For paper applicants, the files are still on paper. The application forms are digitised and entered into GCMS and they still have to move around the physical files (attachments - passport copy, language proof, ID copies, PCC, etc.).
For online applicants, the entire application including attachments are digital and they use an application called Horizon to view and assess these applications. Horizon talks to GCMS and no need to move physical files. I gathered this from the 2022-23 ATIP document
If you want to see how they treat paper applications as an example, you can see the CIO One Touch Manual for PR applications... I would assume the process would be similar: