Companies are making 350% on their investments in machine learning

Many articles talk vaguely about how robots will replace jobs but skim over the question of how the technology works.

I’ve been skim-reading articles in The Economist, The Sunday Times and The Evening Standard lately about the coming wave of robotics and automation.

Those articles are all the same. They talk vaguely about how robots will replace lots of white collar workers within ten years. And they skim over the question of how the technology works.

Ten years is a nice time scale for a prediction: far enough out that you can make amazing claims, close enough that they seem vaguely urgent. And far enough that nobody’s going to hold you to them.

The articles I’m seeing don’t cover any of the good stuff. They don’t explain how machine learning actually works. Or the overall benefits of automation. Or how you can benefit.

I’m trying to fill in those gaps. Last week I wrote a lot about the computer science behind machine learning – what they’ve figured out, and how they cracked the problem. You can find those articles here and here.

Those articles were about the science and theory of machine learning. Today I want to talk about how this is happening in real life. What does it look like in practice? Who’s buying it? And what happens to the workers?

Armies of software robots

I listened to a talk at the London School of Economics recently: “Service Automation: robots and the future of work”.

It was given by Professor Mary Lacity of the University of Missouri-St Louis and Professor Leslie Willcocks of Oxford. First things first: they’re not computer scientists. They’re management experts. They specialise in supply chains, automation and outsourcing. In other words, they’re coming at this stuff from the business side rather than the computer science side.

As academics go, they’re practical people. They want to know whether automation really works for businesses… how long it takes to set it up… how much it costs… how often it fails… and what the rate of return is on the investment. They’re big into something called robotic process automation (RPA).

When you think of automation you might think of a giant robot with a hydraulic arm in a car factory somewhere… or a weird human-like Japanese robot with a screen for a face. Those robots are definitely getting better, and more common. But the most common “robots” these days aren’t physical machines. They’re software programs that automate the repetitive tasks you find in a modern office. That’s RPA.

Each RPA “robot” isn’t a machine. It’s more like a software licence. RPA robots are getting more common because they’re getting more flexible. A company can buy the software, take a few days to set up the system, and be up and running within weeks. It doesn’t need special IT staff to set it up, so whoever’s closest to the work can configure it. The up-front investment isn’t huge. And it can be trained to automate all kinds of different processes – stuff like managing customer relationship systems, making sure new staff members get their keycards, and transferring information between databases.

The professors say it’s a “win-win-win” – shareholders get bigger returns, managers get more efficient businesses, and workers are free to concentrate on the stuff that matters. They claim that workers haven’t been laid off, but have been put to work on tasks that need judgment and emotional intelligence.

According to Professors Lacity and Willcocks, the returns on investments in RPA are off the charts. In the fourteen cases they’ve studied, the one-year return on the investment in RPA was between 30% and 350%.

I’m interviewing the CEO of an RPA software business tomorrow afternoon as part of my research for The Penny Share Letter. If you’d like to see how you can actually back this technology with your own money, click here to sign up, and keep an eye out for the June issue in a couple of weeks’ time.

That’s it for today. Tomorrow I want to talk what comes after RPA… a new technology called cognitive intelligence.

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