Most organizations that deploy robotic process automation (RPA) earn a positive ROI within 6 to 9 months of implementation. Yet despite this remarkable statistic, many small and mid-sized businesses (SMBs) remain hesitant to dip their toe in the RPA waters.
RPA offers numerous benefits with an immediate impact on your business. When every dollar counts and every employee is valued for their contributions, RPA is one of the essential ingredients for keeping your business competitive now and into the future.
Regardless of industry, there are a few key principles to bear in mind when calculating your expected or earned ROI. In the following post, we’ll review how to calculate and secure the best possible ROI for your automation program.
4 Steps to Secure the Best Possible ROI for Your RPA Program
Before a successful automation program can begin, follow these four steps to put your organization on the right track.
1. Identify Good Candidates for Automation
Look for well-defined processes—especially those that are repetitive, rules-based, and routine, with well-defined steps and clear handling of exceptions—as pilot projects for RPA. The monotony that makes these processes prone to error when done manually also makes them ideal to automate.
Common Areas to Deploy RPA with Proven ROI: Tasks and processes that instantly lend themselves to automation.
2. Assess the Value of Automation for Your Organization
For each task or process to be automated, ask yourself: What is the measure of success for this task, and how does that benefit the organization as a whole? Then measure and rank your return metrics in order of priority.
Here are just a few of the many key performance indicators (KPIs) that you can use for measuring automation success:
| Employee-Focused KPIs | Customer-Focused KPIs | Cost/Revenue-Related KPIs |
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3. Understand the Cost Elements in Automating Each Step of the Process
For any automation project, there will be one-time costs as well as ongoing costs, both of which must be factored into your ROI calculations. In general, you can expect one-time costs to generate a payback within 6-9 months and ongoing costs to remain quite low.
3a. Understand your one-time costs.
One-time costs for RPA include initial design, development, testing and deployment of the automation scripts. The actual expense can vary significantly depending on the complexity, variability and volume of the work being automated.
Your one-time costs will also vary, depending on your experience and internal expertise. Development may seem to present a lower upfront cost, but internal development includes many “hidden” costs, including training, backups for PTO, cost of absenteeism due to illness, and more.
Additionally, internal development can take longer, increasing upfront costs. Several other factors can impact your time-to-automate including:
- Accuracy of your process definitions
- Number of and reliability of the systems to be automated
- Technical design of your systems
- Number of branches and decision paths needed
Working with an experienced RPA partner can help you quickly remove unknowns from the implementation equation and speed up the time-to-automate.
3b. Understand your ongoing costs.
Ongoing RPA costs can include license fees, infrastructure setup and maintenance, automation script maintenance, and more. Although maintenance costs are often neglected, ongoing maintenance is critical to the long-term success of your RPA program. As processes, systems, inputs, and outputs change, your bots will need adjustment.
Here are some factors which can help you estimate the ongoing costs of your RPA program.
- Licensing fees vary by provider, but you should estimate an average of $3,000-$10,000 annually per bot. This is subject to how the platform calculates its fees. Some platforms license by the ‘bot’ itself and others license by the number of actions or processes.
- Infrastructure setup and maintenance costs can be analyzed like a typical desktop computer setup within your organization. Your IT team should be able to give you a close estimate.
- Bot maintenance usually falls at roughly 10% of the original development cost per year. For example, if development costs $5,000, you can estimate that ongoing bot maintenance as $500 per year.
- Third-party integration fees. You may also need other software licenses to integrate certain systems (e.g., user accounts, additional licensing for bots, etc.) These are highly dependent on your specific use cases and individual license fees.
4. Calculate Return on Investment
Once you understand both your one-time and ongoing costs, you have the critical input needed to calculate your return on investment. Next, you need to understand what you are gaining from automation by looking at your manual cost metrics—in other words, what it currently costs you to do the work manually. These metrics include:
- The base cost per process cycle:
- Instances per period (day/week/month/year)
- Total staff count performing the work
- Staff salaries
- Time spent on quality control and reworking
- Cost of errors (e.g., penalties, interest loss, etc.)
- Training costs when staff turns over
In addition to what you’ll be saving, consider indirect benefits like being able to run additional instances (higher throughput) and faster runs (accelerated cash flow). Once you understand what you’re currently paying for manual work, simply compare your RPA costs with your current costs to help you reach a decision.
Example Case Study
Let’s make things more concrete. Here’s an example RPA case to see how one company’s costs compare before and after automation – and how quickly they realize a return on their initial investment.
Before Automation
Company A is a franchisee company licensing the purchase and use of their products and name across the country. Before automation, three firm employees spent approximately half of each day performing the following process to reconcile franchisee sales to supplier orders:
- Extract a report of sales and passthrough orders from three franchisee websites
- Standardize columns and consolidate data
- Extract report of purchase orders from two supplier websites
- Standardize columns and consolidate data
- Compare the two datasets
- Report differences or errors between franchisee and supplier data
- Rerun with feedback from franchises
- Enter standardized data into the firm’s ERP System
- Submit and send invoices
- Enter purchase orders to suppliers
Manual Costs
Now let’s look at the manual costs of completing these tasks. In this example, three people are performing these tasks at an average rate of $23/hour. Each works on these tasks 3 hours per day Tuesday – Friday, and 4.5 hours each on Mondays. In addition, there is a 3% error rate on an average of 300 orders per day and 0.05% interest lost per day on an average order of $1,500 ($6.75 per day). Finally, training costs are 9 hours every 9 months, or $138 annually.
In sum, the total annual manual cost comes to $21,653.
Cost to Automate
Next, let’s calculate the cost to automate these tasks, including the following expenditures:
One-time development costs: 42 hours at $125 / hour = $5,250 on a one-month timeline
Ongoing costs (allocation prorated based on utilization of bots):
- RPA Platform
- Annual cost of 1 bot runner = $2,460
- Runtime ~30 minutes/instance
- Cost = $0.14 per instance
- Annual Cost = $109
- Infrastructure
- Est. $250/month
- Cost = $0.17 per instance
- Annual Cost = $133
- 3rd party licensing fees = $0
- Maintenance cost estimation (rule of thumb ~10% of dev costs each year)
- Cost = $44 per month
- $0.67 per instance
- Months 2 – 12 = $484
Total Year 1 RPA costs = $5,976
Total Year 2+ costs = $726
Payback After Automation
To calculate the payback period, let’s take the pre-automation (manual) cost of $21,653 per year, and compare the costs for automation for Years 1 and 2 (and beyond). You’ll save:
Year 1 ROI = $15,677 or 72.4%
Year 2 and Beyond ROI = $20,927 or 96.7%
In addition, by offloading rote, error-prone tasks onto bots, our example staff is freed up to work on direct-revenue generating activities with clear benefit to the firm’s bottom line. Aside from the financial benefits, there is also a host of non-monetary benefits including:
- Additional instances run, resulting in higher throughput;
- Timelier runs, resulting in faster payment;
- Reduced errors, enabling maximum interest on deposited payments and easing conversations with franchisees; and
- Greater productivity, by reassigning existing staff to activities that require their skillsets instead of hiring additional staff.
Conclusion
The numbers make it clear. An automation program that systematically allows your organization to automate one project after another will yield a significant ongoing benefit. With a combination of low recurring costs and high recurring value, you can reap the rewards in months, not years.
Contact R-Path Automation to learn more and get started today.