Understanding the True Cost of an AI Project: Building Digital Infrastructure for Long-Term Value
- Anush Chandra Mohan
- May 31
- 3 min read
Updated: Jun 28
As businesses across Australia explore artificial intelligence (AI) and automation, one question arises frequently: "How much will an AI project cost, and what infrastructure do I need first?"
At Evanam, we've guided numerous businesses through their AI journey, and one truth remains consistent: successful AI implementation starts with a robust digital foundation—typically an effective Management Information System (MIS)—before adding AI layers to deliver enhanced value.
Step One: Building Your Digital Infrastructure (MIS)
Before diving into AI, businesses must establish reliable digital infrastructure, usually through a robust MIS platform.
A good MIS captures, manages, and processes business data systematically. It's the critical first step because AI systems depend entirely on quality data.
Example Costs for an MSME (Micro and Small Enterprises under 10 employees):
Software Licensing: AUD $10,000 annually
Implementation & Training: AUD $15,000 (one-off cost / 6 weeks)
Data Migration & Integration: AUD $5,000 (one-off cost / 2 weeks)
Ongoing Maintenance & Support: AUD $5,000 annually
Total Initial Investment for MSME: Approx. AUD $35,000
Step Two: Layering AI for Automation and Insight
Once the MIS foundation is stable, the AI journey can begin. An AI project's cost typically falls into several clear categories:
Costs for MSME (under 10 employees):
Data Preparation & Cleaning: AUD $5,000 (~40 Hours)
AI Solution Development: AUD $15,000 (~70 Hours)
Integration & Deployment: AUD $5,000 (~30 Hours)
Ongoing Monitoring & Maintenance: AUD $5,000 annually
Total AI Initial Investment for MSME: AUD $25,000–$30,000
Combined Investment and ROI Example
Consider a realistic scenario of a Melbourne-based SME retail business employing 40 staff, generating AUD $500,000 in monthly sales (AUD $6 million annually).
Before AI implementation:
Annual operational cost: AUD $2.4 million
Annual error-related costs: Approximately AUD $50,000 due to inventory inaccuracies, wrong orders picked and dispatched, and inefficient manual processes
Annual sales: AUD $6 million, with growth stagnating at 2-3%
Supply chain metrics: Average inventory turnover of 45 days, resulting in excess stock and associated holding costs
Sales metrics: Forecasting accuracy at ~70%, often leading to stockouts or excess inventory
AI Implementation Outcomes:
After investing AUD $140,000 into combined MIS and AI infrastructure
Operational Efficiency: Automation of inventory and sales processes led to operational cost reductions of 20% (AUD $600,000 annually) by means of increased daily output.
Reduction in Human Errors: AI-driven inventory management systems significantly reduced errors by 50%, translating to a saving of AUD $15,000 annually.
Enhanced Sales Forecasting: Predictive analytics increased forecasting accuracy from 70% to 90%, cutting inventory turnover from 45 to 30 days and reducing inventory holding costs by AUD $45,000 annually at their 3PL's. Additionally, improved forecasting increased sales by 10%, equating to additional revenue of AUD $600,000 annually.
Quantitative ROI Breakdown:
Year 1 Total Savings and Additional Revenue:
Operational Efficiency Savings: AUD $480,000
Reduced Error Costs: AUD $15,000
Reduced Inventory Costs: AUD $45,000
Additional Revenue: AUD $900,000
Total Financial Benefit: AUD $1.44 million
Initial Investment: AUD $140,000
Net Benefit (First-Year): AUD $1.3 million profit plus ongoing annual savings
Within just one year, the SME not only recovered their initial investment but significantly boosted profitability and established strong foundations for continued growth.
Long-term Value of AI Investment
The real benefit of investing in digital infrastructure and AI lies beyond initial cost savings.
Businesses can expect:
Consistent annual operational savings of 20–40%
Scalable systems that allow growth without proportional cost increases
Enhanced competitive advantage through better insights and customer experiences
Conclusion
Implementing AI isn't merely adopting technology; it's strategically laying a robust digital foundation first. While upfront costs can seem significant, the long-term financial returns and operational efficiencies more than justify the investment. Evanam's experience clearly demonstrates that the right infrastructure combined with strategic AI deployment delivers quantifiable, sustainable value, enabling Australian businesses to thrive long into the future.
