Kevin McQueen has a Product Management and Business Development background in the cloud based messaging and document management industries. He currently works with FV Tech, which is an OCR Service Bureau specializing in providing Automated Data Entry/Document Management solutions to automate paper processing for documents like purchase orders, BOLs and EOBs.
Buying software and hardware to enable and in-house Document Management application for data extraction and forms processing versus outsourcing the application should come down to a solid business case that includes quantitative analysis in the form of a cost benefit analysis if outsourcing, or ROI if buying a premise solution using an NPV or IRR formula as part of the equation.
However, often times it comes down to the company philosophy of building versus renting. The renting companies believe in focusing on their core competency and reducing cost while outsourcing all non- core functions. The building companies often are more focused on maintaining control. The following should be considered in terms of answering the in-house vs. outsourcing question for your organization.
8 things to consider when deciding to buy or rent OCR capabilities (i.e., should you bring the software and hardware in-house or work with a service bureau?)
1 -- Inbound forms- Are your forms paper or digital?
If paper, they need to be digitized by using a fax service (instead of fax machines) or use scanners to digitize the paper so that they can be entered into a digital workflow to begin the data extraction process.
2 -- If the images are skewed or of poor quality, they will need to be enhanced with image enhancement software.
OCR software does not read poor image quality or low dpi images very well; the image will need to be enhanced for an accurate read, so this requires another software package.
3 -- What kinds of forms are being received? Structured or unstructured?
Structured forms have fields found in the same place on every form like a loan form. Or they may very like in purchase orders or invoices which are examples of unstructured forms. Some OCR software platforms alone are not very accurate with unstructured forms. Although software vendors will claim otherwise, will the software vendor give a guarantee for the accuracy claims? Another important question is how you will handle false positives? A false positive is when the OCR software recognizes the 7 as a 1 or a 3 as an 8.
4 -- What accuracy rate is required to guarantee a reduction in FTEs for the data entry task?
This is an important component of your business case. In other words, labor can be both a fixed and a variable cost. How will this apply to your data entry operations scheduling? If your accuracy rate with OCR software is mid 80s, will this justify a reduction in FTEs?
5 -- What is the lifespan of the hardware and software before it is obsolescent for your IRR formula?
Software and hardware depreciate much faster than other equipment and must be accounted for in the ROI formula. We believe the software life cycle can be as short as 6 months is a maximum of 18 months for OCR software. Remember Moore’s law for the hardware. Consider the time of implementation, training and depreciation in deciding whether an in-house solution is really the best choice.
6 -- How will the OCR software interface with your document management package or Image archiving solution and is work flow required?
What is the capital expenditure for archiving hardware and software? We have found that many legacy ERP systems using an AS400 cannot accept a file upload.
7 -- It is important to consider your overall requirements and cost.
What is the annual cost for hardware, software, training, maintenance, IT support and implementation for an in-house OCR solution versus the transactional cost of using an OCR Service? How much will the learning curve cost? What is the cost of implementation delays?
8 -- When considering the capital expenditures equation, is risk part of your discount factor for the NPV equation for an on-premises solution?
We have many customers that were obtained after an their internal OCR Document Management project failed. A service offers a guarantees in the form of service level agreements. Equipment and software can always be purchased.
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For niche applications like an OCR document management for automated data entry, one must consider both the hard cost and soft cost of processing paper when evaluating against the cost of maintaining the status quo. Depending on the application, the soft cost often adds up to more than the hard cost. For example, consider the cost of mistakes caused by data entry errors. These costs should include, rekeying cost, stocking, shipping and customer service.
With today’s movement toward SaaS and cloud computing, I believe the argument becomes even stronger toward outsourcing a niche application like a Document Management for data extraction using an OCR platform.
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Some recent posts on imaging/scanning that may be of interest:
