Digitization of Records: Should You Do it and When?

By Ben Schmidt, Consultant

During the pandemic, Mattern has seen a sharp uptick in law firms attempting to address their off-site records programs. It makes sense; while this project is often set to the backburner, law firms have found time to address items such as off-site storage.

Mattern has found that the outcome that many firms wish to achieve is that of “paperless” or “paper light”. The benefits of going paperless or paper light are well documented, but the general idea underpinning it is that law firms want to stop sending money to off-site records providers for paper files if they can avoid it. And on the other side of that same coin, they don’t want to send new paper off-site as that will just perpetuate the situation.

The solution that some firms have arrived at is the buzz-worthy “digitization” of records. Thus, what you get is firms aggressively investigating how to not only turn off the spigot of new files heading off-site, but also investigating how to address the records that are already sitting in those warehouses.

What does the argument look like from a financial perspective? Does it favor digitization of records? And if so, at what point in the document’s lifecycle?

If we were to sum up in a soundbite-length response, it would be: start digitizing on a go-forward basis and leave your look-back files alone until they meet your governance policy term-end.

Let’s unpack why that is by examining the potential journey of a single box (1.2 c.f.).

We’ll start with the obvious. Storage is cheap. In almost every case, storing files on racks is the cheapest part of any firm’s storage contract. To illustrate, let’s take an example cost for storage and apply that cost to a single box (1.2 c.f.) and then assume that box has to sit there for a full 10 years:

At $0.20/c.f., with annual 3% escalators, it would cost your firm a total of $33.02 to store that box all the way to year 10, assuming no other services are utilized.

To digitize that same box, you typically have several fees involved with any off-site records vendor: (1) the cost to retrieve that box, (2) a setup fee – which will usually be inclusive of a certain number of pages, such as 50 pages, (3) the cost per page to digitize any overage pages over the included amount – we’re going to assume roughly 2,000 pages in a box, (4) the cost to then destroy that box. We can assure you that no matter what provider you use, the total cost for all of this will exceed the amount you’d pay for just leaving that box be for 10 years. To prove it, let’s play it out using some example costs.

Conversely, if you just wait until the end of that box’s term and destroy it, your costs would be:

As you can see, assuming there are no other services utilized for that box, the numbers definitely bear out that it is simply more cost effective to let a box sit in storage once it’s there and then destroy it when it comes up against policy. For boxes that are simply collecting dust and not used frequently, there is basically no reason to look back and digitize records that are already off-site. And to be clear, the majority of the boxes sitting in storage – 80% – do just that, sit there and are never touched again. Thus, only a relatively small percentage of boxes could be considered “active”, in the sense that there is some activity involved once they’ve been sent off-site.

There is a caveat to the above charts. If your firm intends to do a large-scale scanning project, many providers will give you some price breaks on each of the listed line items. But, even if you were to obtain a 50% break (which would be highly unlikely), you’d still pay way more than you would be just letting the box ride its time out in storage and destroying at the end.

There is one more possibility that a firm could investigate, and that is setting up your own scanning operation on-site at the provider. To do that though, you have a host of complications that end up costing you fairly significant dollars. In short, you have to set up a room at the provider’s location, staff it with your personnel (a cost in its own right), likely pay the provider to have staff of their own involved (due to on-site security requirements) and you’re still paying the retrieval and destruction fees on top of it all. These costs add up, but there may be a case to be made for this option. But when everything is factored in, you’re trying to undercut $43.45/box – if we play this out for 10 years.

However, the case for digitizing on a go-forward basis is quite different. The potential cost avoidance by not sending a box off-site is $27.51 if that box is going to sit there for 10 years. But what is the cost to digitize that box to avoid sending it off-site?

Well, first you need to have the capabilities to digitize said box. Meaning, you need (1) labor with the wherewithal to do the work, (2) equipment, and (3) a digital records repository, i.e., a Records Management System (RMS). There are a few ways to look at each of these costs, but labor is the trickiest. So first, we’ll get equipment and the repository out of the way. Equipment means scanning equipment. This is a fairly minimal cost. You can either obtain a dedicated scanner(s) or utilize existing MFDs to handle the work. A repository is something that you have to invest in anyway, so it should not be an added cost.

Labor is a bit trickier. Labor is either going to be labor that already exists and will be tasked to handle these responsibilities in addition to other regular responsibilities, or it is something you will have to add. If you already have the on-site personnel equal to the task, the labor could be viewed not as an additional cost, but an existing one. However, if you have to staff up, then you are looking at additional costs. In such a case, you’ll have to examine the scale of the digitization you intend to do in the context of the cost of the additional labor, as compared to that $27.51 per box you’re avoiding.

The analysis of the situation may actually show that digitizing does not make sense for you. Your scale may be too small and the labor costs may be too high. But, as the scale of the project goes up (compounding that $27.51 you save for each box), then the labor costs diminish on a per box basis, and in that instance, it starts to make more sense.

In sum, when examining your off-site records and deciding on the best way to go paperless or paper light, the answer isn’t going to be “digitize everything”. The answer is more nuanced than that. And in every case, it is going to make more financial sense to simply let sleeping dogs lie and only consider scanning on a go-forward basis.

2020-11-18T20:35:19+00:00