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For a one-time acquisition fee of between $5,000 and $15,000, a single software robot can eliminate—or at least defer—the need for much more significant IT investments.

Technological complexity is a scourge inside large organizations. It’s difficult to manage. It drives up IT expenditures. It impedes organizations’ ability to scale. And it takes many forms, from patchworks of homegrown legacy systems to siloed databases and point-to-point integrations.

Traditional approaches to taming technological complexity typically involve large investments, high-risk implementation or transformation projects, and lengthy payback periods. Even when CIOs attempt to address complexity by making incremental improvements to systems, those investments may consume 20 percent or more of the total IT budget.

Some CIOs are employing a new approach. They’re deploying robotic process automation (RPA) tools to relieve employees of tedious, time-consuming, and convoluted interactions with complex IT. The “robots” in robotic process automation are software programs that mimic human-computer interactions and execute repetitive, rules-based tasks like gathering and comparing data from multiple systems, reading and writing to databases, or extracting and reformatting data into reports and dashboards.

Consider how a financial services company might apply RPA to the process of assessing credit risk for a large commercial client. To get information about the credit products (e.g., loans and lines of credit) the client has with the bank, data analysts must manually pull data from dozens of separate legacy systems. The process, which takes days and involves multiple people, impairs the bank’s ability to effectively manage risk. If the CIO wanted to simplify the data environment, the traditional approach might involve implementing new data infrastructure and APIs—an effort that could easily exceed $10 million.

With RPA, the CIO could install one software robot that could extract data in a fraction of the time it took two data analysts. The one-time acquisition cost for the bot? Anywhere from $5,000 to $15,000.

To the extent software robots take on activities employees have traditionally carried out, CIOs can significantly reduce—and potentially eliminate—the portion of their budgets they allocate to making usability enhancements to systems, thereby freeing up cash for innovation or other value-producing opportunities.

Large RPA deployments aimed at reducing labor costs also offer a compelling ROI. A company that deploys 500 bots at a fully loaded cost of $20 million (including software licenses, planning, process reengineering, programming, testing, and implementation) could potentially realize $100 million in savings, assuming the bots replace 1,000 employees.

Given the costs and benefits of RPA, some routine back-office functions that companies outsource, such as claims processing and certain data center operations, may now be more cost-effectively performed in-house with bots. Companies with high levels of third-party risk have additional incentive to use bots instead of business process outsourcing providers. CIOs working with outsourcers already using RPA should see significant savings.

Currently, early adopters are leading the RPA charge, but research firms widely expect adoption to increase dramatically over the next several years as executives learn more about the technology. Lack of awareness, as opposed to an inherent downside or barrier to entry, is the primary reason deployments are currently limited. As far as technology goes, RPA is relatively easy to deploy because it doesn’t depend on new platforms or infrastructure. It does, however, require sound upfront design and detailed process knowledge to prevent configuration errors.

RPA represents a pragmatic solution for addressing cost, growth, and performance objectives. In some cases, it can help companies defer major investments in IT modernization or new ERP suites, even as they reap the financial and operational benefits of automation. In other cases, CIOs can implement RPA in tandem with a larger transformation initiative, thereby allowing organizations to gain some immediate benefits. Software robots don’t have to automate end-to-end processes to offer value. Even small investments in RPA can have a quick and significant payback.

—by Richard Walker, principal, Deloitte Consulting LLP