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									         Outsourcing Data Entry: An Overview
                              An IMERGE Consulting Report

                                        by Arthur Gingrande, Partner




Executive Summary
                         Since the 1950’s, contracting data entry work to a service bureau has become
                         accepted as a “best practice” in the data processing industry. However,
                         outsourcing, as it has become known, is not as simple as merely shipping
                         documents off to be digitized, especially in this age of increasing regulation.
                         There are corporate and national security concerns as well as legislation
                         governing health data and financial information. Add the rapidly changing global
                         economy and uncertain political landscape in parts of the world, and it’s clear
                         that any data entry outsourcing program – whether domestic, offshore or a
                         combination of the two – must have built-in controls, a high degree of flexibility,
                         and clearly established standards for accuracy and data integrity.




                 The challenge is to minimize loss of control and accuracy when
                 outsourcing data entry.


                   This report examines key issues involved in outsourcing data entry today:

                              Underlying factors driving the trend
                              Different models of outsourcing being practiced by organizations
                              Important criteria for selecting an outsourcing partner
                              Benefits and risks, including hidden costs
                              Enabling technologies and management controls that can assure the success
                              of a program
                              Cost comparison tables, located in the Appendix, using industry standard
                              pricing models, which the reader can use to determine the potential return
                              on investment of outsourcing for their organization.


   To augment this report, there is a pre-recorded web seminar sponsored by The Association for Work Process
   Improvement (TAWPI) and Datacap Inc. This one-hour presentation features additional perspectives on data entry
   outsourcing, offered by leading industry participants in offshore data entry, Application Service Providers, and
   technology solutions that enable remote scanning and automated data entry. To obtain a copy free of charge, visit
   www.datacap.com/webinar
                                                     2


Introduction To Outsourcing
  A Service Bureau is a specialized firm that offers scanning and/or data entry services, usually based on
  a per document price. Service Bureaus are located within the United States (“Onshore”), in Canada,
  Mexico, or the Caribbean (“Nearshore”), or overseas, in Europe, South America, Asia-Pacific and India
  (“Offshore”).

  Outsourcing, especially offshore, has accelerated dramatically in
  recent years. Key reasons include increased bandwidth, faster                     Data Entry
  scanners, more standardization for data transfer, and the opportunity
                                                                              The Oldest Outsourcing
  for competitive advantage created by round-the-clock business days                Profession
  and compressed cycle time. Furthermore, outsourcing data entry             Data entry services were
  enables an organization to focus on its core competency, whether it’s      first outsourced in the
                                                                             1950’s, with the advent of
  product development, services, distribution, retail, etc.                  the punch card-based, data
                                                                             entry service bureaus.
  Of course, the main driver for use of outsourcing is cost savings. Data
  entry labor rates in other parts of the world are significantly lower      Five decades later,
                                                                             according to a survey by
  and, even with triple-pass data entry methods, documents can often         Outsourcing Center, Inc.,
                                                                             data entry is the most
  be processed overseas for less cost than manual data entry in-house.
                                                                             outsourced job category,
                                                                             followed by manufacturing
  Organizations that outsource data entry sacrifice a degree of control
                                                                             and call-center positions.
  over the process. Distance and differences in culture, language, and
  technical infrastructure affect performance levels and accuracy. Process management, security, and
  legal compliance add further complications and a level of risk that has associated costs, sometimes
  significant ones.

  Penalties for non-compliance with government regulations, such as HIPAA, Sarbanes-Oxley, and the
  Patriot Act, can be quite expensive. For example, violations of HIPAA medical information privacy
  rules carry fines in the hundreds of thousands of dollars. The decision to outsource data entry must take
  into consideration the necessary degree of security, confidentiality, and privacy protection, which are
  constraints imposed on the process by compliance legislation. Other factors include back up, auditing
  and disaster recovery capabilities.



Evolution of Outsourcing
  The outsourcing of operations and services, including data entry, is a long-standing tradition in
  America, going back to the early fifties, when back-file conversion dominated the first wave of data
  entry tasks.

  A second outsourcing trend emerged in the 1980s, when the manufacturing industry had to adjust to
  foreign companies providing automobiles, electronic equipment and components at lower prices. To
  compete, U.S. manufacturers began contracting operations to offshore companies that could provide
                                                           3

         labor at significantly lower costs.

         In data entry, the 1980s were a time of significant technical advancement, when the personal
         computer began to play a prominent role in data entry service bureaus. The trend away from key-from-
         paper operations to key-from-image operations accelerated with the increased usage of scanned
         images. Use of the computer in key-to-disk operations made it possible to boost operator speed and
         control data entry accuracy through the use of rules, lookup tables, database integration, and auto-
         completion of data fields.



      Outsourcing Becomes a “Best
      Practice”
         After companies like General Electric and Texas
                                                                             Evolution of Outsourcing
         Instruments joined the offshore outsourcing                 First Wave        Second Wave              Third Wave
                                                                                      • Claim              •   Data Analysis
         movement in the 1990s, many high-tech                      • Legacy
                                                                                        Processing
                                                                      conversion                           •   Auditing
         companies followed suit. It was the beginning of a                           • Rules
                                                                    • Claim-Data                           •   Mining
                                                                                        processing
         third wave in outsourced data entry, fueled by ever          entry           • Database           •   Compliance
                                                                    • Back log          integration            filing
         more powerful IT capabilities and a global
                                                                    • Outbound        • Adjusting          • Research
         communications infrastructure that enabled rapid             calls           • Correspondence     • Fraud
         transfer of images and data.                                                                        detection

                                                                                          Figure 1.


   What happened to the Paperless
                                                           Today, technological innovation and high-speed
             Office?
                                                           Internet connections enable on-the-fly data analysis,
While the ratio of digital to paper documents
continues to grow, the volume of paper documents in        data mining, fraud detection, and automated
many industries remains steady, maintaining a              recognition of unstructured documents (see Figure 1).
demand for data entry workers.
                                                           As a result, data entry operations have become more
For example, according to Health Data Management,
approximately 5 billion medical claims are filed in the    flexible. Forms and business documents can be
U.S. each year. For several years now, the                 scanned in-house, or by a domestic service bureau,
percentage of claims filed electronically has hovered
around 60%, which means nearly 2 billion claims are        then transmitted to an overseas subcontractor for data
still paper.
                                                           entry.



      Advantages of Outsourcing
         Tough competition and shareholder expectations are driving U.S. companies to cut operating costs and
         to sharpen their focus on core competencies. To this end, they are shifting from a business model in
         which a company owns all of its operations to a virtual model in which peripheral processes, such as
         data entry, are managed by an outside service provider.
                                                            4

  Financial benefits of outsourcing are driven mainly by two factors:

                  Lower wages for the same skills, often leveraged by taking advantage of cost differences in other
                  regions of the world, and;

                  Improved business processes that result from better concentration on primary competencies.
                  Because a growing number of service providers locate their operations offshore in foreign
                  countries in order to gain the most cost-effective wage differential, the practice is often called
                  “offshoring.”
  Originally perceived as a downsizing tool,
  outsourcing is now a major driver of
  organizational change and business process                       IT Enabled Services Growth 2004-
  re-engineering. A recent analysis by                        Billions          2008
  McKinsey & Co shows that of the 700                        $145
  service job categories in the U.S, 550 will
                                                             $140
  be affected by outsourcing in the near
  future. The IT-enabled services (ITES) market              $135

  is likely to reach $131 billion in 2004 and                $130
  $142 billion in 2008. (See Figure 2.) When                    2003        2004         2005       2006    2007   2008    2009
  measured against the current cost base of
                                                                                            Figure 2.
  $532 billion, the differential of $390 billion
  represents the net savings that the U.S
  economy can expect to see from outsourcing.


Most Frequently Outsourced Data Entry Types:

   Business                                Data Type
   Attorney legal practices                Clients lists, and information pertinent to their case
   Member organizations and
                                           Mailing lists, members lists, petitions, surveys, and other material.
   Trade Associations
   Automobile manufacturers                Rebates, recalls, surveys, comment cards, other promotional material
   Business form producers                 Content of business forms
   Employment agencies and career          Resumes, job opportunities, client information and potential employer
   outplacement                            information
   Collection Agencies                     Account papers, mailings, client information, delinquent and paid-up accounts
   Direct Mail and Fulfillment             Mailing lists, order entry and catalog data
   Hospitals and
                                           Medical forms, insurance forms, patient records, and billing information
   Other medical offices
   Insurance                               Insurance forms, client lists and claim data
                                           Coupon redemption, sweepstakes entries, contest entries, refunds, rebates,
   Marketing fulfillment
                                           mailing lists and catalogs
   Medical Claim Processors                Specific data fields on HCFA, UB-82, UB-92, and dental forms
   Retail                                  Sales receipts, coupons, comment cards, and other customer feedback
   Sales Organizations                     Client lists and sales leads
   Sports Franchises                       Player statistics, attendance data, season ticket holder lists
   Telemarketing Sales                     Telephone numbers for sales calls, orders, and client data
                                                        5


Data Entry Outsourcing Models
  Outsourcing data entry involves turning over data entry operations to a service bureau, which
  leverages their expertise, resources and ability to scale. The client manages the service bureau by first
  defining measurable performance metrics, based on their own cost of doing the outsourced tasks, and
  then using those metrics to evaluate the provider’s performance.

  There are several business models for outsourcing data entry. Many organizations engage in
  combinations, mixing in-house processing of some documents with outsourcing of others:


       Conventional Outsourcing occurs when a company contracts with a service bureau for services over a
       defined time period. Services are paid to the service bureau on a per item basis.

       Facilities Management occurs when a company contracts with a third party to run their data entry services
       in-house, for a defined time period.

       Joint Ventures are used when a company partners with a second company, typically offshore, to provide
       data entry services to the company and/or third parties. In conventional outsourcing and joint venture
       models, a company may transfer an entire functional area to a service provider on startup.

       Build Operate Transfer (BOT) entails a company partnering with a service bureau to establish an offshore
       facility; hire and train employees; transition the onshore process to the offshore operation; and finally run
       the facility and manage the workforce. The company has the option, after a predefined time period, to
       purchase the offshore operation.

       Application Service Provider, or ASP, is a third-party entity that manages and distributes software-based
       services and solutions to customers across a wide area network or the Internet, from a central server. The
       ASP is a cost-effective way to outsource IT resources and administration, to enable in-house processing.



Outsourcing Benefits
  The motivation to outsource data entry operations is fueled primarily by cost. Domestic service bureaus
  can offer low cost data entry services by taking advantage of economies of scale, inexpensive labor,
  and image-enabled, document processing technology that automates data entry and document
  indexing.

  Of course, labor is much cheaper offshore. According to a 2004 study by the University of California,
  Berkeley and McKinsey Global Institute, data entry wages in India are $2.00 per hour versus an
  average $20 per hour in the U.S. (see Appendix for Cost Comparison Tables).


1. Reduced Capital Costs

       Outsourcing offers two types of savings:

       Capital Expenditures - Companies can save 100 percent of their intended capital expenditure (land,
       facilities, hardware, etc.) by working with an outsourcing firm. If the company’s workload increases,
       outsourcing obviates the need to invest in additional capital or ramp up capacity. Similarly, a company
                                                        6

        may find that the service bureau’s capacity offers a competitive advantage, particularly when operating in
        a price-sensitive market. If facilities already exist, they can be sold or used for other purposes.

        Revenue Expenditures - Organizations can save 50 percent or more over manual data entry, plus
        operational and administrative expenses.


2. Converting Fixed Costs to Variable

        Most service bureaus operate on a ‘per item of work’ basis, which means that by outsourcing, a company
        can eliminate key operator salaries that represent the major fixed cost of data entry. The practice of
        paying only when the work is done has a major impact on the bottom line, especially when income levels
        or volumes are down.


3. Savings on Healthcare and Legal Costs

        Other incentives to outsource data entry do not involve labor savings, but instead entail savings on legal
        and medical costs. These include complications due to repetitive strain injuries (RSI), which are especially
        common among the population of users who have little or no training in typing. Emil F. Pascarelli, in
        Repetitive Strain Injury: A Computer User's Guide, reports that the number of RSI incidents has increased
        dramatically since the first PC was released in 1981, when only 18% of all illnesses reported were RSIs.
        In 2000, an estimated 70% of all occupational illnesses reported to OSHA were RSIs. Such injuries cost
        companies $20 billion a year in legal and medical costs.


4. Cost-Effective Solution to Seasonal or One-Time Work.

        It is not unusual for catalog retailers, tax processors and subscription houses to experience peak loads of
        80 percent over normal volumes. By outsourcing, companies don’t have to maintain peak level staffing
        throughout the year. Outsourcing also allows companies to augment the skills of their in-house staff so
        they don’t have to turn away business that their regular staff can’t handle.


5. Disaster Recovery

        In a post-9/11 world, an offsite service bureau provides a U.S. company with additional backup protection
        in the event of a catastrophe, by warehousing data at a separate storage facility.



Benefits of Offshore Service Bureaus
There are additional benefits that can be realized by contracting with an offshore data entry service
bureau:

1. ‘Round-the-Clock’ Operations

        International time zones allow corporations the competitive advantage gained by accessing data entry
        labor pools 24 hours a day, 7 days a week. Service bureaus in India begin work while the U.S. sleeps,
        meaning that any work submitted the day before will be completed by dawn the next morning. Productivity
        grows because the work is done in a single regular workday, without the need for overtime pay.
                                                         7

2. Access to Educated, Skilled Labor

       Many offshore companies feature graduates who have completed at least five years of college. Chocko
       Valliappa – CEO of Vee Technologies, an offshore data entry outsourcer, based in Bangalore, India –
       runs his own university to train data entry operators. As a result, in addition to jobs that require only low-
       paid key operators, Vee Technologies and others are accepting contracts for projects that require
       knowledge workers. Turnover abroad is relatively low among this group of workers, compared with
       American employees.



Risks of Outsourcing
  The overriding risk of outsourcing data entry is loss of control over the process. The burden falls upon
  the customer to ensure that delivered data is accurate, security is not compromised, and above all, that
  no violations of government and industry regulations occur. Without sufficient controls, quality issues,
  significant fines and expensive mistakes could wipe out any cost savings realized by outsourcing.


1. Accuracy

       If inaccurate data is delivered, there may be expensive consequences, such as paying incorrect invoices
       or health claims, or degradation in productivity as problems are located and fixed internally. Even if an
       organization contracts with an outsourcer for triple-pass data entry, where each document is entered more
       than once, there’s no way to guarantee accuracy, short of frequent site visits.


2. Government Compliance

       Even more important is maintaining compliance with government regulations, such as the Health
       Information Privacy and Accessibility Act of 1996 (HIPAA), Sarbanes–Oxley (SOX), and the U.S. Patriot
       Act.

       HIPAA – The main purpose of HIPAA is to protect the privacy of personal health data by controlling
       access to health claims, such as HCFA 1500s and UB-92s. Nonetheless, a major health insurance
       company was recently surprised to discover their service bureau in India was displaying the names of
       insurance company clients in a demonstration on their Website. The service bureau’s actions threw the
       insurance company into a thicket of HIPAA violations, and ultimately caused it to bring data entry
       operations back to America.

       Sarbanes-Oxley – As a result of Enron and other high-level white collar crime, Sarbanes-Oxley requires
       CEOs, CFOs, CIOs, and other top managers to certify the integrity of their financial data. SOX’s strong
       focus on data security and who can access what information makes offshore data security a board-level
       issue, particularly with invoice and remittance processing, and other organizational financial data. In 2002,
       the frequency of non-compliance incidents, due to offshore vendor carelessness, caused the Office of the
       Comptroller of the Currency to issue risk-management compliance guidelines for USA banks that use
       offshore service providers.

       US Patriot Act – In a post-911 environment, complying with government regulations is forcing
       organizations conducting business overseas to certify that they are not contributing to terrorist
       organizations. Non-compliance could mean hefty fines, and even jail time.
                                                        8

Network Security

       For IT management, security issues can be more serious than government compliance. Some firms allow
       offshore companies remote access to their in-house software applications and network infrastructure. In
       this scenario, a rogue programmer could insert hidden code through a network “back door” that would
       allow access to the system at a later date. One answer to the problem is for companies that outsource
       their operations to purchase or develop software that can protect their network infrastructure and eliminate
       its susceptibility to remote data access.


Industrial Espionage

       Another concern is that an employee of an offshore firm could be paid to show a client’s data and/or
       intellectual property to competitors. The problem is that corporate espionage abroad may not necessarily
       be subject to the same privacy protections and guarantees in America, or that U.S. privacy laws might not
       be actionable in the offshore country.

       Although industrial espionage is always a risk, when it occurs on foreign soil, lack of familiarity with that
       country’s local laws, customs, and facilities can lead to unique twists and turns. Although a good contract
       can go a long way toward providing the necessary legal protection, it is a good idea to avoid a standard
       outsourcing contract. Instead, the client should have one drawn up by a law firm with experience in the
       country of the service bureau that is doing the work.



Choosing An Outsource Partner
  When selecting an outsourcing vendor, there are common-sense guidelines for setting expectations,
  building in controls, managing the relationship, and evaluating results. Outsourcing veterans, like
  Chocko Valliappa of Vee Technologies, providing outsourcing since 1982, maintain that success
  begins and ends with good communication. “The services customer has to be very clear about their
  process, their expectations and continually voice their thoughts along the way.”

Keys To Success                                          Potential for Failure
 • Customers understand their process                       • No support from top management
 • Good communication                                       • Outsourcing processes which require
                                                              extensive logistical activities or personal
 • Plan approved by both parties
                                                              presence
 • No politics from the top to the bottom
                                                            • Outsourcing processes which lack rules and
 • Outsourcing process documented                             procedures
 • Proper governance                                        • Cultural mismatch

                                                    Figure 4.


  Valliappa looks for certain “conditions” that can help or hinder an outsourcing program. They include
  a customer who is knowledgeable about their own process. “They’ll have a firm grasp of the value and
  cost benefits of the service we are offering,” he says, “and they’ll be able to clearly communicate what
  is required from us to satisfy them.”
                                                             9

  Typical Concerns and their Importance for Offshoring Customers

  Language Skills

  Cost of Labor

  Language Skill

  Security/Business

  IP Protection

  Country Infrastructure

  Cultural Fit

  Proximity to the US


                                  0                      1        2             3            4            5

                                             Figure 5.                 Source: Vee Technologies

  Valliappa suggests that customers manage the relationship by keeping internal politics out of the
  equation, getting buy-in from top management, and regularly evaluating results. “A program is bound
  to fail,” adds Valliappa, “if there are unrealistic expectations, poor communications, or if they are
  outsourcing processes which require a personal presence. However, if both parties can communicate
  well about the process, rules and expectations, most problems can be solved.”



Enabling Technology for Managing Data Entry Outsourcing
  While data and document capture technologies are often thought of as products strictly for in-house data entry, a
  new generation of products are available that can assure the cost-savings of data entry outsourcing, yet manage
  the accuracy, communications and control issues that diminish the return on investment.

  By using an integrated capture product, an organization can mitigate the loss of control and accuracy,
  while still guaranteeing cost savings. In fact, many organizations today are creating a hybrid approach,
  where they use automated recognition technologies, such as optical character recognition, on a certain
  class of documents, outsource a different class for manual data entry, and retain yet another class for
  in-house data entry. Such a strategy requires a robust platform that can enable scanning, batch
  processing and careful administration.

  Datacap Taskmaster is a data and document capture software solution used by organizations
  worldwide in finance, insurance, healthcare, government and corporate AP departments. Taskmaster
  leverages the latest technologies, such as Optical Character Recognition (OCR) for machine print,
  barcode, XML, image processing, and a GUI built for productivity. These technologies make it a tool
  for enabling a successful outsourcing program.
                                                   10

  Indeed, service bureaus, ASPs, and end-users, such as Blue Cross Blue Shield of Arizona (BCBSAZ),
  USIEnergy, Guardian Life, The Hartford, Avidity, and California’s Central Coast Alliance for Health, use
  Datacap Taskmaster to combine in-house data entry with outsourcing.

  BCBSAZ processes paper HCFA 1500 and UB-92 medical claims by scanning them with Taskmaster,
  using OCR technology to automatically extract data. However, the small percentage of claims that are
  not scannable are outsourced. “We not only outsource the ‘garbage’ claims, but we also use our
  outsourcing vendor for occasional spikes in volume,” says Ed Davis, Director, Support Operations at
  BCBSAZ.


Use Taskmaster Web to Outsource Scanning
  With its three-tier, client-server architecture, Taskmaster supports scanning and indexing over the
  Internet using only a browser. Taskmaster Web supports both on-line and off-line scanning. The
  advantage of on-line scanning with Taskmaster is that a batch is created and tracking begins the
  moment a document is scanned. This eliminates problems with synchronization and missing batches
  that can occur when scanning is done off-line. Taskmaster Web’s administrative interface enables
  complete management and auditing of the process, giving an organization a way to outsource
  scanning, yet maintain a high degree of control over the process.


Independent Scanning and Indexing
  In addition to distributed scanning, Taskmaster’s architecture, utilizing XML technology, enables the
  indexing of document images over a browser. Once scanned (centrally or remotely), the indexing of
  images can be distributed to an outsourcing company using the Internet. Index operators log in to the
  Taskmaster Web Server with a user name and password, and Taskmaster doles out the work, tracks the
  progress, and updates the images with the index values. An administrator can track progress of a batch,
  check on the productivity of users, and completely control who has access to data for best results as
  well as to comply with regulations.


Automate AND Outsource
  Taskmaster’s forms processing capabilities enable users to apply automated recognition of machine
  print, handprint, check boxes and barcodes. Its rules-based architecture enables capture of standard
  documents, such as tax returns, surveys, and medical claims, as well as unstructured and variable
  documents, like invoices, Explanations of Benefit (EOB) and shipping records.

  By automating the capture of data from documents with Taskmaster, a user assures high accuracy
  levels, and makes the best use of data entry personnel. This is the model used by BCBSAZ and
  California Central Coast Alliance for Health, another medical claim processor.
                                                    11

   With Taskmaster handling recognition, data entry operators become verifiers, speeding through batches
   of document images, checking for low confidence characters and failed validations, doubling and even
   tripling their productivity. Organizations can choose to outsource verification, using Taskmaster Web, to
   a third party service bureau or at-home workers, again maximizing the value of the outsource
   relationship.


Control Is the Key
   Taskmaster’s extensive administrative controls help supervisors track and audit every document from
   the moment it is scanned until it is released to the repository, keeping tabs on who has access, when
   and what was done. This job monitoring feature, combined with password access and other security
   controls, supports most requirements of HIPAA, Sarbanes-Oxley and other government regulations
   pertaining to the handling of data.



Conclusion
   Outsourcing meets a fundamental need for U.S. businesses looking to lower the cost of operations and
   streamline productivity. With thorough management and oversight, an organization can balance the
   cost savings of outsourcing data entry with the trade-offs in accuracy and control.

   Automated capture systems also help an organization lower cost and accelerate productivity. Today’s
   capture systems can help an organization tightly manage outsourcing by providing an in-house
   platform to automate the capture of data when possible and distribute capture tasks when outsourcing
   is the best option.
                                                     12


APPENDIX

Cost Comparisons

Breaking Down The Costs of Outsourced, ASP and Automated Data Entry
   In choosing whether to outsource or automate data entry in-house, one decision methodology is to
   analyze which method of acquiring data entry services produces the lowest net cost per document.

   The potential size of the outsourcing market is illustrated in the hypothetical insurance case study
   illustrated in Figure 5. The numbers are based upon costs reported by the insurance industry and on
   surveys taken by the U.S. Department of Census. Calculations reveal that potential cost savings of $582
   million could be realized if only 10% of the data entry labor dedicated to processing insurance claims
   was outsourced.


   Looking at the same                 Data Entry Cost Comparison (Inhouse vs. Offshore)
   problem in a
                            Cost Basis           Weekly Cost/claim adjuster             Weekly Total Cost
   different way, Figure
   6 provides some          U.S. Salary                *$1200 - $1400/week                  $4800 - $5600

   comparisons when         Offshore Salary                   **$500                           $2,000

   engaging an                                Annual Savings $145,600 - $291,200
   Application Service                 Sample Document: HCFA 1500                   Volume: $1,000/day
   Provider. In this       Figure 6.    * Source: Health Data Management       ** Source Vee Technologies

   example, both data entry and IT resources are outsourced, using the Internet as a workflow tool.

   Here, users can gain the benefits of a web-based capture tool, like Datacap Taskmaster, for data entry
   automation and scanning over the Internet, without the capital expenditure of investing in IT . The final
   calculations show that the net cost for processing an invoice using Application Service Provider (ASP)
   is $.31 – virtually 1/8 the cost of $2.42 for entering the data manually.

                           ASP Savings Calculator
Activity                                Manual              ASP          Savings
Data Entry, Validate, Fix Time (6        3 min.              .4            2.6
fields)
Average Invoice Line Items                3.5                3.5                -
Data Entry Time/Line Item                  .8                 .1               .7          Figure 7.
Total Entry All Line Items                2.8                .35
Total Time                                5.8                .75                           *Source: Fidesic
Total Cost:                              $2.42               .31           $2.10           Corporation
                             Sample Document: Invoices


   Finally, Figure 8 presents a third set of comparisons, which demonstrate the need for careful analysis
   before embarking on an outsourcing program. This R.O.I. calculation for a medical claims processing
   operation compares the cost of using in-house automated data entry, such as Datacap Taskmaster,
                                                     13

versus outsourcing. Variables include document volume, manual labor expenses, the cost of hardware
and software, cost of services, and recurring costs. At a certain volume, when the cost per medical
claim is calculated and compared to the cost available from outsourcing, the comparison actually
favors in-house processing.

                  Outsourcing Vs. Inhouse Automated Data Entry
          Category                             Details                         Cost/Year
  Software:                       $199,760 amortized over                       66,586.00
                                  three years*
  Professional Services:          $45,000 amortized over                         $15,000
                                  three years*
  Software Maintenance:           18% of total software*                         $35,957
  Manpower (FTEs):                25 Operators @ $22,890/year                   $572, 250
  Total Inhouse Capture           Per Claim cost .18*                           $689,793
  Total Outsource Cost            Per Claim cost .25**                          $945,000
  Annual Savings                                                                $255,207
          Sample Document: HCFA 1500                        Volume 15,000 claims a day

   Figure 8.      *Source: Datacap Inc.      ** Source: Industry standard price per claim



In the example in Figure 8, the net cost per form using Taskmaster in-house over three years comes to
18 cents, for a total annual cost of $689,793; versus $945,000 for annual outsourcing costs, which
computes to 25 cents per form, excluding additional hardware costs. While there are many factors and
results will vary case by case, the point can be made that outsourcing data entry is more expensive
than in-house, automated data capture.




                 ABOUT THE AUTHOR

                 Arthur Gingrande, Partner, IMERGE Consulting
                    Arthur Gingrande is a partner of IMERGE Consulting in Lexington, MA, and a nationally
                    acclaimed expert in image-based intelligent character recognition (ICR), electronic forms, and
forms automation. Before that, as vice president of marketing and business development for two software
development firms and later as a consultant, he developed the marketing/business plans for six of the leading
software development firms in image/data capture and automated forms processing He also consults to end
users in the areas of needs analysis and implementation oversight of electronic document management
systems (EDMS). He is editor and publisher of Contemplor, a newsletter dedicated to document management
and forms automation technology. Since 1991, over 200 of his articles on ICR, forms automation, imaging, and
EDMS have been published in various trade journals and I.T. magazines. Mr. Gingrande is the author of
numerous articles in Today and other TAWPI publications, including Cost-Justifying an ICR Solution and
Measuring and Improving Data Entry Productivity. He is also the author of the definitive book on forms
processing, Forms Automation – from ICR to Electronic Forms to the Internet, and also Processing
Unstructured Documents: Challenges and Solutions, both published by AIIM, plus numerous white papers and
articles for that organization. Mr. Gingrande’s resume is available at the IMERGE Consulting Website,
www.imergeconsult.com. He can be contacted by phone at (781) 258-8181 or by email at
arthur@imergeconsult.com.

								
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