4 Steps to Measure AI & Automation ROI

For small to mid-sized businesses (SMB) struggling to keep up with manual tasks and inefficient processes, implementing artificial intelligence (AI)  and automation can help to streamline operations, reduce errors, and enhance productivity. 

However, knowing the exact ROI of both fields helps you justify the investment, make informed decisions on the best vendors and tools, and set realistic expectations for long-term success. 

The result is measurable ROI that boosts your bottom line, and frees up resources for growth. SMBs can also turn to managed service providers (MSPs) specializing in AI and automation to further support these technologies, ensuring seamless integration and ongoing optimization. 

In this blog, we’ll guide you through four steps to effectively measure the ROI of AI and automation, empowering your business to make informed decisions and maximize benefits.

AI and automation: A brief overview

Automation refers to the use of technology to perform tasks with minimal human intervention. For example, using specialized business software to automate repetitive tasks like data entry, to free up employee time for more strategic activities. Other examples may include automated monitoring tools that exist within cybersecurity and data analytics solutions, which automatically track for security events, or alert you to statistical changes that occur in your data-sets. 

AI, or artificial intelligence, involves using machine algorithms to mimic human intelligence, such as learning from data or making decisions. AI solutions can help in areas like customer service, where chatbots can handle routine inquiries, or in sales, where predictive analytics can identify potential leads in performance data-sets. A sub-field, called generative AI, has exploded in popularity and prominence in recent years to provide original content based on user output.

Step 1: Define clear objectives and goals of AI and automation

Before diving into AI and automation, it’s crucial to understand what you want to achieve. This means setting up clear objectives and goals that properly align with your business strategy. 

Believe it or not, we have spoken with many customers who have jumped directly into their purchasing journey of automated, AI-powered solutions within data, cloud and modern workplace platforms, without fully defining the scope of their needs for these shiny tools.

For SMBs, your business objectives might include improving operational efficiency, reducing costs, or enhancing customer service, while others may focus on driving innovation in certain business areas, or improving access to data insights using automated alerting and AI analysis. 

If you don’t quite know where to begin, consider areas where you spend a significant amount of time on manual processes, or struggle with insight analysis. Do you have a high volume of repetitive emails or data entry? Are you overwhelmed with customer service inquiries? These are the types of questions your leadership team needs to consider in order to align the tools.

Defining these pain points will help you better identify where automation or AI solutions can have the biggest impact before you spend time and resources investigating software vendors.

Managed services can also assist in the creation of your AI and automation strategy and implementation and management of these technologies, ensuring they are tailored to your specific needs and integrated seamlessly into your operations using their proven expertise.

In terms of real-world examples, a global survey conducted by McKinsey found companies implementing AI in their business processes saw an average cost reduction of 20%. This shows that having clear objectives like cost reduction can lead to significant financial benefits when leveraging AI and automation.

Step 2: Identify key performance indicators (KPIs)

Once you have defined your objectives, the next step is to identify key performance indicators (KPIs) to measure success. KPIs are quantifiable metrics that reflect how well you are achieving your objectives. For example, if your goal is to improve operational efficiency, relevant KPIs might include the time saved on manual tasks, error rates, or employee productivity levels.

For AI solutions, your KPIs might focus on accuracy, such as the percentage of correctly handled customer inquiries by a chatbot. For automation, KPIs could include the reduction in time spent on repetitive tasks or the decrease in operational costs. Managed services can help identify, track and analyze these KPIs on your behalf, providing further insights and recommendations for continuous improvement. They can also offer technical training and support to better ensure that your team understands how to interpret and act on the data.

According to a 2023 report by Deloitte, organizations using AI and automation for their customer service operations saw a 68% reduction in average resolution time. This KPI directly measures the efficiency gains from implementing AI and automation solutions, and having proactively tracked it, it means these businesses were better able to quantify and demonstrate the long-term impact of the introduction of AI and automation tools for the rest of the organization.

Step 3: Calculate costs and benefits

To measure the ROI of AI and automation, you need to first compare the costs of implementing these technologies with the benefits they bring. Start by calculating the total cost of ownership (TCO), which includes the purchase price of all the software and hardware, implementation costs, and ongoing maintenance and support associated with a managed services partner. 

For example, a recent survey by IBM of 6,700 C-level executives in 46 countries revealed 99% reported reduction in cost per contact from using virtual agent (AI) technology, estimated at $5.50 cost savings per contained conversation. These companies would further calculate whether the cost savings from the implementation outweigh additional expense in hardware investments or MSP support they may have sought in order to fully manage the new tool.

Next, estimate the benefits. These might include direct savings from reduced labor costs, increased revenue from improved sales processes, or enhanced customer satisfaction leading to higher retention rates. Consider both tangible benefits, like cost savings and time savings, and intangible benefits, such as improved employee morale or better decision-making capabilities enabled by AI solutions. Recent research by PwC based on automating data analytics within the business found that automating even rudimentary AI-based extraction techniques resulted in 30% to 40% efficiency improvements, which is a lot of time saved.

For both areas, managed services can help your SMB calculate these exact costs and benefits, providing detailed analyses that consider all aspects of the implementation, and ongoing use of AI and automation. They can help ensure that you have a comprehensive understanding of the financial impact, making it easier to justify the investment to stakeholders. It is recommended to consider an IT partner if your current in-house IT team can’t calculate costs and benefits alone.

Step 4: Monitor and adjust

The final step is to continuously monitor the performance of your SMB’s AI and automation solutions, and adjust as necessary. This involves regularly reviewing your KPIs to ensure they align with your business goals (which naturally may evolve or change entirely), fine-tuning your AI and automation implementation within your business operations, and making proactive adjustments based on the data collected.

According to a 2023 IBM report, the average ROI on enterprise-wide AI and automation initiatives was just 5.9% – a figure below the typical 10% cost of capital. However, it reported that enterprise companies that actively monitored and adjusted their AI solutions over time managed to gain a 13% ROI on their AI projects, more than twice the average ROI of 5.9%.

The biggest difference that these companies made was the intentional embedding of AI and automation in their products, services and business units using a proactive, steady and balanced approach to adopting these technologies, which included building data cultures, developing a multidisciplinary strategy, and training their teams using partnerships with experts.

While the companies surveyed are larger enterprise organizations, your SMB can still aim for and unlock the same level of ROI for your operations by following these 4 steps and carefully gathering the guidance and expertise of external IT partners such as MSPs for your use case.

4 steps to measure AI & automation ROI: What’s next?

It’s clear that understanding the ROI of AI and automation is essential for your SMB to make informed decisions on your adoption of these tools. By following these four steps, you can effectively measure and maximize the benefits of these transformative technologies.

It’s understandable that as a SMB, you may lack the internal resources or knowledge within your existing IT department to spearhead your AI and automation efforts, including your ROI strategy. If this is the case, speak to the team at SparkNav today and discover how we can help you guide your AI and automation deployment and ROI analysis today with our data & AI experts.

Robert Griffin
Robert Griffin
As COO, Robert Griffin plays an instrumental role in aligning operational excellence with strategic goals by leveraging his decades of experience in enterprise leadership. With deep knowledge and expertise in security, governance, risk, and compliance (GRC), and AI, his insights are often shared through thought leadership channels, including LinkedIn and blogs. → Follow Robert on LinkedIn.