AI Software vs. Human Labor: A Cost Analysis

Today we’re going to tackle a topic that is top of mind for most businesses, while at the same time being somewhat taboo to discuss directly - can AI software (a catch all for AI agents, large language models (LLMs), machine learning, and other artificial intelligence systems) actually save small to medium size businesses money? Businesses today are constantly seeking ways to optimize their operations and reduce costs. With the advances in AI and automation tools, many are turning towards AI software to streamline processes and increase efficiency. However, the question remains: is AI truly more cost-effective than human labor?

We’ll take a look at a few different common roles across industries and explore the financial implications of both AI software and human labor, providing real-world examples to guide businesses in making informed decisions. 
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Understanding Cost Components

To accurately compare the costs, it’s crucial to break down the financial components of both software and human labor.
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AI Software Costs

AI costs typically include:

• Initial purchase or subscription fees: Many AI tools operate on a SaaS model, requiring recurring payments.
• Implementation and integration: Costs associated with setting up and integrating the AI into existing systems.
• Training and maintenance: Employee training and periodic software updates or troubleshooting.
• Customization: Additional costs for specialized features.
• Cybersecurity and compliance: Investments to ensure software compliance with security standards, depending on the industry.

Human Labor Costs

Human labor costs include:

• Salaries and wages: Recurring costs based on industry, experience, and location.
• Benefits and perks: Additional expenses like health insurance, retirement plans, and paid leave.
• Training and onboarding: Time and resources for reviewing resumes, interviewing, and training new employees.
• Productivity and efficiency: Impact of human errors, breaks, illnesses and vacations on output.
• Turnover and hiring costs: Hidden costs of recruiting and training new employees due to attrition.
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Software vs. Human Labor: Real-World Cost Comparisons

Let’s explore real-world scenarios to compare the cost-effectiveness of software and human labor.

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SDR Teams without AI Cold Calling vs. SDR Teams with AI Cold Calling

• Human Labor: Hiring a team of 5 US based sales development representatives (SDRs), each earning ~$82,000 annually (salary + additional cash compensation), results in $512,500 in annual cost (including 25% benefits and training load).
  
• Software: Implementing AI cold calling software, which can increase call volume productivity for each SDR by 6 to 11x, costs as little as $2,990 per year per rep (for the TwinsAI Scale Plan). Which means that the cost per lead called decreases from $1.64 per call to around $0.20¹ per call. A decrease in cost per call of up to 88%.
  
  • ¹ Assuming the following:
    
    • Annual fully loaded SDR comp is $102,500
    • An SDR works 235 business days per year
    • Each SDR has a daily call target of 100 calls
    • SDRs work 8 hour shifts
    • Every SDR dedicates 3 hours of their shift to phone calls

Customer Support

• Human Labor: Hiring five full-time support agents at $21.65 per hour results in an annual cost of $282,500² (including 25% benefits and training load).
  
  • ² Assuming the following:
    
    • Each agent works 238 business days per year
    • Each agent  works an 8 hour shift per day
    • 10 days of paid vacation and 10 paid holidays per year
    • 3 paid sick days per year
      
• Software: Using an AI-powered chatbot can cost anywhere from $6,000 to $120,000 (and up) per year, we’ll use the mid-market number of $15,000 per year which can handle most inquiries that a 5 person team would expect. However, the business would still need a team of 2 support agents to handle customer escalations for a total cost of $105,400 (including 25% benefits and training load) leading to a savings of almost 63%.

In this case, AI automation significantly reduces costs while allowing human agents to focus on complex issues and escalations.
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Data Entry & Processing

• Human Labor: Hiring a 4 person team of data entry specialists at a rate of $20.00 per hour results in an annual cost of $208,800³ (including 25% benefits and training load).
  
  • ³ Assuming the following:
    
    • Each data entry specialist works 238 business days per year
    • Each data entry specialist works an 8 hour shift per day
    • 10 days of paid vacation and 10 paid holidays per year
    • 3 paid sick days per year
      
• Software: Implementing data entry automation software like Cortex Agents from Snowflake or data entry agents from Functionize can come with implementation costs of $50,000K+ and ongoing maintenance fees of around 20% of the year one cost. Additionally, to fully utilize these systems, a skilled operator is needed which brings the labor costs up to around $125,000 (including 25% benefits and training load).
  
  If we use a $75K year one cost (implementation + first 12 months subscription) for the software and then calculate a three year average with no annual labor increase (there’s only so much math we’re going to do in this post folks), using software would cost ~$160,000 per year, generating a savings of 23%.

In this data entry and processing use case, software has a higher year one cost but offers substantial long-term savings.
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Content Creation & Marketing

• Human Labor: Hiring a team of 3 writers to generate content for a B2B company with a moderate content plan would typically cost around $52,500 for junior writers and $87,000 for more senior roles. In this use case we’ll hire a blended team with one senior contributor and two juniors for a total salary of $240,000 per year (including 25% benefits and training load).
  
• Software: Using AI-powered content tools like Claude or ChatGPT a single senior contributor can generate drafts at a fraction of the cost and refine the final output with an annual software cost of around $2,400 (ChatGPT Pro) for a total cost of $111,150 (including 25% benefits and training load) generating a savings of almost 54%.

AI can assist in content creation, but human editing and oversight is critical (underline inserted by an actual human) for quality, brand alignment and generation of interesting content (in my opinion).

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Factors Beyond Cost

Cost isn't the only factor to consider. Other aspects like quality, scalability, adaptability, and long-term ROI also play a significant role.

• Quality & Accuracy: Humans excel at tasks requiring creativity and complex decision-making, while software is ideal for repetitive tasks that demand speed and accuracy.
• Scalability: Software solutions scale easily, whereas expanding a workforce involves additional hiring and administrative costs.
• Adaptability & Problem-Solving: Humans can adapt to changing situations and unforeseen challenges, while software may struggle with dynamic decision-making.
• Long-Term ROI: Software requires upfront investment but can lead to significant long-term savings. Human labor offers adaptability but may incur increasing costs due to inflation and turnover.

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FAQ

Can AI software fully replace human labor? Today, writing this in March of 2025 the answer is no, human workers are essential for strategy, customer relations, problem-solving, and pretty much anything requiring creativity.

What industries benefit most from software automation? Industries with repetitive, data intensive operations like customer service, data processing, bookkeeping, restaurant and other service reservations and sales prospecting. 

Is investing in software a one-time cost? No, ongoing updates, maintenance, and subscription fees are typically required.

How do businesses decide between software and human labor? Businesses should assess their needs based on cost, scalability, quality, and long-term ROI basis. Saying this, in most cases using AI software to augment human workers will be the best approach.

Will AI and automation lead to job losses? While automation may reduce demand for some jobs, it also creates new opportunities in other areas like prompt engineering, AI management, product management and digital infrastructure.

What are the risks of over-reliance on software? Over-reliance can lead to security vulnerabilities, reduced personalization, and a lack of adaptability.

Can businesses combine software and human labor for optimal results? Yes, using automation for routine tasks and human employees for strategic work can achieve optimal efficiency.
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Wrapping up 

The most cost-effective option between software and human labor depends on the specific task, business goals, and available resources. While automation can offer scalability and cost savings, human expertise remains crucial in many areas.

By strategically combining software with human capabilities, businesses can achieve optimal efficiency and innovation. Tools like TwinsAI offer AI-driven solutions that enhance productivity while keeping a human-in-the-loop, striking the right balance between automation and a personal touch. Success lies in finding the right blend of technology and human skills to drive business growth and customer satisfaction.