECM planning and strategy begin to mature, the institution stands to lag behind an industry standard that is destined to coalesce slowly but coalesce, just the same. A scattershot approach Evidence typified by the research published in The Paper Free Office Dream or Reality (AIIM, Feb. 6, 2012) supports the assertion that the industry s progress toward reaping the benefits of ECM remains less than uniform and more than a little scattershot. Some have yet to think about the concept, some have thought about 3

4 it but have yet to start implementation, and some are adept at getting certain components up-and-running, but an all-inclusive approach remains elusive to them. FIS recent research reflects similar findings. While just over half of the banks interviewed had what they considered to be a comprehensive ECM strategy a small percentage when one considers the paperless office has been touted as far back as the personal computer s introduction into the workplace just 11 percent considered themselves to have completed implementation or come close: Has your financial institution defined an enterprise content management (ECM) or paperless banking strategy for your entire organization? Yes 54% No Bullet Sub-bullet If yes, how far is your bank in overall ECM implementation? Sub-b 0% - 19% 20% - 39% 40% - 59% 60% - 79% 80% - 100% 46% 38% 17% 24% 11% 11% Figure 2. Paperless Banking Strategy Source: FIS 2013 ECM Survey The above feedback raises further questions. What does a bank consider a paperless banking strategy? What does ECM implementation mean to a bank? And what exactly do banks perceive is preventing them from progressing further and faster toward a viable ECM implementation? Barriers to overcome Let s look at that last question. When it was posed as part of the 2011 survey, lack of integrated business processes was the obstacle most cited, with 76 percent of responses, followed by technology to support business objectives at 53 percent and lack of a clear financial business case for transition at 41 percent. This time the makeup of perceived barriers has evolved, indicative of the industry s growing familiarity with the ECM process and the refinement of the FIS survey process, which encouraged more specific responses than in the previous effort. 4

5 Extending ownership of a new process across traditional functional area boundaries 60% User resistance to change 57% Lack of a single identifiable process owner 52% Lack of understanding the value of business process improvements associated with ECM 42% Costs exceed expectations 42% Securing cooperation from business line owner 35% Potential of outsourcing business functions 7% Lack of support from executive management 6% Figure 3. Barriers to Overcome Source: FIS 2013 ECM Survey Concerns over integrated business processes and available technology have disappeared, likely reflecting an industry-wide recognition of advances in image capture and a general awareness of the feasibility of integrated and automated business processes. Given that around 11 percent of respondents in Figure 2 have achieved more than 80 percent ECM integration, it is safe to say that recognition of a process does not equate to its successful implementation. While there are many potential reasons for the industry s inability to get the hang of reducing and removing paper from its daily workflows, experience has demonstrated to FIS that inadequate planning may well be an issue. The overwhelming majority of items cited as barriers in Figure 3 can be addressed with effective planning that includes the following activities: Defining a process owner and getting support from executive management, who may or may not be the process owner. Although it is not unusual to recommend that the project champion be a top-level executive, this is not the preferred choice for an ECM initiative. The planning process will be more productive if the choice is someone in a business line that will play an active role in the daily processes that will be impacted by electronic document flow. Executive buy-in is important, but peripheral involvement is adequate. Educating staff regarding the business process improvements associated with ECM. This is necessary as business lines should be driving process re-engineering (see next bullet). Anyone who has a piece of that process has to sit at the table and be part of it, including departments as wide-ranging as loan origination, lending, IT, support, and accounting and finance. Their involvement helps ensure their recommendations are on target because they are building a familiarity with the process. 5

6 Establishing enterprise-wide ownership across boundaries, including securing cooperation from each business line owner. If the goal is to have an initiative that is enterprise-wide in scope, then it is ideal to have the implementation driven by cross-functional teams. That is the easiest way to craft an overarching strategy that includes enough detail regarding how the job is going to be done, what technology is going to be used to support it and how the business lines are going to work together to make sure everything functions at an optimum. Creating a culture that minimizes resistance to change. This is a byproduct of the process summarized in the previous bullet, which makes it easier for all areas of the bank to be engaged; it sets the tone for what will hopefully become business as usual. Setting realistic expectations for expenditures and costs. This will be expanded upon in the section Forging Realistic Expectations for Financial Benefit on page eight. The Core Importance of Planning Optimal ECM implementation is a marriage of people, technology and process. Selecting the right technology is integral to the initiative s success, but if an organization is not adapted to receive it properly, the benefits, including maximizing savings, cannot be realized. Apply technology to a bad process, and the result is a bad process, automated. This is exactly what happens when a bank tries to cram a solution set into an existing process that has not been re-engineered to align with it. Additionally, having people with the wrong set of skills to be successful in the new world is a prerequisite for failure. The collaborative approach cited in the previous section helps ensure this does not occur, as it fosters the creation of business processes that effectively leverage the selected technology. Image-to-process model as a benchmark If there is an ECM nexus a critical intersection of business process and technology that serves as a benchmark for a paperless banking model it is the image-to-process model. A strategic ECM plan must consider reengineering around the image-to-process model because it offers the greatest efficiencies and potential savings. 1 While it s not accurate to say that image-to-process is the framework around which a bank can build the marriage of ECM technology, process and people, it is a defining characteristic of the model that contributes 1 This is in contrast to image-to-archive, where the data can enter the system at any given point in the process and is not necessarily sharable or searchable. Banks have had a much firmer grasp of scan-to-archive in the past, but this is beginning to change as the scan-to-process concept becomes more embedded in the daily lives of banking personnel, typified by such examples as online ordering and recall, package delivery and tracking, and airport luggage handling. 6

7 greatly to financial benefit achievement. It provides the right context for and can influence process design, adding concrete talking points to a conversation that may otherwise prove too abstract to be actionable. A discussion about image-to-process leads to broader conversations about workflow and the rules governing it for example, which documents need to be completed and electronically queued up before a credit can be approved, or what is the last completed step that triggers access to an information set by the next business line? Given the core value of image-to-process, when FIS asked participating banks to evaluate the progress of their own planning process, it used the methodology as a filter: Does your institution s ECM plan include the following? Both 82% Image-to-archive Image-to-process 15% 3% Do you primarily capture (or plan to capture) images: Still planning the process, capture to be determined at a later date At the first point of contact (paper or digital image is first received) Centrally (paper and digital images are sent to central area for capture and indexing) At the completion of process (all documents generated and signed) 34% 27% 22% 17% Figure 4. Image Capture Plan The results in Figure 4 are decidedly mixed, if we are to assume image-to-process as a bellwether for ECM. While the overwhelming majority of banks interviewed stated that they plan to use both types of image capture technology, a very small percentage plan to use an image-to-process solution exclusively. First point of document contact is critical The bottom part of Figure 4 contains more specific feedback about the banks image capture plans. Only 27 percent of respondents actually capture or plan to capture at the first point of contact. The lack of attention to capture at the point of contact indicates the industry still has a way to go before it grasps fully what it will take to make ECM function to its full potential. 7

8 The fact that banks have yet to incorporate a clear, rationalized plan for image-to-capture and first point of contact in image processing is something the industry needs to address sooner than later. However, the fact that two-thirds of the industry has gained a familiarity with and has incorporated some form of scanning into their plan may signal a necessary precursor to a more effective approach. Forging Realistic Expectations for Financial Benefit A substantial turnaround We have so far discussed planning mainly in terms of process implementation, but there is another aspect of ECM planning with which it intertwines: the ability of the bank to accurately project cost savings. Just as there can be a disconnect between the bank s understanding of implementation and the details of the process needed to get there, so can there be a disconnect between the bank s conception of financial benefits before implementation and those that actually occur. This is less than ideal, given the role of financial projections in a business case and proposal. Given the critical nature of assessing financial benefit, FIS included finance-related questions as part of this survey. 2 It isn t the first time. In the 2011 survey, FIS queried banks on their expectations for ECM cost savings. At that time, the overwhelming majority of responses cited improvements in hard costs such as transportation expense, paper reduction and storage expense/retention. Savings from process improvements were not explicitly called out, but our review of survey responses and experience with bank clients indicate an increasing awareness of the value of business process improvements in ECM efforts. One need only look at the findings in Figure 5 on page nine to see to see that hard costs still retain their appeal, but banks have begun to change their perception of where savings lie. This is evidenced not only in the first response shown in Figure 1, but also by the more granular analysis in Figure 5: 2 For example, FIS Consulting Services recently performed a full paperless banking engagement for a $5 billion bank in which the net savings, before any investment, was more than $3 million. $1.4 million of that was attributable to hard costs; $1.6 million was labor-related. 8

9 Workflow or optimizing business processes 76% Storage expense reduction (from files, staff handling, office space) 64% Replacing manual document identification and indexing 37% Transportation/courier expense reduction 35% Retention/destruction expense reduction 32% Avoiding data entry expense 18% Figure 5. Where Financial Benefits Come From Source: FIS 2013 ECM Survey In what appears to be a reflection of the industry s growing familiarity with ECM and what it brings to the table, an overwhelming majority 76 percent now look for savings from workflow efficiency and business process optimization a substantial shift in perspective from just two years ago. The era of giving short shrift to process improvements appears to be at an end. But does that mean the industry is on the brink of capitalizing on these potential savings? Truth be told, it still has a ways to go. Unrealized potential While optimistic that cost improvements can and do result in savings, our surveyed banks reported only the most modest of results when reporting on their own experiences: 9

10 $500, % $200,000 to $499,999 11% $100,000 to $199,999 8% Up to $99,999 3% $0 24% Reduce courier costs 3% Unknown 43% Figure 6. Actual Annualized Cost Savings Source: FIS 2013 ECM Survey Despite understanding the potential for annualized cost savings, only the smallest percentage seems to be reaping the monetary fruits of their initiatives. Almost a quarter of those surveyed have seen zero dollar improvement, and close to half have no clue what their savings are at all. When these same banks were asked to project future savings, the responses were almost as modest, with almost the same percentage of Unknown responses: 10

11 $500, % $200,000 to $499,999 7% $100,000 to $199,999 12% $50,000 to $99,999 7% $25,000 to $49,999 7% $10,001 to $24,999 2% Up to $10,000 5% $0 10% Unknown 44% Figure 7. Projected Annualized Cost Savings Source: FIS 2013 ECM Survey What do these numbers represent? It s probably safe to say the survey sample includes segments of banks that: Remain unaware of ECM s capability to provide cost savings Understand the savings potential but are struggling to figure out how to get started Take a piecemeal approach one unit at a time without an overarching enterprise-wide strategy Have implemented the technology but have failed to address process adequately Have implemented the technology and have made a good effort to marry it to process, but have overlooked the need to put measuring and tracking tools in place While there are undoubtedly many causes for the industry s inability to capitalize on ECM cost savings to their fullest extent, a pervasive issue is the bank s inability to make a clear, defined connection between the required process re-engineering and the financial benefit that follows as a result. Keys to unlocking cost savings Process and cost savings are umbilical. Implementing ECM from a singular technology perspective without taking the next step of addressing how that technology changes the process, the work steps and the associated skills required of the people in the new world sub-optimizes the benefits not just in terms of performance, but financially. If planned and implemented the right way, ECM s automated processing workflows will most certainly enable: 11

12 Capture, administration, visualization and delivery of grouped information with its associated documents or data Incorporation of data processing tools (such as specific applications) and documents (such as office products) Parallel and sequential processing of procedures including simultaneous savings Reminders, deadlines, delegation and other administration functionalities Monitoring and documentation of process status, routing and outcomes Tools for designing and displaying the process Each one of the concepts represented by these bullets represents a key to unlocking financial benefit. They are contributors to automated workflow, streamlined work steps, the elimination of redundancies, the reduction of lag times, and great improvement in overall process cycle times with greater control and transparency. Thus if overall cycle time is reduced, one is able to either process the same work volume with less labor or process more work volume without adding to staff (absorption). Either one yields a financial benefit together the benefit can be greater than the combination of the two. For example, reduced cycle time can improve loan approval rates as much as loan pull-through rates, which translates into faster growth in loan portfolios. Until the industry forges a greater awareness of process-related/staff savings (or even benefits to their internal and external customers) in contrast to hard cost savings, the potential for those savings will remain greatly diminished. Summary Banks need to move to the paperless operating environment sooner rather than later. It takes time to build a sound strategy, identify metrics, define measurement characteristics and run a pilot program to ensure ECM results in impactful financial benefit. Process improvement is becoming a part of the industry s lexicon, and the technology to support it is advancing at a rapid rate. Those that work most diligently to obtain a deep, comprehensive understanding of what it takes to remove paper entirely stand the best chance to benefit in the long run. Contact Us For more information on strategies to improve efficiencies and overall financial performance, contact FIS Consulting Services at or visit