Byline: Daniel McGinn

Seb Agapite doesn't fancy himself a barista, nor is he looking to hire one. But inside Dunkin' Donuts' product-development center in Braintree, Mass., Agapite stands before a high-tech machine that will let his stores sell high-margin espressos and cappuccinos. Behold the Shaerer Ambiente, an $11,800 "super-automated" espresso machine that Dunkin' Donuts has begun installing in every one of its stores. To demonstrate its magic, Agapite pushes some buttons and 45 seconds later hands NEWSWEEK a latte. "I waited in line eight minutes at Starbucks for a similar product," Agapite boasts.

For managers in all kinds of businesses, it's among the hardest decisions: what's the right mix of labor and technology? Whether it's an automobile plant deciding on the mix of million-dollar robots and unionized labor, or a bank deciding whether to replace more tellers with ATMs, finding the balance requires a clear understanding of the costs, quality and customer- satisfaction trade-offs of man versus machine. Going too far in either direction can be risky: remember the automated baggage-delivery system that wreaked havoc at Denver International?

Dunkin's reliance on a pricey high-tech machine to get into the espresso game is less risky, but it's still a departure from Starbucks' strategy. The Seattle company puts new hires through a full-scale coffee school, training them to hold forth on the difference between Ethiopian and Sumatran beans while simultaneously crafting half-caf, sugar-free, vanilla nonfat lattes. …