On many occasions, the introduction of Artificial Intelligence solutions involves high investments that can cause mistrust in the management teams that must approve them.
In addition to these initial structural costs, each implemented solution will have its implementation and maintenance costs. It is critical to have visibility into what the solution will deliver to the business over its entire period of use to make or inform the implementation decision.
Providing that visibility is what the ROI calculation of these investments offers and the calculation of the net benefit derived from their implementation.
Source: INSIDER. https://www.businessinsider.com/personal-finance/roi
FINANCIAL IMPACT ANALYSYS
The financial impact of the Artificial Intelligence solution is the improvement, measured in economic terms, derived from the implementation of the solution in a specific business task.
This financial impact can derive from:
• Efficacy is the economic translation of the improvement in the effectivity of the task outcome: the scope or depth of the task, the precision of the execution, the perception of the result, etc.
• Efficiency is the economic translation of improved task resource usage: process time reduction, process costs, etc.
AI LIFECYCLE
The Solution Lifetime indicates the period that the implemented AI solution will maintain its positive effects over tasks and processes without significant additional investments.
For example, you can implement a Commercial Assistant Chatbot that provides you with an increment in customer interaction by 30% yearly. The Chatbot Lifetime of three years, for example, means that this improvement of 30% will be occurring during three years without new significant expenses in solution design or major programming adjustments.
If we estimated the 30% yearly improvement at 50,000 € euros, it means that the total return of the Chatbot will be 150,000 € before the need to refurbish the implemented AI solution.
AI SOLUTION COSTS
How to Calculate the AI solution costs.
The total costs of implementing the AI solution must be considered. This may lead to consider very indirect costs such as:
• Compensating costs to workers who are not going to be needed in the new process configuration and who are going to leave the company.
• The costs of training and adaptation of the human team to the new process.
• The adaptation of the facilities. Etc.
In our case, we are going to focus on two types of costs, which are easier to obtain and consolidate:
• The acquisition costs of the AI solution.
• The maintenance costs of the AI solution during the expected years of its useful life.
FINANCIAL ROI CALCULATION
The ROI calculation will result in a percentage, but it often is more clear to calculate the net economic profit derived from the implemented AI solution.
If we want to know the net profit that the implementation of the AI solution will provide to us, we have to:
• Estimate the total economic improvement (efficacy plus efficiency)
• Estimate the AI solution lifetime
• Multiply the economic improvement by the AI lifetime period
• From the previous result, substract the AI implementation cost.
The result is the net economic improvement derived from the AI solution implementation.
