How to Build a Microsoft Document Management System

What is a document management system?

A document management system is a digital tool that stores, organizes and tracks your company’s documents. Think of it as an electronic filing cabinet — one that lets you digitize documents, upload attachments and sort everything into folders for easy access later.

But a DMS is much more than a computerized filing system. Many platforms include features that simplify how documents are captured, shared and managed. Common capabilities include image scanning, optical character recognition (OCR), document sharing and collaboration tools, electronic signatures, version control, workflow automation and user permissions.

The right system can improve process efficiency, strengthen data security, support workplace collaboration and help your company maintain regulatory compliance.

“With DMS, companies can properly store documents and rapidly recall them for later use to advance business operations and decision-making,” explained Pravin Vazirani, managing director of Blue Owl Capital.

How to build your own Microsoft document management system

Below are the nine steps we recommend following when building your own custom Microsoft document management system.

Step 1: Assess your needs.

Before you begin, determine exactly what you want your DMS to do. Identify your use cases and build around those needs.

Consider the types of documents and data you’ll be storing and who will need access to them. Will different departments require different permissions? If your business needs to protect sensitive information, plan for strong access controls so users can only view what’s relevant to their role. Broad access can create unnecessary security risks — if anyone can see everything, so can a hacker who compromises a single account.

You’ll also want to evaluate your current file management practices to see what’s working and what needs improvement. How much data will you store, how fast will new data be created, and how long will you retain each type of document? Finally, sketch out your ideal system layout: What folders will you need, and what process will employees follow when adding new documents?

Step 2: Conduct a cybersecurity risk assessment.

Cyberattacks grow more sophisticated every year, making security a top priority in any DMS build. Conducting a cybersecurity risk assessment early in the process will help you identify potential weak spots before they become real problems.

Remember that threats don’t always come from outside. Insider risks, whether intentional or accidental, can lead to data breaches or extortion attempts. That’s why every user should only have access to the files they need to do their jobs.

Your DMS also needs to comply with all relevant security standards and privacy laws, such as the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR) in the European Union and the United Kingdom. Regulators are paying close attention to data protection, and failure to comply can be costly.

Work with department heads, IT staff and key stakeholders to map how data moves through your organization, both in storage and in transit, and identify where your DMS can strengthen those defenses.

Step 3: Plan your budget.

Your budget planning isn’t just about the upfront cost of creating a DMS. It also needs to account for long-term expenses such as scaling, security updates, employee training and ongoing maintenance.

Start by gauging the complexity of your project. How many users will need access? How much data will you store? You may want to consult vendors or IT specialists at this stage to get realistic cost estimates based on their experience with similar systems.

Avoid making decisions based on price alone. The cheapest option can become costly later if it can’t scale or support added functionality. Build flexibility into your budget from the start so you can expand your system as your needs grow, and focus your spending on the features that deliver the most value over time.

Step 4: Research existing solutions.

Before you start building, take time to explore existing DMS platforms. Even if you plan to create your own, reviewing what’s already on the market will help you understand common features, strengths and limitations.

Look at how off-the-shelf systems handle document storage, integrations and workflow automation. You may find tools or capabilities you want to include in your own design or identify pain points you can avoid. Reading user reviews is especially helpful for spotting recurring complaints about usability, pricing or support.

Market research can also guide your DMS layout and functionality. Consider signing up for free trials to see how other systems look and operate. Testing these products firsthand can clarify what you want your custom solution to do and what you’d like to improve on.

Step 5: Build your DMS and leverage Microsoft tools.

Once you’ve outlined your needs, addressed security, planned your budget and researched other solutions, it’s time to start building your DMS. Decide whether you’ll use in-house resources or hire an external development team. Consider your timeline, budget and the technical expertise available within your organization before making that decision.

Whichever route you choose, keep code quality top of mind. Coding bloat is common in large projects, so it may help to bring in a consultant to review progress and ensure developers follow best practices. Solid code early on will improve your system’s speed, scalability and reliability later.

As you build your custom DMS, take advantage of the Microsoft ecosystem. You might use Microsoft SharePoint as the backbone for document storage and management, since it’s designed for exactly that purpose.

“SharePoint is a flexible and customizable platform used for building multiple types of solutions, such as intranets, learning management systems, ticketing software and more,” noted Sergei Golubenko, SharePoint department coordinator and solution architect at ScienceSoft. “However, this platform is best suited for building document management systems, as it offers rich capabilities for this particular use case.”

From there, you can integrate other Microsoft tools, for example, OneDrive for cloud storage or Power Automate to simplify workflows and boost team collaboration.

Step 6: Prioritize integrations.

The best document management systems connect seamlessly with the other business tools your team relies on. Prioritizing integrations early in development helps streamline daily operations and prevents headaches later.

If your company uses Microsoft Office extensively, make sure your DMS works smoothly with Word, Excel and PowerPoint. Integration with Microsoft 365, the cloud-based version of the Office suite, is especially valuable. It allows staff to access your DMS from any device or location — a must if your business has a remote work plan.

Step 7: Test your system.

Once coding is complete, it’s time to put your DMS through its paces. Testing ensures the system works as intended and gives you a chance to catch any bugs or performance issues that slipped past development or your consultant’s review.

At this stage, focus on the user experience as much as technical functionality. Your employees will rely on the system every day, so their feedback is invaluable. Ask them what feels intuitive and what could be improved.

If users find the controls confusing or cumbersome, adoption will suffer. While employee training will help, the goal is to make the interface clear enough that employees rarely need to reference a manual for basic tasks. Use this testing phase to gather feedback, refine the design and fine-tune usability before rolling the system out companywide.

Step 8: Implement your DMS and train your team.

With development complete, you’re ready for the official rollout. As with earlier stages, implementation takes careful planning. During this phase, you’ll install the system, migrate data from existing storage platforms and train employees on how to use the new tools.

Data migration can be one of the most challenging parts of implementation, especially if information is scattered across multiple systems. Take care to prevent data loss and confirm that transferred files are accessible and properly categorized in the new environment.

Create clear usage policies and instructions that outline how employees should store, share and manage documents. You should anticipate questions and minor setbacks as your team adjusts to the new process. A short learning curve is normal; with training and support, they’ll quickly adapt to your company’s new document management system.

Step 9: Maintain and scale your system.

Congratulations — you’ve reached the final step! More accurately, you’ve completed the first phase of your DMS journey. The system you launch today won’t stay static forever. As your company grows, your DMS should evolve with it.

It’s important to monitor your system’s performance and capacity to ensure it can handle additional users, expanded functionality and larger data volumes. If you see signs that you’re nearing those limits, start planning upgrades early to avoid disruptions.

Keep your DMS healthy with regular audits and security reviews. These checkups will help you catch small issues before they become major problems. Don’t overlook feedback from everyday users, either — they often notice workflow hiccups or missing features first. Use their input to make smart updates so your system stays effective as your company grows.

Why build a Microsoft-based document management system?

Microsoft users have more flexibility than most when it comes to setting up a custom document management system. There are plenty of prebuilt DMS packages available that run smoothly across devices, but building your own lets you design a platform that fits your business exactly and integrates seamlessly with the Microsoft tools you already use.

“Microsoft’s greatest benefit is its ubiquity in that it is used by countless businesses in nearly every industry,” Vazirani noted. “While this ubiquity is excellent for uniform document sharing, the needs of a business for document management can be more industry- and even business-specific.”

Vazirani also emphasized the importance of integrations. “For instance, if you are looking to manage financial data, then it is imperative that the DMS you use is able to communicate with your accounting and finance software,” Vazirani said.

By building your own Microsoft-based DMS, you can ensure it syncs perfectly with your existing systems and workflows, giving you more control and customization than an off-the-shelf option.

Microsoft integration examples for your DMS 

If your business already uses Microsoft 365, you have built-in opportunities for powerful integrations that can create a truly connected document management system. Here’s how SharePoint Online, Teams and OneDrive can work together in your custom DMS:

• SharePoint as the foundation: When you create a team in Microsoft Teams, a Microsoft 365 group and a SharePoint site are automatically generated. SharePoint provides the underlying structure for document storage and organization, managing file storage, metadata, permissions and version control. It serves as the content management backbone of your system.
• Teams as the collaboration hub: Microsoft Teams brings your staff together in one workspace for communication and collaboration, while SharePoint manages files behind the scenes. When users open the Files tab in any channel, they’re actually viewing a linked SharePoint folder, meaning documents stay organized and up to date across both platforms. Team members can work from either space and always see the latest version of every file.
• OneDrive for personal storage: OneDrive supports file sharing and chat functionality within Teams and integrates seamlessly with SharePoint Online. Files shared in private Teams chats are automatically stored in OneDrive within the “Microsoft Team Chat Files” folder. This integration gives users a unified experience — they can access files from SharePoint, Teams or OneDrive and even work offline through OneDrive sync.

For example, consider a legal firm using this integrated setup:

• Contract templates are stored securely in SharePoint with appropriate metadata and permissions. 
• Legal teams can collaborate on specific cases through Teams channels, where all case documents are automatically organized in the related SharePoint site. 
• Individual attorneys can work offline through OneDrive.
• The firm maintains centralized control and governance through SharePoint’s robust security features.

Microsoft 365 security features

Cybersecurity and risk management should be built into your DMS from the start, and Microsoft 365 includes robust tools that help protect your data across platforms.

• Conditional access: Control access based on user, device or location. For example, you can require multifactor authentication when employees open sensitive files from unmanaged devices or unfamiliar networks.
• Data Loss Prevention (DLP): Automatically detect and protect confidential data. DLP policies prevent sharing documents containing financial, personal or proprietary information outside your organization, keeping protection consistent across SharePoint, OneDrive, Teams and email.
• Sensitivity labels: Apply digital labels that classify and safeguard content. Labels can encrypt documents, restrict sharing and mark files visually based on sensitivity. So, for example, a confidential report can automatically receive encryption and external sharing limits.

Together, these features make Microsoft 365 a strong foundation for a secure, compliant document management system.

Microsoft development resources

If you plan to customize your document management system beyond built-in features, Microsoft offers robust development tools and official documentation to help. The SharePoint Framework (SPFx) provides a modern way to build web parts and extensions that integrate with SharePoint and other Microsoft 365 apps.

For deeper integrations, Microsoft also offers APIs for authentication, workflow automation and data access across the Microsoft 365 suite. You can find detailed step-by-step guidance on Microsoft Learn, which walks through setup, customization and deployment.

Common Microsoft DMS challenges and how to fix them

Even the best-built document management systems hit the occasional snag. Here are some common issues businesses run into with Microsoft-based DMS platforms and how to solve them before they become major headaches.

• Sync problems: Files sometimes fail to sync between SharePoint, OneDrive and Teams, usually because of poor connectivity, outdated software or file paths that are too long. Keep apps updated, check your network and avoid file paths over 260 characters. A shallower folder structure with concise, descriptive names can prevent sync failures.
• Permission mix-ups: Overly complex permissions can slow things down or block users from accessing what they need. Simplify your setup by using group-based permissions instead of assigning them one by one. Establish clear inheritance rules and review access rights regularly.
• Search frustration: If users can’t find what they’re looking for, tweak your search configuration. Refine the search schema, remove unused fields, and use filters or refiners to help narrow results. Cleaning out outdated files also improves index performance.
• Slow performance in large libraries: SharePoint libraries with thousands of files can drag down performance. Keep lists under 5,000 items when possible. Use metadata to organize and filter documents instead of burying them in deep folder trees, and split oversized libraries into smaller ones.
• Custom integration issues: Custom SharePoint solutions sometimes break after Microsoft updates. Review code for deprecated APIs and migrate older builds to the modern SharePoint Framework (SPFx) for smoother, future-proof performance.

Tips on long-term DMS maintenance and stability 

Your DMS isn’t a “set it and forget it” system. To keep performance strong and ensure your Microsoft-based platform grows with your business, make maintenance and scalability part of your ongoing plan. Here are some tips:

• Monitor performance: Use the Microsoft 365 Admin Center to track key metrics like load times, error rates and user activity. Set up alerts so you’re notified when performance dips or storage nears capacity. Watching data growth helps you predict when to expand resources before problems arise.
• Manage content smartly: Automate cleanup with retention policies in Microsoft 365 to remove outdated files. Limit document versions to prevent bloated storage and use metadata-based navigation instead of deep folder trees to keep your system quick and responsive.
• Optimize your infrastructure: In high-traffic environments, enable caching for large files and fine-tune network connections for remote teams. A Content Delivery Network (CDN) can also speed up access to static files for global users.
• Plan for scalability: Build your system architecture so it can expand horizontally. Use hub sites to connect related SharePoint sites, improve navigation and keep search results accurate as your content grows. Archive older or inactive data in secondary storage to free up space without losing access.
• Streamline user access: As your company scales, automate how users are added or removed from your DMS. Tools like Microsoft Entra groups make it easier to manage permissions and maintain security as teams evolve. Review data policies regularly to ensure they support both protection and productivity.

Compliance and regulatory support

Your document management system should make compliance easier, not harder. Microsoft 365 includes built-in tools and certifications to help businesses meet industry and international standards right out of the box. Here’s what you need to know.

• Healthcare: For healthcare organizations, Microsoft provides Business Associate Agreements (BAAs) and complies with HIPAA laws. Encryption, access controls and audit trails protect patient data, while services are independently verified through HITRUST certification.
• Financial services (SOX): Businesses subject to the Sarbanes-Oxley Act can use Microsoft Azure and 365 to maintain proper internal controls and audit trails. These tools support financial data integrity, access logging and hybrid environments that combine on-premises and cloud workloads.
• Global standards (ISO 27001): Microsoft 365’s ISO/IEC 27001 certification ensures strong data protection, incident response and business continuity — core components of a secure DMS.
• Compliance management made easier: The Microsoft Purview Compliance Manager offers templates and built-in assessments for various regulations. It helps track compliance, enforce policies automatically and generate reports through tools like sensitivity labels, DLP policies and conditional access.

Together, these features bake compliance into your DMS from day one, reducing risk, cutting costs and giving you peace of mind that your system meets key legal and security requirements.