ECM Market Trends 2005 & Industry Best Practices

1. ECM Market Trends 2005 & Industry Best Practices October 2005

2. ECM Trends and Best Practices Table of Content • Key Business Drivers for ECM • Key Market Trends • Current Technology Challenges • ECM Maturity at the End-User Level • Developing an Effective ECM Strategy • Lesson Learned, Potential Pitfalls, and Traps to Avoid • But first…A little about Doculabs

3. About Doculabs

4. Who is Doculabs? Definition Doculabs is a consulting firm focusing exclusively on document and content-based applications. Our services lower the business risk of investment decisions through client specific recommendations, objective analysis and in-depth research. This approach is based on our fundamental belief that in order to protect a client’s long-term interest, advisors shouldn’t be service providers. Founded in 1993 Headquartered in Chicago Privately held Served over 400 customers Quick Facts

5. About Doculabs Our Key Differentiators Research of suppliers’ capabilities and financial service customers’ best practices (operational and financial metrics) Analysis without the bias of integration services or vendor preferences Recommendations based on the needs of your firm, not the industry at large (actionable deliverables and emphasis on knowledge transfer)

6. What actually is ECM…

7. ECM, the AIIM definition • Enterprise Content Management (ECM) is the technologies, tools, strategies, and methods used to capture, manage, store, preserve, and deliver content and documents related to organizational processes across an enterprise • ECM is not a technology but a concept which incorporates a variety of core technologies

8. ECM Business Drivers

9. ECM Business Drivers Key Statistics Organizational Information “7.5% of documents are lost forever” “U.S. managers spend an average of 4 weeks a year searching for or waiting on misfiled, mislabeled, untracked, or ‘lost’ papers” “Large organizations lose a documents every 12 seconds”Source – Cuadra Associates 20% Unmanaged information is growing at roughly 36% annually structured 80% unstructured 27% of ECMusers are highly disappointed in their ECM ImplementationsSource – Jupiter Research The global market for compliance information management will grow at 22% a year thru 2009 and will pass the $20 billion mark that year Source – Jupiter Research 90% remains unmanaged A conservative failure rate estimate of ECM technologies within large organizations is 50% There is a 10x cost of compliance by taking a one-off versus an integrated approach to compliance projectsSource – Gartner Group Unstructured Information

10. Offense • Customer demands • Operational efficiency Defense • Compliance and litigation • Other risk reduction IT • Effectiveness • Efficiency ECM Business Drivers Why You Do It: Business Drivers for ECM Offense: • Operational efficiencies, Cost reduction and productivity improvement • Customer demands: servicing and satisfaction requirements, personalized communication, self service Defense: • Compliance and litigation: risk and cost reduction • Other risk reduction: business continuity, security requirements, etc. IT: • IT effectiveness and efficiency through resource consolidation, cost reduction, and strategic enabling for future strategic initiatives

11. ECM Business Drivers Why Companies Buy ECM Technologies? Source: AIIM User Survey: The Practical Application of ECM Technologies

12. Key Market Trends

13. Key Market Trends Increasing Complexity • Increasing complexity in a quickly growing market • Migration from niche applications to infrastructure platforms • Applications are getting more complex and providers are expanding their products to match these needs

14. EDMS (Imaging, Workflow, Document Management) Web Content Management Organize ERM/COLD Security (Document, Perimeter) Content Integration Digital Asset Management Portals Taxonomy and Search Collaboration Collaborate Process Management Forms Records Management Store and Distribute Archival and Storage Print and Distribute Key Market Trends The ECM Technology Stack

15. 1995/96, 2002/03 FileNet  Watermark, Saros, Greenbar, eGrail, Shana, Yaletown 1997 Eastman Software  Wang Software 1997 iManage  FrontOffice 1999 Hummingbird  PC DOCS, EDUCOM 2001 2005 Microsoft  NCompass Labs MSFT- Groove Networks, EMC-Captiva 2003/04 Vignette  Epicentric, Intraspect, TOWER 2003 Interwoven  iManage, Software Intelligence 2003/04 EMC  Legato, Documentum 2003/04 Open Text  Gauss, IXOS, Artesia, Quest 2001-04 Global 360 (eiStream)  Eastman Software, Viewstar, Keyfile, Identitech (BPM) 2004 2004 2004 2004 2004 Mobius  eManage Oracle  Collaxa Adobe  Q-Link Veritas  KVS Captaris  IMR 2004 HP  Persist 1999-2004 Stellent  InfoAccess, INSO, Kinecta, Ancept, Optika Key Market Trends Industry Consolidation: M & A Activity (As of Dec 2004) 2001-04 Documentum  Box Car, eRoom, BullDog, TrueArc, AskOnce 2002-03 IBM  Tarian, Green Pastures, Venetica Next 3 to 5 years…

16. Key Market Trends Some Perspective on IT Market Giants But first…a three dimensional vendor “risk analysis methodology • Vendor risk • Product risk • Implementation risk Like the old analogy…Do you want it Faster, Cheaper or Better? You can normally get two but not all three.

17. Key Market Trends Some Perspective on IT Market Giants • EMC • Combines EMC dominance in storage management with Documentum dominance in content management for “ILM” • ApplicationXtender significant contender for mid-market • Directly faces key ECM issues of the day: how to do ILM, how to do mid-scale ECM • IBM • Current positioning: provides ECM capabilities tied to WebSphere, DB2 • Strengths include dominant IT presence, WebSphere centrism, great ECM potential, content integration to other data sources, global reach • Most implementations are highly customized

18. Key Market Trends Some Perspective on IT Market Giants • Microsoft • Addressing ECM challenge with operating environment (Longhorn), Office, SharePoint and Content Manager • Will address enterprise ECM, with “small time” ECM solution– and be a disruptor for the rest • Oracle • Not just Metadata, but also the unstructured content physically resides in a structured store • The basis of their position is that all data is better off being stored in a structured store, i.e. “the database” • They are not trying to win the feature war, rather trying to compete on simplicity and scalability

19. Technology Challenges

20. ECM Technology Challenges Technology Challenges 2005 • Information Lifecycle Management • ILM = “proactive management of storage/archive that is business-centric, unified, policy-based, heterogeneous, and aligns storage resources with data value” (ECM) • Easier to describe in marketing-speak than actually implement • Enterprise Content Integration (ECI) • Complex integration is required up or downstream from content repositories • Effort is perceived as too high to consolidate into a single repository, while ECI integration is perceived as acceptable • Taxonomy Development • It’s a significant undertaking… and can pull you under if you’re not careful • Few automated tools exist to assist with this effort • Email Management • Implementations and vendor capabilities continue to improve • Primary requirements: • 1) scalability, 2) archival, and 3) advanced records management capabilities for e-mail • Few vendors adequately address all three

21. ECM Technology Challenges Technology Challenges 2005 • Electronic Forms • Significant confusion exists within the market…Adobe…IBM (PureEdge)….Exstream…all coming from different directions to solve the same problem • Correspondence systems, requiring interaction, have been slow to adopt more advanced forms capabilities • Document Composition • Most system generated documents are born out of applications / tools that are 10+yrs. old • The “average” financial service firm has 6-9 different publishing and document composition utilities in production – typically from 5+ different vendors • Conversion costs are falling, via the use of offshore service providers and conversion utilities • Web Content Management • Usage has grown beyond initial design • Confusion over tools and approaches – logical segmentation of source code management, site deployment, design tools, and content management, etc.

22. ECM & Service-Oriented Architectures (SOA)

23. B Inception Chaos Stabilization Rationalization Redirect this investment toward modular architectures C Performance Surplus Customers’ capacity to ingest functionality A Point at which industry-wide standards reached adequate maturity, e.g. XML, Web services, SOA Performance Deficit Point where customer requirements have been met by vendor functionality developed in a non-modular approach Modular functional development Supply-side functional development ECM Market Trends Understanding the Evolution of ECM Phases  Functionality Time 1995 2000 2005 1990 2010 Market definition First round of consolidation begins Budgets still remain at the departmental level Component object model initiatives undertaken, but failures persisted due to standards not being practical enough SOA goes mainstream ECM is an enterprise architecture-based decision DB vendor market share now at risk Partial Source: Innovator’s Solution by Clayton Christianson and Michael Reynor

24. Primary ECM Reference Architecture Layers Primary Enterprise Reference Architecture Layers Today’s Components Evolving Components Current ECM Stack Presentation and Interface Content creation/ presentation/ access Business Services Process and Collaborative Services Process Management Content Middleware Application Services Data Management Data Services Enterprise Reference Architecture Application and Data Systems Current State Future State ECM Market Trends ECM Market Evolution

25. ECM Market Trends Content Management Reference Architecture

26. ECM Market Trends Summary of Trends and Implications • Organizations are evolving their IT strategies in two ways: • Developing standards-based enterprise reference architecture (ERA) and service-oriented architecture (SOA) strategies • To provide a roadmap for IT technology decisions (including ECM) • Which simplifies re-use of services across applications, improves flexibility, etc. • Embracing additional strategic concepts, such as: • Infrastructure consolidation • Integrating structured and unstructured information • Information lifecycle management (ILM) • The ECM market has historically been defined by types or categories of products – but this is changing • Organizations (and the vendors that serve them) are beginning to think about the “layers” of services required to address application requirements • This market evolution will take time • Service-oriented architectures are just starting to become important for large enterprises • It will take a few more years before this is truly important for the mid-market • Vendors are trying to stay ahead of the curve • Vendors beginning to offer frameworks, some modules, or both • This is also what OEM partners will look for

27. ECM Market Maturity

28. ECM Market Maturity ECM Market Maturity Levels • Most firms has invested and implemented some ECM capabilities • Ranging in age from 3-10 years, many 2nd generation • Many original systems intended as simple point solutions • Over half have quickly become mission critical and transactional in nature • Both user populations and volumes have grown • The number of LOB applications requiring “electronic document capabilities” continues to create a backlog for IT • Many ECM implementations remain unsatisfactory • when compared to other primary application environments

29. ECM Market Maturity Some Lessons Learned • Requirements are not mapped to vendor capability • There is no single clear vendor winner • Integration effort is underestimated • Generally 30% of IT costs • Ingesting content is harder than you think • Clean-up, Taxonomy, Capture, Indexing • User frustration level is high because of complexity of usability of ECM systems • Must maximize Participation and Accuracy • Effective enterprise roll-outs are rare • Excel at smaller first phase: plan big but implement small • Be excessively proactive

30. ECM Market Maturity ECM: How do you compare?

31. ECM Market Maturity ECM Project Challenges Source: AIIM User Survey: The Practical Application of ECM Technologies

32. ECM Best Practices and Benchmarks

33. 45% ECM Best Practices and Benchmarks ECM ROI Expectations Source: AIIM Industry Watch: ECM Implementation Trends 2005

34. 57% ECM Best Practices and Benchmarks Measurement of ROI Source: AIIM Industry Watch: ECM Implementation Trends 2005

35. 72% ECM Best Practices and Benchmarks Overall ECM ROI Experiences Source: AIIM Industry Watch: ECM Implementation Trends 2005

36. ECM Best Practices and Benchmarks Financials – Industry Benchmarks • Most ECM Cost/Benefit Analysis is a one-time event, • Normally based on the initiation of a project • But, the responsibility for continued monitoring is unclear, and this not done • 9 out of 10 firms over-invest in software/hardware, and under-invest in support staff (use Capital Exp. and minimize operating costs ) • Why?...Keeping headcount low is key for most IT organizations, and few have “bench” staff with the specialized knowledge to address detailed ECM requirements • Attributing benefits back to specific ECM investments is difficult, but not a justification for the lack of any level of financial visibility • Successfully “selling” business unit managers requires a systematic approach of monitoring and re-forecasting, typically above and beyond what is required for annual budgeting • The “credibility” of financial estimates is driven primarily by the frequency of measurement and reporting rather than the magnitude of impact

37. ECM Best Practices and Benchmarks Process – Industry Benchmarks • Begin with a metrics-based diagnosis of current processes – manual or automated - in terms of complexity and risk • Most clients fail to understand the growth in complexity as they scale-up operating and support diverse processes

38. Generalized Process – Front End Capture

39. Example: Complexity and Failure Points

40. ECM Best Practices and Benchmarks Process – Industry Benchmarks • Begin with a metrics-based diagnosis of current processes – manual or automated - in terms of complexity and risk • Most clients fail to understand the growth in complexity as they scale-up operating and support diverse processes • Understand the business economics driving a process and anticipate the associated costs of document processing tasks • Taking an accurate inventory is the first step – sources and destinations of documents by “role” or user • Measuring at a high-level, the costs of document processing tasks • Map out “future state” process scenarios and supporting systems • By documenting processes, organizations can quickly recognize latency points and redundant activities • Systems architecture is the last step, and typically many components already exist • Ultimately all this effort culminates in a credible ROI

41. ECM Best Practices and Benchmarks Quality – Industry Benchmarks • Process design has the single biggest impact on quality • Many firms over-engineer a process, adding complexity, and undermine process-level quality objectives • Setting baseline quality expectations is critical • During tests, “acceptable” ranges are set for character, field, document and process level quality levels • Comparison of samples is key to early detection of problems – and should be done by vendor and buyer independently • Root cause analysis is a continuous process • Recognize quality and productivity, at the operator level, are tied to compensation, and improving one variable (such as quality) can result in negative effects on productivity • Without adjusting compensation formulas, implementing changes is difficult

42. Doculabs’ Methodology

43. 3 8 1 2 4 5 6 7 ECM Strategy Methodology Doculabs ECM Strategy Development Methodology Conceptual Design, Reference Architecture Future State Definition Metadata Taxonomy Development Candidate Solution Analysis and Recommendation Enterprise Requirements Definition Current State Assessment Selection and Consolidation Strategy Deployment Strategy Business Case Analysis ECM Methodology

44. ECM Strategy Methodology Keys for Actionable Strategy • Determine needs of the business • IT can’t do it alone • The decisions made in the strategy must have executive management commitment for follow-through • Develop measurements early in the process • Think long term • Develop a post implementation plan and budget for ongoing costs • Realization the end result of the strategy will not include any direct savings

45. ECM Strategy Methodology Potential Pitfalls and Traps to Avoid • Lack of a good strategy and reference architecture results in higher costs and lack of cohesiveness • Mapping your business requirements to a single vendor’s capability • Objectively judge the benefits of a good sales relationship vs. choosing a vendor serving your long-term needs • Integration effort is underestimated • Ingesting content is harder than you think • User frustration level is high because of complexity of usability of ECM systems • Adoption psychology during roll-out is not considered

46. Conclusion

47. Conclusions • The implementation of ECM technologies requires detailed operational, IT, organizational and procurement approaches to REMAIN successful over time • Most customers focus on the technology or functionality, but neglect operational metrics and process improvement issues • “Fixing” problems after implementation can dramatically increase costs • Doculabs augments internal teams by providing strategy development and periodic independent assessments, grounded in industry data and benchmarks

48. Some final thoughtsabout Doculabs Service Offerrings….

49. 3 8 1 2 4 5 6 7 Doculabs Service Offerings Doculabs ECM Strategy Development Methodology Conceptual Design, Reference Architecture Future State Definition Metadata Taxonomy Development Candidate Solution Analysis and Recommendation Enterprise Requirements Definition Current State Assessment Selection and Consolidation Strategy Deployment Strategy Business Case Analysis ECM Methodology

50. Doculabs Service Offerings Additional Service Offerings Measurement Model Development Scenario Development Preliminary Implementation Deployment Options Assessment Current Process Mapping Change Management Communications Planning Contract Negotiation Assistance Reference Architecture Development Content and Process Technology Portfolio Management Vendor Facilitation Adoption Services Communications Plan Project Management Services PMO Definition Rollout and Change Management Definition Measurement Analysis