Intelligent Automation Basics: How to Measure Savings

Intelligent automation (IA) is transforming the way businesses operate by streamlining processes, reducing costs, and enhancing efficiency. Calculating the savings from IA involves several key metrics, including Full-Time Equivalent (FTE) savings, cost avoidance, contract cancellation, hosting wins, cost avoidance due to litigation, and measuring outcomes tied to business impact.

In this article, we will understand various ways to measure these savings effectively.

1. Full-Time Equivalent (FTE) Savings

FTE savings refer to either reducing the number of full-time employees needed or achieving productivity gains through automation. Here’s how you can calculate these savings:

1. Identify Tasks for Automation: Start by listing all the tasks that can be automated.
2. Determine Time Spent: Calculate the total hours employees currently spend on these tasks.
3. Convert Hours to FTEs: Divide the total hours by the standard full-time hours (e.g., 2,080 hours per year) to get the number of full-time equivalents.
4. Determine Cost per FTE: Calculate the cost of an employee based on their country, as salaries and benefits can vary significantly by location.

Calculate Savings: Multiply the number of FTEs saved by the average salary and benefits cost per FTE.

Calculation Using Hourly Rate: Multiply the total hours saved with hourly rate.

2. Cost Avoidance

Automation can help you prevent future costs in various ways, such as avoiding overtime, reducing error rates, minimizing compliance penalties, and steering clear of litigation costs. Here’s how you can calculate these savings:

1. Identify Potential Costs: Start by listing all the potential costs that automation can help you avoid.
2. Estimate Cost Impact: Calculate the financial impact of these costs if they were to occur.
3. Calculate Avoided Costs: Sum the estimated costs that are avoided due to automation.

Increasing the headcount or filling open positions can sometimes be considered cost avoidance rather than FTE savings.

3. Contract Cancellation

When automation lets your business terminate or renegotiate contracts with third-party service providers, you can save a lot of money. Here’s how to figure out those savings:

1. Identify Contracts: Start by listing all the contracts that can be canceled or renegotiated thanks to automation.
2. Determine Contract Value: Calculate the annual cost of each of these contracts.
3. Calculate Savings: Add up the annual costs of the canceled or renegotiated contracts to see your total savings.

4. Hosting Efficiency Gains

Hosting savings come from optimizing or reducing your hosting infrastructure through automation. This might involve moving to more cost-effective cloud solutions or cutting down on on-premises infrastructure. Here’s how you can calculate these savings:

1. Identify Hosting Costs: Start by listing all your current hosting costs, including expenses for hardware, software, and maintenance.
2. Determine Optimized Costs: Next, figure out what your costs will be after implementing automation.
3. Calculate Savings: Finally, subtract the optimized costs from your current costs to see your savings.

5. Cost Avoidance Due to Litigation

Automation can play a crucial role in preventing legal disputes and the associated costs. By ensuring compliance with regulations, reducing errors, and maintaining accurate records, automation helps minimize the risk of litigation. Here’s how you can calculate these savings:

1. Identify Potential Legal Risks: Start by listing the potential legal issues that automation can help you avoid.
2. Estimate Litigation Costs: Next, calculate the financial impact of these legal issues if they were to occur. This might include legal fees, fines, and other related expenses.
3. Calculate Avoided Litigation Costs: Sum the estimated litigation costs that are avoided due to automation.

6. Measuring by Outcome/KPI Tied to Business Impact

To ensure that the savings from intelligent automation are aligned with business goals, it’s crucial to measure outcomes using Key Performance Indicators (KPIs) tied to business impact. Here’s how to approach this:

1. Identify Relevant KPIs: Start by determining which key performance indicators (KPIs) align best with your business goals. These might include metrics like customer satisfaction, process cycle time, error rates, and revenue growth.
2. Set Baseline Measurements: Before you implement any automation, establish baseline measurements for these KPIs. This will give you a clear starting point to compare against later.
3. Track Changes Post-Automation: Once automation is in place, keep an eye on these KPIs to see how they change. Monitoring these metrics will help you track improvements over time.
4. Calculate Business Impact: Finally, quantify the business impact by comparing the baseline and post-automation KPI values. Look for increases in revenue, higher customer satisfaction scores, shorter cycle times, and fewer errors.

Improvement in Customer Experience: One of the biggest benefits of intelligent automation is how it can improve the customer experience. Automation helps provide faster response times, more accurate information, and a more personalized journey for customers. To measure these improvements, you can use tools like customer satisfaction surveys, Net Promoter Scores (NPS), and customer retention rates.

In conclusion, figuring out the savings from intelligent automation requires a thorough look at different cost factors. By accurately measuring things like FTE savings, cost avoidance, contract cancellations, hosting cost savings, litigation cost avoidance, and the overall business impact (including better customer experiences), businesses can make smarter decisions and get the most out of their automation efforts

How are you measuring savings from your automation initiatives? Comment below and share your insights!