DAM: Corporate Approval's Uncertain ScienceBy Edward Cone | Posted 2003-02-12 Email Print
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Online Exclusive: How do you get the nod to go ahead with a digital asset management project?
Getting a digital asset management project funded by corporate headquarters is a more demanding job today than it was when AOL Time Warner Book Group chairman Larry Kirshbaum played digital pioneer just three years ago.
The cost of a digital-asset management system at an enterprise level is typically in the range of $3 million to $5 million. That's according to Mike McGinniss, an Accenture consultant who has worked on several large digital-asset management implementations, including the project at Time Warner Trade Publishing, as AOL Time Warner Book Group was then known.
The actual software license runs about $500,000 for a large project, says David Lipsey, vice president at Artesia, the software vendor tapped by the Book Group. Beyond a relatively small investment in hardware, the rest of the money goes to consulting and development fees paid to Artesia and third parties such as Accenture. The digital-asset management system that AOL Time Warner deployed cost approximately $2 million, participants indicate.
Now evidence is accumulating that such expenditures may be a worthwhile investment. "Companies are getting payback for their investment in one to two years," says Accenture consultant Debra Polishook. "The metrics so far are soft, but our clients will swear by them. When we have gone back to them, all of our clients say they are meeting and beating their business cases."
Most of the measurable returns from digital-asset management products come from lower costs and improved productivity. Gistics, a research company that last year put together an extensive study on digitizing content, calculated the first-year return a large catalog company could expect to see from a digital asset management system investment. The firm figured the cost of deploying the system—the hardware, software, services and maintenance—at $490,360 (the software alone was $205,790). But the system would save a company $720,497 in the first year. The company would save $625,282 in reduced staff and associated overhead, and an additional $95,215 savings would come from productivity gains associated with people being able to do more work in less time. Gistics also says digital asset management could put the company in a position to boost sales $500,000 through better online merchandising.
Kirshbaum, however, didn't have hard numbers to apply to projections of return on investment when pitching the digital-asset management system now in use at the publisher to his corporate bosses. "We didn't do a lot on return on investment; that was not the focus," says Phil Madans, director of publishing information at the Book Group. "It was new technology, so we did not do that analysis."
Kirshbaum, a respected publishing veteran, presented what seemed a compelling case for fast-tracking the creation and management of digital assets: the alleged imminence of e-books as a business. Part of the case was made by a June 2000 report by Andersen Consulting, which projected a $2.3 billion U.S. market for e-books by 2005. He also weighed in with his intuitive sense of the underlying value of controlling the components of his books, in electronic form.
At the time Kirshbaum started pushing for a digital-asset management system, the components of the group's books were scattered in file cabinets, Macintosh computers and at printers and compositors. "He said, 'Things are created digitally today, and if I can't inventory them now, what am I going to do in five years?'" recalls Lipsey. "When he asked, 'Where's my books?' nobody could answer."
It didn't hurt that the request came at a particularly flush moment, with the just-merged AOL Time Warner commanding a market cap three times today's shriveled value of $68 billion.
Being a relatively small division of a huge company that was looking to manage digital assets at all its divisions helped too, says Madans. "It is a different thing for us to put it in than doing it at Time Inc. or Warner Brothers."
These days, "ROI is getting more defined," McGinniss says. So far, the payoff has been mostly in reduced distribution costs for physical content, such as replacing the sending of disks and art by an overnight package service like FedEx. "I have seen six-figure annual cost savings in distribution, and trade publishers spend five figures a year on scanning and reproduction," says McGinniss. "That won't deliver ROI in year one, but it can be substantial dollars." In addition, Accenture has found a 25%-50% reduction in time spent searching for assets, and a similar reduction in time distributing assets.
The Book Group does not release numbers on its cost savings. But, by the time Accenture got to Viacom's Simon & Schuster unit, six months after the Book Group engagement, ROI was becoming more of a formal expectation. "Times were changing—they needed something, even something anecdotal," McGinniss says. The big publishing house wanted to understand both the revenue-generation and cost-cutting components of ROI, he says, but settled for the cost component when the revenue side was clearly not there yet.
New revenue comes from increasing sales of existing products, not the delivery of new products, so far. "Sales and marketing are the big bang out of the gate," McGinniss says. "The revenue upside is stealthy, things like developing and managing more 'Look inside this book' assets."
Yet the numbers don't necessarily tell the whole story. "It is hard to quantify some returns you know are there," says Peter McKelvy, vice-president of the Content Management Group at Discovery Communications. Discovery is using an ROI model based on the number of people needed to manage photographs in the analog world of filing cabinets and copying machines.
Relieving people of tedious tasks like finding files can lead to additional payoffs, however tough to measure. "People don't leave earlier when they save that time, they apply themselves to higher value work on the project, and we get a better product," says McKelvy. "We can exploit significantly more material from the archives without significantly increasing the staff, and that way we add value to the content we already own."