Cost Benefit Analysis for Business Process Automation

Mark Canes

Having previously discussed the concept of business process automation ("BPA") and how to identify bottlenecks that BPA can potentially resolve, let's now turn our attention to the costs of implementing BPA, and the cost versus benefits comparison.

The costs will largely depend on your starting point. If you already have a powerful ERP software system in place, chances are it offers many of the tools needed to automate processes. If so, the primary remaining costs will be time and service costs, being the time you need to invest in documenting your processes and identifying the areas that require improvement by automation, and then the service costs you'll incur with your ERP Software provider in helping you set up, troubleshoot and finally implement solutions.

You may also need to supplement the ERP software with one or more 3rd party automation tools. For example, if you need to automate processes that deal with emails, data on websites and files that get dropped in folders on various servers, you'll likely want a dedicated BPA software system - so factor in the cost of both software licenses and training/implementation on that.

Of course, if you do not already use an integrated ERP software system, then you're starting from scratch, and the cost to achieve your BPA goals will certainly include one or both of (1) acquiring a new ERP system, and (2) purchasing dedicated BPA software. So the relative costs here will be a lot higher, but on the other hand (in the case of implementing ERP software) you'd be looking for many more benefits than just BPA. So you'd have to factor that in - the software cost would only partly be apportioned to BPA.

On the other side of the equation, the most obvious benefit of BPA would be time savings, which may translate into improved productivity or payroll savings, or both.  These are usually relatively easy to quantify and value. If you pay an admin person $25/hour, and automating an activity will save them 20 hours per month, that's a $500 saving per month. If you can then have that person assist a salesperson for those 20 hours each month, perhaps the salesperson will sell more, increasing the benefit, however that's likely difficult to accurately predict.

But that's only part of the picture. Properly automated processes reduce the scope for human error, and sometimes eliminating those errors saves even more than the raw time savings. So when evaluating the benefits, be sure to give careful consideration to the potential costs of errors that BPA, properly tested and implemented and well documented, will avoid.

Let's expand on that last thought: if BPA is not very thoroughly tested before implementation, and well documented, you may very well end up with negative results. Automating a process that is itself a mess will simply get you to the wrong place faster. With absent proper documentation, a single change of personnel can leave you trying to unravel a mystery when you need to tweak an automated process.


I'll finish up with this example of BPA that I recently encountered. An institution uses fillable PDF documents for applications, which are completed and then emailed in. Previously their users would then print the PDF, and manually enter the data into the applicant database. There are several different versions of the form, with slightly different fields, and each form type gets entered into a different table in the database.

The organization implemented a powerful (and quite costly) BPA Software solution, which monitors the inbox, and for each received email, it uses OCR (optical character recognition) to read the document version number, then based on the the form type, reads the filled in fields and creates a record in the appropriate table. It then archives the email. The net savings of this automation? 3 full-time data entry people, making the time to recover the full cost of implementing BPA at less than 4 months.

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