Measuring the ROI in robotics
This post is part of a three-part video series, The automation opportunity in private equity, developed in partnership with Privcap. The videos offer insights on the incredible advances offered by automation—variously identified as artificial intelligence (AI), machine learning and robotic process automation (RPA).
Automation is not just about reducing head count, but improving accuracy and efficiency.
The most widely known benefit to bringing a "digital workforce" into a company is payroll reduction—setting up bots to perform mundane tasks and laying off the people who used to perform these tasks. While this offers the promise of higher profit margins, it also adds to a fearful narrative of mass worker displacement.
Private equity specialists Cory Eaves of General Atlantic, Tamas Hevizi of Automation Anywhere and Dave Noonan of RSM say the benefits of automation tend to be more nuanced than simply a lower payroll, and that in most cases RPA leads to greater employee productivity and satisfaction. After all, who wants to spend time performing rote tasks when they could instead be working on higher-touch initiatives?
"Automation many times is correlated with freeing up labor," says Hevizi. "We are in a very tight labor market, so many times what we're hearing especially in the United States and also in Western Europe, is that companies truly need to free up some of the workforce. They can't find the people, can't find the talent at any grade level."
Eaves shares the example of a business that decided to partially automate a pre-employment screening function that a handful of its employees were in charge of doing by hand. "They had to deal with databases all across the country, sometimes around the world," he says. "Each one has a different user interface, different website. And they literally have employees who log on to each one of those websites, and search for background cases essentially on those people.”
The business implemented ten robots to automate parts of that process, and the result was automation of almost 23% of the labor. “The business was growing fast enough that those people were actually absorbed into other growth areas of the business,” Eaves says. “There was no reduction in the total number of people in the business.”
Businesses can also start seeing returns relatively quickly, according to Noonan. “You can be up and running with a significant bot running a function of the business in three to four months at the outset, and that's through iterations of AI learning and machine learning,” he says. “Returns are almost immediate."
