The Value of Offsite Storage-
Records and information managers are charged with several key goals when administering a system-wide program. Risk management is critical to reducing exposure to litigation, audit and statutory compliance. Value added benefit enhancement such as improved productivity among all employees is also a key measure in a program’s success. The third critical area is cost control and overall program expense reduction. A key ally in meeting this goal is the effective use of outsourcing partners.
How Much Cost Reduction?
One of the primary teaching texts for the records industry, Information and Records Management, makes the following statement regarding semi-active and inactive records transfer. “Office space in most organizations is too expensive for the storage of inactive records, which are those records referred to infrequently – usually less than once a month per file drawer. Inactive records should be transferred to low-cost storage equipment in a low-cost storage facility or be converted to another medium.” These types of decisions are formally articulated on the records disposal schedule, provided the organization has a disposal schedule. If not, savings from outsourcing activities and systematic management of various records series can be profound indeed. The same text states that if no formal records management program is in place, “between 30 and 60 percent of its records are either inactive or semi-active and need to be destroyed immediately or transferred from prime office space to a low-cost storage facility.”
30-60 percent is very large number. This begs the question “is it possible to place a dollar figure on this percentage?” In a preceding paragraph the same book quotes studies from filing equipment vendors and other records experts that place the costs of storing one linear filing inch of records in an office space for one year at somewhere between $10 and $25. Using these numbers as a basis, a 4-drawer vertical filing cabinet will contain approximately 100 linear filing inches of records. Calculating the costs of this filing cabinet’s annual maintenance would produce a range of approximately $1,000 to $2,500 per four-drawer cabinet. This equates to approximately 7 cubic feet of records or 7 standard records cartons. If these were the only 7 cartons in existence and a commercial records center charged $50 per month* to store them, savings would still be $400-$1,900 per year per filing cabinet for inactive records. For 50 cabinets of inactive records, (approximately 350 cubic feet) the savings could be $20,000 to $95,000 per year, based on the data provided in the Information and Records Management text. This is based on a computation of $50 in storage costs per 7 cartons per month, or $7.14 per carton. When the number is lowered to a still exaggerated but more realistic figure of $1.00 per month, per carton, the savings per cabinet increases to a range of $916-$2,416 per year or $45,800-$120,800 per year for 50 4-drawer cabinets of inactive records. As you can see, effective records management combined with effective outsourcing can significantly reduce operating costs for the organization.
Specialization and Standardization
The primary reason for seeking an outsourcing partner is to avoid the capital intensive and labor-intensive investments necessary to achieve economies of scale. Constructing a records center is an expensive proposition. Specialized high-bay buildings must be constructed. Racking systems must be purchased along with specialized software systems for tracking records assets. Specialized fire protection and security equipment must be installed and monitoring costs paid. Material handling equipment, conveyance equipment and delivery vehicles must be leased or purchased. Inaddition, most significantly, additional labor must be added to provide the necessary services for facility operations. This adds costs from both a salary and benefits standpoint. Depending upon the size and total records holdings contained within the records center, an ROI for these capital investments may be decades away. When labor costs are considered, the investment may never pay for itself fully. Records management listserv subscriber Robert Bailey stated, “I have done over 50 "outsourcing" assessments. Never have I found it cheaper to do it "in-house". On several occasions, I have been asked to review earlier assessments already done, and in each case the "in-house” costs were either not honest or understated.”
The reason commercial records centers are viable is through the combination of records from many clients in a standardized format to achieve economies of scale. This is a luxury typically unavailable to an in-house records center. Even in situations where there are large volumes of records, such as in government archives where many departments, ministries or agencies may be housed within the same facility it remains less expensive to outsource inactive records to offsite commercial facilities. The Canadian province of British Columbia has outsourced their archive to the private sector for the last 20 years. In a speech to PRISM International delegates in 2002, Sandy Santori, Director of the Ministry of Management Services for the Province of British Columbia, the Minister remarked, “All parties benefit with this arrangement – the government, the storage firms and, ultimately, B.C.’s taxpayers. The three contracts to private storage facilities totaled $2.3 million in the last fiscal year. For every dollar spent to store records in these off-site facilities, it is estimated the government saves four dollars.”
Where are the Limits?
If so much money can be saved through outsourcing, some members of management might be tempted to outsource all records management activities to the private sector. This would represent a profound misunderstanding on their part. Even though services such as inactive records management, computer backup tape rotation, back file conversion projects to digital or film images and confidential destruction services represent opportunities for significant savings, active records programs and the records management system must still be managed by a competent records management professional. File reference rates make it impractical to store active files offsite (in most cases) due to frequent retrieval. There can be exceptions where this activity becomes practical but daily references to active materials is usually better managed within the location of the records owner. Likewise, the management of electronic records, coordination with departments in areas like training, records audit capabilities, and ongoing legal research to update disposal schedule references are part of the core support services of any organization.
The presence of a skilled records manager or records management department within an organization greatly assists the organization in improving the efficiency and effectiveness of other employees.
This is clearly illustrated by a recent article “Order Out of Chaos” in CIO Insight. “Every time someone writes a Word document, types an e-mail message, creates an Adobe Acrobat file, or generates an audio or video file—using all those tools that IT provides—another shovelful of unstructured data is tossed onto the company's information mountain. How much? Analysts estimate that fully 85 percent of all the data in an organization is unstructured—and that the amount of unstructured data in the average business doubles every two months.” This is an incredible volume of information being created on a daily basis. What’s more, the article goes on to assign a real cost to an organization if this information must be accessed by employees. “IDC research says the average knowledge worker spends 21/2 hours a day panning for information nuggets in unstructured sources like Web pages and Word files—even though many of those pages and files may be their own. A year's cost for 1,000 knowledge workers not finding what they need, according to IDC: $6 million.” In light of this information, it is clear that the maintenance of an active, well-funded and well supported records management program generates significant increased savings on its own.
Other Benefits
In light of recent privacy legislation such as HIPAA and Gramm-Leach-Bliley, information security and maintenance of privacy is a paramount concern. Most offsite records storage companies offer very robust security which may include perimeter fencing and lighting, mantraps, vehicle traps, keypad and biometric entry systems, requester verification, identity confirmation, mandatory escort when entering records center spaces, video camera surveillance, motion sensors, central station monitoring, random access filing, and redundant security and monitoring systems for vault areas. Offsite centers also employ enhanced employee vetting procedures, bonding and employee confidentiality agreements to enhance records protections.
In addition, many commercial records centers employ enhanced records protections systems such as specialized fire sprinkler systems such as ESFR (Early Suppression Fast Response), large drop, dry pipe and in-rack sprinklers and heat rise detectors. Many records centers are also in contract with emergency records remediation companies who can restore water damaged records as a result of flooding of client spaces, etc.
Most records centers also provide client-viewing areas to conduct spot checks or systems audits. Some centers can rent this space for a longer period in order to provide space for litigation preparation, etc. A recent development among some commercial facilities is provisioning for business continuity services. This may include hot site, warm site or cold site areas for emergency operations relocations. In some cases, assistance may be available to develop disaster recovery plans, disposal schedules, or supplemental labor for intensive projects like records inventory or indexing.
Some commercial records management providers may operate other business units that provide additional services of interest to your company, as well. Some of these include office or personnel relocation services, self-storage services, mailing and bulk mail support services, inventory management and order fulfillment services such as pick ‘n’ pack operations, general warehousing, courier services, server co-location services, etc. A discussion with your commercial records management provider should provide you with information about other services to help you reduce cost, improve employee efficiency and enhance your records management program.
*All storage dollar values are for illustration purposes only.
Resources:
Article: Order Out of Chaos – CIO Insider
Reference Text: Information and Records Management, Robek, Brown and Stephens
ISBN: 0-02-801793-5