Software automation is an extremely popular term nowadays. Like artificial intelligence, many modern businesses invest heavily in such services or are considering such investments in the near future.
However, is software automation really that crucial and beneficial for your business? Or is it another seasonal trend that will be forgotten in a few years? To answer this question, we must first discuss the term itself and consider the most effective ways to estimate the potential benefits or profits from such a solution.
Software Automation in a Nutshell
Frankly, the idea behind this term is very straightforward: the core goal of applying software automation within your business is to streamline repetitive and time-consuming tasks or processes, using software solutions.
The benefits of such an approach are obvious: by automating repetitive tasks, you can redirect your time or other resources to some other, more urgent or complex operations. However, such advantages seem obvious only at first glance.
Simply put, software automation requires certain investments and time, just like any other service. So, if the potential benefits of AI automation services are lower than your expenses, why would you invest in the first place?
When not to Invest in Software Automation?
Unfortunately, despite the overall usability, software automation may not always bring enough value. You shouldn’t consider applying new software solutions to streamline operations when:
- You are dealing with low-frequency or low-value tasks. Streamlining processes should always aim at the most common and repetitive operations. Otherwise, if you want to automate a task that happens once a month or so, your expenses and efforts won’t redeem themselves.
- Complex decision-making that requires human involvement. While many software automation solutions offer excellent data processing and analysis tools, they should be treated as additional instruments. You shouldn’t streamline final decision-making due to many factors. Instead, you can and should utilize such functionality to enhance the accuracy and correctness of potential decisions by automating various data-related operations, such as scraping, processing, analysis, and summarization.
- Process instability and frequent changes. Most software automation solutions are rule-based and can work properly only when the tasks are predictable and static. However, if the process frequently changes, software automation is the last thing you want to implement. Your automation solution won’t work in the best scenario if the task is unstable and related factors are constantly changing. In the worst case, it can process the operations entirely mistakenly.
- Loss of human touch and the uncanny valley. Finally, some tasks and operations, such as customer support services, should be carefully automated. On the one hand, modern AI solutions and other software features can streamline almost the whole customer support lifecycle. However, such extensive and complete automation will have a drawback, causing users to experience an uncanny valley syndrome and negatively impacting customer experience and satisfaction.
- High implementation costs and low ROI. Finally, suppose your initial investment in software automation yields a negative return on investment (ROI), meaning that your spending is lower than the potential benefits and profits. In that case, you should reconsider your automation project, unless it is something crucial.
When do You Benefit from Software Automation?
At the same time, integrating at least some software automation solutions usually brings a lot of value to your operations, especially when:
- Your team constantly deals with multiple repetitive tasks. Therefore, if some processes must take place daily and demand some time and resources to be fulfilled, streamlined operations are a perfect choice for you. Such implementations can easily cover most routine assignments or even automate the entire lifecycle of specific operations, allowing your employees to redirect their efforts and focus on more urgent or complex tasks.
- You plan to scale your business software. It seems impossible to scale modern software systems without applying software automation practices. They not only help ensure higher performance and accuracy but have also become an essential tool for scaling any software. Without streamlining some aspects of your business software, you won’t be able to increase the list of offered features or services efficiently.
- Your business requires compliance and accuracy in its operations. Apart from speeding up the workload, software automation also suggests higher accuracy and compliance of results. All the processes that are suited for automation are usually straightforward and rule-based. So, your team can set up an end-to-end software solution that covers the entire task, eliminating human engagement and reducing the risk of human error to a bare minimum.
- The estimated return on investment (ROI) from software automation is positive. Finally, if your discovery phase reveals that potential revenue from streamlining certain software operations will exceed your expenses, then consider undertaking such a software project.
How to Estimate Potential Benefits of Software Automation?
Finally, let’s talk about the best practices on how to estimate your future benefits, as well as count all pros and cons of such solutions. Frankly, there are various possible approaches to evaluating the results of software automation projects.
Still, one of the most general and effective ways to define the main pros and cons of streamlining software operations, as well as deciding on whether investing in such projects is worth it, consists of a few core steps:
- Identify Current Manual Processes
- Measure Baseline Task Metrics
- Estimate Automation Impact
- Convert to Financial Gains
- Consider One-Time and Ongoing Costs
- Calculate ROI and Payback Period
Identify Current Manual Processes
First of all, you need to specify precisely what you can improve. Your first step would be to examine current business operations and identify those that are performed manually or are semi-automated.
However, simply defining only manual tasks is not enough. Among them, you should identify repetitive or common processes, tasks that are time-consuming, or error-prone. For instance, it can include data-related operations such as report generation, data entry, and invoice processing.
Measure Task-Related Metrics
After setting the list of processes that can be streamlined, you should measure various metrics. To accurately estimate the benefits of software automation, you must first determine the amount of time and effort required to perform these tasks.
The core metrics you will need include:
- Time spent per task (per employee, per day/week)
- Labor costs (salaries of assigned specialists, hourly wages, etc)
- Error rates (how often mistakes happen and how crucial they are)
- Process delays (bottlenecks, dependencies, waiting time)
The measurement process itself is a basic math.
Estimate Automation Impact
To estimate the impact of streamlined operations, you have to focus on:
- Time savings (% reduction per task).
- Labor cost reduction (fewer hours needed).
- Increased throughput (more tasks handled per day).
- Error reduction (fewer mistakes = fewer reworks).
While measuring task metrics is a factual process based on real results, estimating the impact of automation is rather a hypothetical and approximate process. To illustrate what it looks like, let’s consider an example.
Let’s suppose that manual invoice processing takes 10 minutes each. Your employees must process 100 invoices per day, which requires approximately 1,000 minutes (≈17 hours).
However, after discussing the issues with the developers, they prototyped the automated invoicing. The prototype requires only 2 minutes per invoice, resulting in an 80% time savings of 13.5 hours daily. Based on this information, you can also calculate the cost reduction and the increase in performed tasks.
Convert to Financial Gains
To compute your financial gains from software automation, you can use a relatively simple formula:
Time savings × hourly wage = labor cost savings
Still, apart from that, don’t forget that:
- Improved accuracy = fewer losses due to errors
- Faster output = more revenue or customer satisfaction
Consider One-Time and Ongoing Costs
Nevertheless, don’t forget that apart from savings, the software automation implementation project also requires certain investments, which can be both one-time and ongoing. The core software automation project expenses consist of:
- Development or license costs
- Maintenance and updates
- Staff training and change management
The development and software licensing are a one-time purchase, which takes place during the development phase. The same applies to staff training and management, as well as spending on dedicated software developers, etc.
However, the software maintenance and updating processes are ongoing expenses. So, take them into account (for instance, in a 10-year perspective) when comparing investments and revenue.
The best way to estimate these expenses is to discuss them with your software development partner or seek advice from a bespoke software development company.
Calculate ROI and Payback Period
Finally, to calculate ROI and define the approximate payback period, you can use the foregoing formulas:
- ROI = (Annual Benefits – Annual Costs) / Annual Costs × 100%
- Payback Period = Initial Cost / Monthly Savings
The process of calculations and making various predictions is relatively simple and common for different approaches. Yet, the measurements of manual and automated tasks can vary significantly, depending on your specific business goals and needs, as well as the available technological solutions and their integration into an existing system.
