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How does automation increase costs?

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Automation serves as a revolutionary approach to streamline work, enhance productivity, and potentially reduce operating costs. However, the converse side of the picture reveals that automation can also increase costs in specific circumstances.

In this article, we will delve into understanding how automation can escalate costs.

Upfront Financial Investment

First and foremost, the implementation of any automation technology requires an upfront investment. Developing, purchasing, or licensing automated solutions can be a significant expense. Advanced automation technologies like AI and machine learning have high-end price tags and necessitate skilled professionals for their integration and maintenance in the company's operations.

Furthermore, customized solutions that are tailor-made for specific management">business strategies and operations also require substantial financial resources. Therefore, small businesses or firms operating on tight revenue margins may find it challenging to allocate notable funding for the automation process in their initial phases.

Staff Training and Management

Automation is not a plug-and-play solution where you just integrate the technology and everything starts working seamlessly. Rather, the adequate functioning of automation solutions requires necessary staff training and management which introduces additional costs. Whether it's about learning how to use a new software or adapting to an updated workflow, employees will need time and training to make the most out of these tools.

Also, if the in-house personnel lack the necessary skill set to manage these solutions, hiring new workers or outsourcing to experts becomes inevitable. This not only inducts additional costs but also may cause a surge in the monthly operating expenses due to higher salaries or consultancy fees.

Depreciation and Ongoing Maintenance

Last but not least, like all technologies, automation solutions also have a life expectancy and could become obsolete over time. Companies need to keep an eye on the regular updates, potential enhancements, and periodically overhaul their technology stack to align with industry trends. All of these factors result in depreciation and ongoing maintenance costs.

This scenario gets trickier when the automation solution does not yield the expected efficiency gains or cost savings. Businesses may then need to reassess their strategy, which could entail additional costs. Despite its numerous benefits, automation should, therefore, be approached as an investment, where the potential short-term costs should be evaluated against the long-term efficiency gains and cost savings.

July 28, 2023
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