Many hear about "automation" from their engineering teams, blogs like this, and other sources on the Internet, touting it as a "best practice" in software creation and management. While we could talk all day about how automation is a great thing from a technical perspective, today we will briefly cover why automation matters from an executive level.
Read on to learn how to truly move the needle and measurably increase your profit margins simply by refocusing a portion of your IT team's time to investing in automation.
What is Automation?
Automation ... is the use of various control systems for operating equipment
... with minimal or reduced human intervention.
Software system automation benefits from being software defined. This means that businesses can benefit from automation in software without capital expenditure on physical goods (as in manufacturing or other industries).
Software automation is simply more software that reduces the amount of time your engineers, testers, and operations specialists spend performing repetitive or human error-prone tasks. A business can automate: building of software, deployment of software, integrity testing, quality assurance processes, communications processes, project management processes, server capacity management, and much more.
Spend Once, Ongoing Benefits
In any IT organization, one of the largest expenses stems from wages. If your business is software-oriented, IT wages may be your largest expense in the whole business! The larger the proportion of your business' expenses that stem from IT wages, the more important it is to be able to do more with less.
Automation is the most straightforward way to directly reduce costs. A business can make an upfront investment of time (and therefore money) in automation to reduce ongoing expenditures associated with operating the business. When Tuple evaluates automation of something, we typically view it as a capital investment because it is spend-once, ongoing-leverage.
Show Me the Money
We can value automation similarly to normal expenditures.
PresentValue = (AnnualSavings / CostOfCapital) - PresentSpend
Let's run through some examples Tuple has seen in real practice.
Automate Build+Deploy for a SaaS Startup
Each IT organization spends a different proportion of time building and deploying changes to their offerings. This time is not value-added time: marketing, sales, and customers do not benefit from engineering or operations time spent on build+deploy.
Tuple helped a startup automate a particularly expensive build+deploy process to reduce their headcount in IT by 50% and save $700K/year by the CTO's own estimation.
The business needed to deploy changes for their enterprise clients multiple times per week. They had 7 people on the operation team to manually perform these tasks multiple times per day and ensure nothing went wrong. The business was spending around $700k/year on this team.
Tuple approached the CTO of the business to explain that we could completely eliminate all manual steps in this global deployment process, instead designing logic to allow machines to perform the steps totally unsupervised at the push of a button.
The business spent about $150k with Tuple building out such a system. The project took about three months.
By building out the systems to build+deploy software changes automatically, Tuple was able to provide a system to the business so that software engineers and testers could simply push one button in a web interface to begin an automated process. The build+deploys went from taking hours of skilled labor to seconds, and the machines executed the steps in under 5 minutes.
The business saw positive ROI from the expenditure within 3 months, and the 12 month ROI was over 350%! For a business with a cost of capital of 7%, a simple estimate of the value of this project, viewing it as a simple perpetuity of discovered savings cash flow:
PresentValue = (700k / 0.07) - 150k = 10,000k - 150k = $9,850,000