Here is how RPA can offer up to 40 per cent cost savings for F&A Services

My previous blog highlighted key findings from our recent research study on RPA, including RPA as a concept, and related key business trends. This blog focuses on how RPA makes financial sense from an F&A perspective-

Case Study background-

An organization with annual revenues of USD 10 Billion has been considered. Typical size of the F&A functions for such an organization are estimated at 750 FTEs. All F&A FTEs have been appropriately distributed among different processes as highlighted below-

Assumptions in placeThe organization has already leveraged cost reduction due to offshoring/outsourcing-

  • All F&A processes have been outsourced/offshored to the maximum extent possible
  • Cost reduction due to offshoring/outsourcing only includes the labor arbitrage component
  • Labor arbitrage impact is estimated to be around 70 per cent
  • Majority of the transactional work is delivered from offshore locations
  1. Cost reduction due to RPA implementation-
  • 24-41 per cent of F&A employee base can be replaced by RPA implementation. For the 750 FTE process described above, 255-370 can be replaced by RPA implementation
  • A typical RPA license replaces 3 FTEs, hence number of RPA licenses required in above case is 85-130
  • Given that RPA is utilized to automate transactional processes, around 80% of the FTEs replaced by RPA are from offshore locations
  • Cost changes due to lower real estate requirements and increased telecom costs have been excluded from the analysis

      2. Cost of implementing RPA-

  • One-time cost items, including consulting, implementation, configuring, and training fees, are estimated at US$45,000
  • One-time RPA deployment cost is amortized over the period of three years and added to the RPA license and operational cost to arrive at the total running cost of an RPA license (if Robots are 85, then one-time cost per robot is: 45000/85=USD 529, which over 3 year period is USD 176)
  • The RPA license is US$4,000 per annum and operational cost (of the person managing configuration and control) of RPA is US$1,000 per annum
  • Server hosting fee of US$5,000 per annum has been included
  • Total cost of RPA implementation per annum in the above example= USD 865,000- USD 1,315,000

      3. Impact from RPA Implementation-

  • Total savings due to RPA over already offshored F&A operations in the given F&A scenario= 26-42 per cent

It is not a cakewalk though. Multiple factors that need to be considered for the evaluation of adoption potential across different industries and business functions-

  • Types of processes- Degree of presence of processes which are a) transaction/rule based and b) consistent over time
  • Volumes- Volume of transactional/rule based work, and importance of horizontal business processes within different verticals
  • Inefficiencies- Prevalence of issues such as presence of disparate IT systems, issues related to transparency and compliance, and quality
  • Nature of industry- Nature and corresponding propensity of different industries towards adoption of new technologies, e.g., banking industry has higher propensity than manufacturing industry

Want to know more? The NASSCOM-Everest report “Seizing the Robotic Process Automation (RPA) Market Opportunity” examines the state of the RPA market today and its potential in the coming years. It offers a series of case studies across horizontal and vertical business processes and highlights lessons learned from early RPA adopters. This report also explores the “coopetition strategy” adopted by BPM service providers, RPA technology vendors, and specialist technology integrators and the various options it results in for a BPM buyer. Finally, it takes a look at the future implications of RPA on the BPM industry.

Download this new report from here-

3 Comments
  1. abiya
  2. Petchiappan
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