Paybacks and Automation

December 05, 2010 BY Charles Fallon

On the subject of automation, one point frequently raised in its favor is that prices on automation are continually falling as technologies mature.

It is a curious statement to make because, on the face of it, that fact suggests companies should be in no hurry to invest in automation.

Let's say the current payback on automation solution X is 10 years.

That means, if we invest in 2010, we would reap the rewards of that investment in 2020.

If prices are continually falling, that means the payback periods are continually falling too.

So, thanks to falling prices, the payback on solution X is 8 years in 2012.

That means, if we wait and invest in 2012, we would reap the rewards of that investment in... 2020!

And making that investment in 2016 will deliver a 4 year payback with rewards to kick in... 2020!

Obviously, I have made up the numbers. The rate at which prices are falling may not be significant enough to drive the payback period down as I have done.

But if that were the case - if the fall in prices is not meaningful enough - then the point shouldn't be raised in the first place.

The time to invest is when the prices of automation stabilize. When they stop falling, they will be as cheap as they get. Calculate paybacks at that point and see if its a winner. Until then, let the prices keep falling where they may.