Definition
An ultimate negative outcome, such as the failure of a project, brought about by an excessive number of bureaucratic hurdles.
Origins
Blend of death by a thousand cuts + paper cut. The "thousand cuts" of the original phrase are now inflicted by paper, a metonym for bureaucracy.
See Also
How People Actually Use It
when something has so many issues that would be minor on their own that it becomes terrible.
"Guy: So, whats wrong with it? IT Guy: Man, this PC has so many damn bugs. It's a death by a thousand papercuts type deal."
Source: Urban Dictionary