Process Automation ROI: How To Easily Calculate Yours

Expectations for the digitalization and business processes automation are quite significant. But which benefits can truly be achieved in practice? How can you ensure that the added value from automation efforts exceeds the initial investment?

This blog post shares a simple and easy-to-follow calculation of the return on investment (ROI) for your process automation projects. With no false promises and silver bullets – just a tried and true assessment with management-ready results.

Advanced low-code / no-code solutions offer a fast-track to business process automation that is easily understood by business users. This minimizes the involvement of the IT departments, leaving more room for process improvements and business requirements.

However, before starting to automate your selected processes, it is worth drawing a comparison between the expected results and anticipated costs – in a meaningful and tangible way.  A suitable measure for this purpose is the return on investment (ROI). The figure below illustrates the return that can be expected from the suggested investment.

Contrary to the classic ROI calculations, a more detailed benefits analysis has proven to be highly valuable when calculating the return on investment for your Business Process Automation. In this case, we shouldn’t only consider the short-term, quantitative benefits, but also take a closer look at the long-term, qualitative benefits of process automation too.

The quantitative metrics usually translate quite well into monetary benefits, such as the reduction in cycle time, for example. However beyond that, there is a range of qualitative factors that often provide reliable indications on the overall impact of your automation initiative. For instance, the increase in employee satisfaction or improved customer experience.

Short-term metrics are easy to define and can be measured as soon as the project’s been kicked-off. These could include the reduced process costs resulting from automation, for example.

Long-term metrics on the other hand, are more difficult to quantify than their short-term counterparts. Nevertheless, they are the ones that provide a deeper insight into the full potential of process automation. Examples of such metrics would be the employee and customer satisfaction, or the rate of innovation.

Since the traditional approach to ROI calculation often does not sufficiently address the long-term and qualitative benefits, the true value of process automation is thus not fully reflected. Therefore, in order to get a more accurate picture of the return on investment for your process automation efforts, the range of considered factors needs to be expanded. This requires an understanding of the four basic concepts that enable a richer analysis of the process automation results. And these are the following:

• ROI (Return on Investment)
• TBO (Total Benefits of Ownership)
• TRG (Total Resources Gained)
• TVO (Total Value of Ownership)

What is ROI (Return on Investment)?

The Return on Investment is a key indicator for assessing the profitability of any investment. In the context of process automation, we compare the annual benefits from automation with the total annual costs.

What is TBO (Total Benefits of Ownership)?

Total Benefits of Ownership (TBO) tries to capture the total benefits realized through the automation project. The TBO is a qualitative description of the factors that will have a positive impact on the organization. For example, improved customer experience or technological advantages.

What is TRG (Total Resources Gained)?

Total Resources Gained (TRG) indicates how much annual employee capacity has been freed up through process automation.

What is TVO (Total Value of Ownership)?

Total Value of Ownership (TVO) is the overall result, or in other words, the holistic ROI of the process automation investment. It also takes into account the long-term and strategic benefits, as well as new opportunities created by automation.
Therefore, the formula goes as follows:

So, what benefit does the Total Value of Ownership bring you now? By expanding the traditional ROI calculation with TBO and TRG, the qualitative and strategic benefits get thoroughly assessed too. These positive effects should not be neglected when weighed against the costs of process automation, as they can generate decisive competitive advantages! Download the free whitepaper with Excel calculator now, estimate the ROI of your process automation and drive your competitive position!