Robotic process automation (RPA) is a powerful tool that can reduce operational costs, boost data accuracy, and facilitate core business operations. RPA’s capacity to enhance productivity, promote innovation, and help industries offer a streamlined consumer experience makes it one of the most useful tools in the modern marketplace. Like any investment, companies are wise to consider the Return on Investment, particularly compared to other technology projects. This post explains the process and benefits of quantifying the ROI of RPA.
Appropriately done, RPA can yield a substantial ROI; according to Automation Anywhere’s August 2021 Now & Next report, the average business enjoys an ROI of 250% within six to nine months of initialization. Leading earners, composed of the companies that followed best practices, welcomed an average of 380% ROI on their RPA investments. These figures are a nod to the tremendous potential of RPA business technology.
Organizations must understand how to maximize their ROI to evaluate the effectiveness of an industry’s RPA process. This post shares how to calculate the ROI for your RPA project.
The Basics of ROI
ROI is a project’s expected return on investment. ROI is a vital tool that allows you to quantify the impact of your RPA investment with real data. With an awareness of your RPA initiative’s ROI, you can:
- Justify the initial investment with data-driven evidence
- Use the data to drive strategic technological decisions
- Enhance your RPA solution for more profitable outcomes
- Ensure that your system is yielding optimal value for your organization
In theory, calculating ROI requires simple math; however, things are more complicated in reality. It can be challenging to measure inclusive costs accurately, and determining total value can be particularly nebulous. With RPA, the total value comprises both tangible financial returns and more intangible returns that may prove challenging to assess properly.
Calculating the ROI for RPA
It is important to know that there are many ways to investigate how robotic process automation aids an industry. Along with the financial benefits, there are intangible benefits such as employee morale or consumer relationship management. A complete picture of the ROI of RPA involves examining its financial costs and potential advantages and then factoring in the human parts of the equation.
When calculating RPA costs, you must tally up the following expenses:
- Operating costs: including licenses, subscriptions, and other ongoing fees to maintain the solution.
- Capital expenses: including one-time expenditures such as custom development and any necessary infrastructure upgrades.
Of course, the accuracy of your cost measurement relies upon the completeness and accuracy of your expenses.
Evaluating the Return
While the calculation of costs is exacting, the return evaluation is more intuitive and, thus, more challenging. RPA offers numerous intangible benefits that are doggedly incalculable.
Consider calculating a tangible economic return: by incorporating a business automation process, your corporation saves the equivalent of three employees’ yearly salaries. You can identify the value of that savings by calculating the dollar value of that return by adding up the total cost of three employees’ wages and including all the extras: retirement plans, insurance coverage, etc.
Conversely, think about the calculations involved in evaluating an intangible return. Say your employees are pleased that they no longer have to perform the tedious labor replaced by RPA. How can you measure the increase in employee happiness? How did you determine the value of the newer work employees have time to complete? Was this work completed more quickly? Was it higher quality?
Inputs for Quantifying the ROI of RPA
The tangible benefits of RPA come down to a handful of inputs, which we’ve built into our RPA Calculator. Together, they allow swift calculations to predict your return on investment. These inputs consider an analysis of how the work is currently being accomplished as well as the future state, once RPA has been implemented.
As RPA aims to remove non-valued labor by employees, a key input is the number of employees currently tasked with the process, their average compensation and percentage of time spent on the process. Taken together, these make up the “return” on the investment and are provided as both a savings of money and hours for the organization.
Our calculator next asks for inputs on how many applications are currently used for the process and the number of steps within the process. Answers to these questions help estimate the complexity of development required for this particular bot.
When calculating the ROI of RPA, companies are wise to consider how many months until they break even, so we’ve included that on our calculator, too. Finally, some companies prefer to break down technology investments into pay-back periods, so we offer a five-year payback title with your analysis.
Wrestling with Measuring ROI’s Intangibles
While cost reduction is a significant driver for RPA, many businesses desire the types of intangible advantages automation systems provide. In Automation Anywhere’s Now & Next report, “productivity improvement” was the top-ranked benefit of RPA, and the second benefit was “moving employees to higher-value work.” Although measurement is complex and may rely upon qualitative rather than quantitative data, it is undeniably vital to office culture and customer experience.
Below we highlight several important benefits of RPA and describe how one might evaluate each.
How many minutes does a human employee take to complete one instance of the assignment you are automating? Post-automation, are employees able to complete a greater amount of tasks within the same amount of time?
Moving Minds to Higher Value Work
Aim to automate repetitive tasks. Post-optimization, evaluate how employees are spending their time. Are they being properly utilized in higher-value work that improves customer experience?
Improved Lead Time
Lead time refers to the duration from the start to the end of a process and generally includes some downtime. Consider how automation can be used to optimize processes. Are there tasks that could be optimized to run overnight or on weekends?
Consider which parts of your business processes are rote. How much time and employee effort could be saved by automating parts of these processes?
Increased Quality of Work
Are you noting fewer errors in data? Are there fewer breakdowns in your workflow?
Are tasks completed more quickly? Are there tasks that may be eliminated?
Improved Service Availability
Does RPA offer your business the ability to increase your service hours? Can the automation run during hours when a human may not be working? Can automation improve business throughput and decrease customer queue times?
Evaluate your customer experience through the lens of improved service availability. You may also estimate the alternative cost of offering the same service level without automation. Are customers getting a better experience overall with RPA?
Improved Business Agility
Does RPA offer the company the ability to adapt to changes in the market faster and more effectively? Indeed, you may not be able to get an exact analysis of the ROI of having customers more satisfied with their experiences. Still, you can select key performance indicators (KPIs) and use them as representative stand-ins.
Selecting Suitable Representatives for KPIs
Take “Moving Minds to Higher Value Work” as an example. How might you calculate the dollar benefit of that? You may determine that a reasonable representative KPI for higher value work is the number of product launches your development team can complete within a given period of time. Or perhaps it’s the number of new clients you earn during that same duration and the revenues they offer. Or possibly the number of employees you could upskill to other positions within your firm.
Determine Your KPIs as Soon as Possible
Determine what you want to measure immediately so you can obtain baselines. For example, to measure efficiency, determine how many full-time employees (FTEs) are required to complete a given task to gauge a “before” figure. Re-measure several weeks after the RPA solution is deployed. Or get a before picture of how many insurance claims are processed by your account receivables team over a month. Then, remeasure to develop your after picture to determine your quantifiable efficiency figures.
Use metrics that are valuable and reasonable for your particular business, and be certain to gather baseline data before RPA deployment.
The Bottom Line
You can reasonably expect that RPA will provide substantial benefits to your workers, clients, and corporation. Still, it’s nice to have that information quantified by data. Further, it is important to take the pulse of your business continually. Needs change, and RPA can be tweaked to ensure ongoing productivity, making your organization more agile and adaptable within the marketplace.
To best gauge RPA, you need accurate feedback and data. It is important to know what parts of your RPA initiative are working and if any are not. The ROI measures you evaluate provide valuable information that you may use to improve the program and your internal processes, and in the end, everyone benefits.