For several years, businesses have been encouraged to think of artificial intelligence as a remarkably cheap alternative to human employees. AI does not take holidays, ask for a pay rise or leave for a competitor. It can write, analyse, answer questions and complete administrative tasks at remarkable speed. For businesses under pressure to reduce costs, the attraction is obvious: replace some employees with AI and allow the savings to flow through to the bottom line.

Actual Issues

The problem is that the calculation is rarely as simple as comparing an employee’s salary to the cost of an AI subscription.

Businesses are increasingly discovering that AI costs can grow rapidly once the technology moves beyond occasional experimentation and becomes embedded in everyday operations. A single request may trigger multiple interactions with an AI system as it searches databases, retrieves information, analyses documents, drafts a response and checks its own work. Each step consumes computing resources and, in many cases, contributes to the bill.

The individual cost may be tiny. Millions of interactions are not.

Better Approaches

This is one reason why businesses are beginning to question the assumption that cheaper AI automatically means cheaper operations. A company may reduce its wage bill while increasing expenditure on software, computing, data storage, integration, cybersecurity, and monitoring. Specialist staff may be needed to manage the technology. Employees will still be needed to check AI-generated work, correct errors, and deal with unusual cases. They will also need to ensure that confidential information is handled properly – something AI frequently cannot identify.

In other words, the employee may not disappear. Their role may simply change, while the business takes on a new layer of technology costs.

There is also a financial cost to losing the knowledge held by experienced employees. A business can cancel an AI subscription relatively quickly. Rebuilding the knowledge, relationships and practical understanding lost when experienced staff leave is considerably more difficult and expensive.

This is why AI makes most financial sense when it is used as a tool by employees rather than as a wholesale replacement for them. An accountant using AI to analyse information more quickly may become more productive. A customer service employee using it to find relevant information may serve customers better. An administrator using it to automate repetitive tasks may have more time for work that requires judgement and experience.

The value comes from helping people do more, not necessarily from removing the people altogether.

Full Cost Calculations

AI can certainly reduce costs in some areas, but businesses need to look at the full cost of completing a task rather than simply the price of the technology. That means including implementation, maintenance, oversight, training, security and the cost of errors. The cheapest AI system is not necessarily the cheapest business solution if it produces unreliable work or creates new risks.

The strongest financial argument for AI may therefore be less about replacing employees and more about making employees more effective. Technology can help businesses control costs and improve productivity. Removing the people who understand the business, though, before understanding the true cost of replacing them could prove to be a very expensive form of saving.

If you need help assessing the costs of AI for your company, get in touch!