This article discusses how to evaluate the return on investment (ROI) of automation initiatives and provides recommendations for doing so efficiently
Businesses are growing more dependent on automation. Technology improvements have made it simpler for businesses to automate their operations and minimise their dependence on human labour. Not only are automation initiatives advantageous to organisations in terms of greater efficiency and production, but they may also provide substantial returns on investment (ROI). Yet, calculating the ROI of automation programmes may be difficult. This article will cover how to assess the return on investment (ROI) of automation initiatives and give advice for doing so efficiently.
a. Determine the automation project’s objectives:
The first step in calculating the ROI of an automation project is identifying the project’s objectives. What are your objectives for the project? Are you trying to decrease expenses, enhance efficiency, or boost output? After identifying the project’s objectives, you may design metrics to evaluate its performance.
b. Create metrices for measuring the project’s performance:
The next stage is to design metrics for measuring the automation project’s success. These indicators should be closely related to the project’s objectives. If your objective is to cut expenses, for instance, you may want to monitor the amount of money saved because of the automation project. If your objective is to increase productivity, you may choose to monitor the time required to accomplish a job before and after the automation project.
c. Calculate the cost of the automation project:
To calculate the ROI of an automation project, you must determine the project’s cost. This comprises the cost of automation software, hardware, and any other project-related charges. When you have calculated the project’s cost, you may compare it to the savings it will create.
d. Compute the savings realised by the automation project:
If your objective was to cut expenses, for instance, you would monitor the amount of money saved as a consequence of the automation project. If your objective was to increase productivity, you would measure the amount of time required to execute a job before and after the automation project. After these KPIs have been monitored, the automation project’s cost savings may be calculated.
e. Compute the ROI of the automation project:
Calculating the ROI of the automation project is the last phase. Just divide the savings realised by the automation project by the cost of the project to do this. For instance, if the automation project cost $50,000 and yielded $100,000 in savings, the ROI would be 100%.
Tips for calculating automation project ROI:
1. Set realistic goals: While establishing objectives for your automation project, ensure that they are attainable and reasonable. Unrealistic objectives may lead to disappointment and make it harder to calculate the project’s return on investment.
2. Consistently monitor metrics: To evaluate the performance of your automation project, you must regularly track metrics. This will enable you to compare the outcomes before and after the automation project with precision.
3. Include stakeholders: It is essential to include stakeholders in the automation project and to keep them informed of its progress and success. This will aid in gaining support for the project and guarantee that everyone is working towards the same objectives.
4. Valuate the long-term advantages: When calculating the ROI of an automation project, it is essential to consider the project’s long-term benefits. For instance, an automation project may yield short-term savings, but it may also result in higher revenue and long-term growth.
5. Utilize automation tools to calculate ROI: A range of automation tools are available to assist you in calculating the ROI of your automation project. These tools may assist you in monitoring KPIs, calculating savings, and generating reports to evaluate the project’s progress.
6. Conduct a cost-benefit analysis: Before beginning an automation project, it is essential to undertake a cost-benefit analysis to evaluate if the investment will be worthwhile. This study should consider the project’s expenses, prospective cost savings, and long-term benefits.
7. Constantly enhance the automation process: To optimise the return on investment of an automation project, it is essential to continually enhance the automation process. This may include discovering new procedures to automate, improving current processes, and applying new technology to increase productivity.
Conclusion
Assessing the return on investment (ROI) of automation initiatives is essential for establishing their performance and defending the investment. Organizations may effectively analyse the performance of their automation initiatives by establishing the project’s objectives, creating success indicators, measuring the project’s cost, evaluating the savings gained, and calculating the return on investment. In addition, by adhering to the aforementioned guidelines, firms may assure the success of their automation initiatives and maximise their returns on investment.
The author is Associate director, Digital Automation and Transformation, ASA & Associates
