Formulating a Business Case for RPA: Ensuring a Strong Return on Investment

Robotic Process Automation (RPA) has become a critical tool for most organizations across industry domains pursiing to enhance efficiency, reduce operational costs, improve accuracy and embrace Digital Transformation. However, to secure buy-in from stakeholders and ensure a positive return on investment (RoI), a good business case is vital. This paper outlines some of the key elements of a RPA business case, business benefits for a strategic outcome, and a framework for calculating RoI.

Identification of key Business Objectives and Value Drivers

We must at first identify the business objectives and key value drivers that are most important for the organization. Most businesses typically focus on:

• Cost Savings: Reduce the manpower costs by automating mundane or repetitive tasks usually performed in the back office of any business.

• Efficiency Gains: Reduce Turn-around-Time (TaT) or Faster processing times in business processes that are core to the company while reducing error rates.

• Scalability: Enabling business to scale without proportionally increasing costs of infrastructure and manpower.

• Compliance and Accuracy: Ensuring adherence to regulations and diminishing human errors for compliance processes. This may not just be the process efficiency but in many cases can be a reduction in penalties.

• Enhanced Employee Productivity: Relieving employees from mundane and routine tasks can get them to focus on higher-value activities that are creative and transformative to the organization.

Selecting the Right Processes for Automation

A compelling RPA business case depends on selecting the right processes. Some of the the best candidates for automation include:

1. High-volume, repetitive tasks: Data entry, invoice processing, report generation, supply chain processes, MRP processes, HR Processes, ERP processes, logistics processes, regulatory processes, claims processing, inventory management etc

2. Rule-based processes: Processes and workflows with little variation and ones that are standardized.

3. Error-prone tasks: Identify manual processes that depict with high error rates due to fatigue, oversight or other reasons.

4. Time-sensitive operations: Processes requiring fast turnaround times and are constantly measured in operations as a key metric for business success or as a cost contributor.

5. Processes involving structured data: Tasks that use clearly defined digital data or structured information can also be good candidates. These days AI/ML Tools also handle unstructured data, PDF’s, eMails, Images, documents etc with relative ease and high accuracy.

A process discovery and feasibility assessment should be conducted to determine the automation potential and expected benefits for each process. This is vital for the success of RPA implementations else choosing a weak process candidate can lead to a poor business outcome.

Estimating Costs and Investment

To ensure a positive RoI, organizations must diligently assess the costs associated with a RPA implementation. The main cost heads include:

1. Software Licensing: Fees for RPA tools and bots including AMC costs.

2. Infrastructure Costs: Cloud-based vs. on-premise deployment.

3. Development and Implementation: Costs of designing, developing, testing and deploying bots.

4. Training and Change Management: Employee training and employee resistance management. Redeploying employees to new areas or tasks.

5. Ongoing Maintenance and Support: Ensuring bots remain functional and effective and are continuously upgraded to changes in the underling Enterprise Applications.

Calculating RoI for an RPA Project

A structured approach to RoI calculation is important to justify the investment. A simple calculation example is provided below:

Example Calculation:

• Annual Savings: $500,000 (labor cost reduction + error reduction (rework) + efficiency gains + reduction in technology consumption + infrastructure reduction due to Automation). Or if companies have cost per transaction already available that is a good point start: Cost per transaction $0.25. Total volume of transactions per year 2,000,000.

• Implementation Cost: $150,000 (including RPA Software licensing, Infrastructure, development, and training)

• Annual Maintenance Cost: $50,000

• Total Costs: $200,000

• Net Saving: $300,000

A positive RoI within 12-18 months is considered an industry benchmark for a successful RPA program.

Imlementation Risks and Mitigation Strategies

To ensure business case is robust, organizations must identify potential risks and outline mitigation strategies. Some of the typical risks are:

1. Process Selection Errors: This is perhaps the most commonly occurring risk, when an organization does not conduct thorough discovery and assessment before automation.

2. IT and Business Misalignment: Ensuring good collaboration between business and IT teams is critical for RPA success. A good practice is to create a RPA project CoE, that can be formed with Virtual teams, where employees in different departments are committing to this project and enabling the virtual team to drive the delivery.

3. Scalability Challenges: Start small with a pilot project, perhaps identify 2-3 processes of small and medium complexity to derive initial results. Then scale incrementally to more complex processes. Optimize between fully automated and partially automated.

4. Employee Resistance: Communicate the business benefits and provide necessary training. Have a concrete plan to reassign employees to new areas or leverage them to scale the business.

5. Regulatory Compliance: Implement good governance frameworks to ensure compliance. Validate the data through testing cycles and compare historic reports for deviations or other observations.

Creating a Compelling Business Case for Stakeholders

To obtain an executive approval, the business case must include:

1. Executive Summary: High-level abstraction of expected benefits and costs.

2. Problem Statement: Clearly articulate current inefficiencies and business challenges. Preferably these need to be quantified in monitory terms.

3. Proposed Solution: How RPA can address these challenges.

4. Financial and Cost Analysis: RoI calculations and payback period.

5. Implementation Plan: Program Plan, resource allocation, and risk management and governance.

6. Success Metrics: Key KPIs and Metrics to track post-implementation performance and cost benifits.

Conclusion

A well-structured business case for RPA ensures that organizations can obtain stakeholder buy-in and achieve a strong return on investment. By identifying key value drivers, selecting the right processes, estimating costs accurately, and addressing risks, businesses can maximize the benefits of RPA and drive long-term business goals with Digital Transformation.