How to Determine Whether Automation is Worth the Cost

There is a lot of talk in the marketplace about the benefits of automation. Even so, people ask Everest Group whether automation is worth the journey. Essentially, they want to know if, after having gone through the cost and effort of automating and deploying a robotic or cognitive agent they will have saved enough money to warrant the initiative.

Here’s an interesting use case that answers that question. We worked with a client that had moved its business process work to rural sourcing in India. Its average cost for labor was $2.00 an hour. Yet, they deployed robotic process automation (RPA) agents. Why? Because it made sense – the company got a high rate of return from digitizing its workforce.

What can we learn from this? First, even low-labor-cost areas are rich targets for deploying service delivery automation (SDA). Second, the benefits go far beyond saving money. For the company I mentioned, automation improved throughput, the time it took to clear the backlog. It also improved the quality of the work; the error rate dropped precipitously in an RPA model versus a low-cost labor model.

The company was excited about the cycle time reduction for clearing its backlog. Sending the work to India involved a several-week backlog; but the automated solution cleared the backlog almost instantaneously. The reduced cycle time and improved quality delivered a huge benefit to the company’s customer experience.

The second component that enabled the cycle time reduction was the proximity of the work to the claims area. By moving it to an automated platform and making that data regularly available to the claims area, they were able to use the data in new ways.

Finally, automation eliminated the complexity of shipping work to India and the governance work involved in going offshore and satisfying regulators. The automated solution needed much less regular scrutiny and was easier to operate.

It was also easier to change. One of the issues around automation is whether you’ve “hardened your arteries” – diminishing the ability to make coding changes. It turns out it’s much easier to make script changes in RPA than going through the process of changing policy and process in a remote location.

So it was a real win-win-win in what appeared at first to be sending work to a very low-cost arena. It made sense to switch to automation just on the basis of the savings from labor replacement and eliminating the complexity of managing a remote low-cost labor workforce. But with the improved cycle time and work quality, the decision became a no-brainer.